Evolving shipping activity in climate scenarios: Coupling econometrics with Integrated Assessment Model

The International Maritime Organization aims to achieve full decarbonization by 2050 in response to climate change. This ambitious goal demands well-defined strategies guided by techno-economic assessments. The complexity of global shipping systems makes predicting long-term maritime trade patterns challenging, necessitating scenario-building rather than precise forecasts. Investigating shipping demand scenarios is crucial due to the uncertainty brought by the energy transition and its role as the primary driver of shipping emissions. This paper improves the representation of maritime shipping in Integrated Assessment Models (IAMs) by examining the impacts of climate targets on future shipping demand. A novel econometric model, grounded in advanced gravity theory and integrated with machine-learning algorithms, is proposed to estimate the elasticities of variables in bilateral seaborne trade. By coupling this model with the WITCH IAM, we explore various scenarios, providing deeper insights into trade patterns and their implications. The results show that stricter climate policies and higher carbon taxes reduce GDP due to higher abatement costs, higher fuel prices, and therefore reduced seaborne trade, especially for oil products and containerized cargo. Early adoption of carbon taxes in Europe may shift oil production and consumption patterns, temporarily boosting seaborne trade. Sub-Saharan Africa could experience significant demand growth due to economic and population increases. • Most models ignore cross-trading and non-cost factors affecting fuel trade. • Stricter carbon policies reduce GDP growth and seaborne trade, especially for fossil fuels. • Only-European carbon tax boosts oil trade globally, and risks regional imbalances. • Sub-Saharan Africa’s rising shipping demand calls for port and logistics growth.