Environmental Costs and Economics Implications of Container Shipping in the Northern Sea Route

Abstract

The Northern Sea Route (NSR) has tremendous potential for marine shipping between Europe and Asia in terms of savings in transport time and distance. However, the Arctic area is environmentally vulnerable thus there is a trade-off between NSR’s impacts on environment vs. its economic benefits, especially when compared with the traditional route through the Suez Canal route (SCR). This study estimates the market shares of different transport modes and alternative shipping routes for the container transport market between Europe and Asia, and the resultant environmental costs. Our analysis suggests that NSR can be a viable option under the status quo. However, its environmental costs tend to be higher than SCR due to small ship size and low load factor in the present, thus that the successful development of NSR can lead to worse environment outcomes. If these issues can be addressed, NSR can benefit from lower operational and environmental costs, which will lead to higher market share and social welfare.