Climate change-induced extreme weather events are increasingly disrupting key maritime trade routes, which is especially concerning for low-income countries that rely on these routes for the importation of essential goods. With limited resources to adapt, these countries face potential economic instability due to higher shipping costs, disruptions in the availability of critical goods, and changes in trade dynamics. The research explores how such shocks impact trade flows.

The methodological approach is two-fold to address the challenges posed by climate-induced disruptions in maritime trade. Researchers will use shipping data on shipping contracts, whilst also using Automatic Identification System (AIS) to track real-time ship movements and adjust for changes in routes due to extreme weather. Second, they will employ a structural model to estimate the economic implications of these shocks, including changes in shipping prices, welfare effects, and distributional consequences. Through this study, the researchers aim to assess the economic impact of climate shocks on the shipping industry and global trade.

This research offers crucial insights into how climate risks affect the shipping industry and global trade. LICs are particularly vulnerable to these shocks given their reliance on maritime trade. The findings will inform policy decisions on infrastructure investment and trade resilience strategies in the face of increasing climate change-related disruptions. By better understanding how shipping routes and costs are affected by weather events, businesses and governments can make more informed decisions about adapting to future climate risks, ultimately improving global trade stability.