Economy-wide impact analysis of a carbon tax on international container shipping

Abstract

International shipping is a vital channel linking the world economy, particularly from the perspective of international commodity trade. The recently proposed carbon regulation in international shipping will not only affect the competitiveness of shipping lines, but will also have implications for the global economy. This paper adopts an energy–environmental version of the Global Trade Analysis Project referred to as GTAP-E to analyze the quantitative effects of a maritime carbon tax on the global economy by placing a special focus on containerizable commodities given their significant role in international trade. The major advantage of the GTAP-E model is that it can capture the effects of asymmetric changes in freight costs on different routes caused by the maritime carbon tax. Based on our numerical results, imposing a maritime carbon tax on international container shipping will not lead to a significant economic impact unless the tax level is high. China will suffer the greatest real GDP loss among all countries. Under a high level of global maritime carbon tax ($90/tCO2), the real GDP loss to China will be around 0.02%. The negative economic impacts on the European countries will be greater if a maritime carbon tax is imposed only on the European container exporting/importing routes, compared to the situation where a global maritime carbon tax is imposed on container shipping. Finally, the imposition of a maritime carbon tax will discourage distant container trade on the routes (origin–destination) “China–USA”, “Rest of Asia–USA”, and “South America–China”.