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Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route

Author

Listed:
  • Eddy Bekkers
  • Joseph F. Francois
  • Hugo Rojas†Romagosa

Abstract

One consequence of melting Arctic ice caps is the commercial viability of the Northern Sea Route, connecting East Asia with Europe. This represents a sizeable reduction in shipping distances and average transportation days compared to the conventional Southern Sea Route. We examine the economic impact of opening this route in a multi†sector Eaton–Kortum model with intermediate linkages. We find remarkable shifts in trade flows between Asia and Europe, diversion of trade within Europe, heavy shipping traffic in the Arctic and a substantial drop in Suez traffic. Projected shifts in trade also imply substantial pressure on an already threatened Arctic ecosystem.

Suggested Citation

  • Eddy Bekkers & Joseph F. Francois & Hugo Rojas†Romagosa, 2018. "Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route," Economic Journal, Royal Economic Society, vol. 128(610), pages 1095-1127, May.
    • Handle: RePEc:wly:econjl:v:128:y:2018:i:610:p:1095-1127
    DOI: 10.1111/ecoj.12460
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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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