Bekkers, Eddy Henricus; Francois, Joseph; Rojas-Romagosa, Hugo (2016). Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route. Economic journal, 128(610), pp. 1095-1127. The Hague: Wiley 10.1111/ecoj.12460
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A consequence of melting Arctic ice caps is the commercial viability of the
Northern Sea Route, connecting North-East Asia with North-Western Europe.
This will represent a sizeable reduction in shipping distances and a decrease in
the average transportation days by around one-third compared to the currently
used Southern Sea Route. We examine the economic impact of the opening
of the Northern Sea Route in a multi-sector Eaton and Kortum model with
intermediate linkages. This includes a remarkable shift of bilateral trade flows
between Asia and Europe, diversion of trade within Europe, heavy shipping
traffic in the Arctic, and a substantial drop in traffic through Suez. These
global trade changes are reflected in real income and welfare effects for the
countries involved. The estimated redirection of trade has also major geopolitical
implications: the reorganisation of global supply chains within Europe and
between Europe and Asia, and the highlighted political interest and environmental
pressure on the Arctic.
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