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

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  • Francois, Joseph
  • Bekkers, Eddy
  • Rojas-Romagosa, Hugo

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

  • Francois, Joseph & Bekkers, Eddy & Rojas-Romagosa, Hugo, 2016. "Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route," CEPR Discussion Papers 11670, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11670
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    More about this item

    Keywords

    Northern sea route; Trade forecasting; Gravity model; Quantitative trade models; Trade and emissions;
    All these keywords.

    JEL classification:

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

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