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

• Published in: The Economic Journal
• Main Authors: Eddy Bekkers, Joseph F. Francois, Hugo Rojas†Romagosa
• Format: Article in Journal/Newspaper
• Language: unknown
• Subjects: Arctic; Northern Sea Route
• Online Access: https://doi.org/10.1111/ecoj.12460

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.