Modeling global and regional economic impacts of greenhouse gas pricing on international shipping and policy implications

Abstract

Establishing a global framework for pricing greenhouse gas (GHG) emissions from international shipping involves understanding the effects on the global economy and different countries. This paper discusses how economic models can be helpful regarding this issue by conducting its own analysis and literature review. The simulation is done by first estimating the impacts of GHG pricing on maritime transport costs using data obtained from intermodal logistics models and voyage statistics. Second, these cost estimates are applied in a computable general equilibrium model to evaluate their impacts on trade and GDP at global and regional levels. Findings suggest that price levels that would cause a modest increase in maritime transport costs would have limited impacts on overall trade and the global economy. However, the effects differ among countries, influenced by the economic scale and reliance on maritime transport. Through model application and comparison with existing literature, these models prove helpful in identifying appropriate price levels that would avoid generating excessive negative impacts on a global scale. They also highlight important elements for devising a mechanism to address disproportionate negative impacts of the measure on countries. Since estimated economic outcomes are influenced by specific modeling techniques, using modeled results to determine the beneficiaries and modalities of such mechanisms necessitates thorough analysis.