16 Dec 2016, Wiley

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

Journal article by E. Bekkers, J. Francois and H. Rojas-Romagosa in The Economic Journal, 2017

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.

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