Unintended consequences of environmental regulation of maritime shipping: Carbon leakage to air shipping

Volodymyr Lugovskyy, Alexandre Skiba and David Terner

Journal of International Economics, 2025, vol. 155, issue C

Abstract: We assess the expected impact of the upcoming International Maritime Organization’s CO2 emissions cap on global maritime shipping. Using detailed data on U.S. imports—covering vessels, routes, emissions, and trade—we estimate a model that allows for substitution between maritime, air, and land transport. Our findings show that the cap will drive a shift to more carbon-intensive air and land transport, leading to an overall increase in transportation-related CO2 emissions in both the short- and long-run. Additionally, it will cause significant welfare losses. Our findings support a case for more efficient alternative policy options.

Keywords: Environmental regulation; Ocean transportation; Air transportation; International Maritime Organization; Pollution leakage (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:155:y:2025:i:c:s0022199625000376

DOI: 10.1016/j.jinteco.2025.104081

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