Climate change is disrupting global trade

Climate change is disrupting global trade

About 1,000 ships pass through the Panama Canal every month carrying more than 40 million tons of cargo, about 5% of the volume of global maritime trade. But the water level in this vital link between the Atlantic and Pacific oceans has fallen to critical levels due to the worst drought in the canal’s 143-year history.

Drought restrictions amid insufficient rainfall in Lake Gatun, which feeds the canal, have reduced productivity by about 15 million tons so far this year. The ships faced an additional six days in transit. The authorities are exploring strategic options to enhance water supplies in the canal.

As this week’s chart shows, ports in Panama, Nicaragua, Ecuador, Peru, El Salvador and Jamaica are suffering the most from these delays, with 10 to 25 percent of total maritime trade flows affected. But the effects of drought are being felt as far away as Asia, Europe and North America. The drought will hamper trade for months to come, as the number of ships passing through the canal is expected to halve to 18 ships per day by February, compared to 36 ships in normal times. Economies that rely on the canal for trade should brace for further disruption and delays.

Under climate change, droughts, floods, tropical storms and other disasters are becoming more common and pose a serious threat to marine infrastructure. Through PortWatch, an open platform launched today by researchers from the International Monetary Fund and the University of Oxford, policymakers can prepare for and decide how to respond to trade disruptions caused by shocks such as extreme weather events.

The platform uses real-time satellite data to track nearly 120,000 cargo and tanker ships worldwide – more than 99 percent of global maritime trade. It provides daily estimates of trade volume at 1,400 ports and more than a dozen narrow points, such as the Panama Canal.

PortWatch simulates the international spillover effects of port closures and plots the disruptions to subsequent supply chains on an interactive map. It allows analysis of climate scenarios and provides modeled risk estimates for a range of extreme climate events. PortWatch also sends alerts about potential and actual business disruptions after major disasters.

— This blog was co-authored by the PortWatch team, including Parisa Kamali. See press release: IMF and Oxford University launch ‘PortWatch’ platform to monitor and simulate trade disruptions.

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