Northeast Passage in Asia-Europe liner shipping: An economic and environmental assessment

Abstract

In recent years, the Northeast Passage (NEP) has been widely discussed in the shipping industries since it can potentially bring economic benefit thanks to its relatively short sailing distance vis-a-vis the conventional Asia-Europe route via the Suez Canal. Concomitantly, due to the recent advocacy of green shipping, how to deploy effectively a shipping fleet so as to reduce the environmental cost has become an increasingly crucial issue in the shipping industries. However, it has not been investigated how the optimal shipping allocation between the conventional Asia-Europe route and NEP, based on both economic and environmental considerations, will be influenced by different aspects of shipping costs respectively, which will further affect the ocean carriers' decision and adoption attitude toward the NEP. In this paper, a quantitative assessment model considering the shipment operating cost as well as the external cost of various pollutant emissions is presented to analyze the multi-port multi-trip liner service in an Asia-Europe container shipping network. Based on the shipping network with cargo demand of an Asian shipping company and empirical data from the existing literature, our study demonstrates how the optimal shipping allocation varies between scenarios by performing sensitivity analyses. Our findings indicate that the icebreaker fee, as well as Suez Canal toll, plays a more decisive role than the fuel price in affecting the adoption of the NEP. The relevant policy and managerial implications are discussed.