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

104 Pages Posted: 29 Nov 2016

See all articles by Eddy Bekkers

Eddy Bekkers

World Trade Organization (WTO)

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Hugo Rojas-Romagosa

CPB Netherlands Bureau for Economic Policy Analysis

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

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.

Keywords: gravity model, Northern Sea Route, quantitative trade models, trade and emissions, trade forecasting

JEL Classification: C2, D58, F17, F18, R4

Suggested Citation

Bekkers, Eddy and Francois, Joseph F and Rojas-Romagosa, Hugo, Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route (November 2016). CEPR Discussion Paper No. DP11670. Available at SSRN: https://ssrn.com/abstract=2877275

Eddy Bekkers (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
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Joseph F Francois

University of Bern - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

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University of Adelaide - School of Economics ( email )

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Australia
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Hugo Rojas-Romagosa

CPB Netherlands Bureau for Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands
+31 70-338 3338 (Phone)
+31 70-338 3350 (Fax)

HOME PAGE: http://www.cpb.nl

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