The Impacts of Carbon Pricing on Maritime Transport Costs and Their Implications for Developing Economies

We provide an in-depth review of the extant literature on the impact a maritime carbon pricing measure might have on maritime transport costs. First, we analyse the relative importance of the determinants of maritime transport costs for trade and economic development, and secondly assess the transmission channels and economic effects of a carbon price on maritime transport costs. We argue that the introduction of a carbon price has a limited impact on total maritime transport costs for the average country. However, Small Island Developing States and Least Developed Countries are more likely to be negatively impacted by such a measure in terms of maritime transport costs as we provide novel evidence that the relationship between per unit transport costs and trade flows is negative and elastic at least for the case of Pacific Small Island Developing States.