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

NOTE!!! THIS SEMINAR STARTS AT 15.00H

Time: 15.00-16.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Hugo Rojas-Romagosa (CPB)

Discussant: TBA

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject
A consequence of melting Arctic ice caps is the possible commercial opening of the Northern Sea Route (NSR), connecting North East Asia (i.e. Japan, Korea and China) with Northwestern Europe. In practical terms this represents a sizeable reduction in the sea route distance by around 4000 km, or roughly 40% less than the current shipping distance using the Southern Sea Route (SSR), which includes the Indian Ocean and the Suez Canal. In this paper we examine the economic impact of the opening of the NSR. In a first step we estimate bilateral geographic shipping distance reductions linked to the NSR.  We then link shipping distance reductions to projected changes in trade volumes and implied total (non-shipping) distance costs using a regression-based gravity model. As a last step of our analysis we integrate both estimates into a computational general equilibrium (CGE) model of the global economy  to assess the impact on bilateral trade flows, sectoral output, overall welfare, and employment/wage changes. We also analyze the changes that shorter shipping routes have on transport related pollution levels, which depend on both shorter distances but also on potentially larger trade volumes. The redirection of trade has major geopolitical implications linked to both a dramatic drop in traffic taking the SSR (and so passing through Suez) and high volume traffic along ecologically sensitive Arctic routes.

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