A1461
Title: Greening the fleet, raising the price? Shipping decarbonization and inflation dynamics
Authors: Soodabeh Ghahramanpour - Bayes business school (United Kingdom) [presenting]
Ioannis Moutzouris - Bayes Business School (United Kingdom)
Malvina Marchese - Bayes Business School (United Kingdom)
Ioannis Kyriakou - Bayes Business School (United Kingdom)
Mahmoud Fatouh - Bank of England (United Kingdom)
Abstract: The shipping industry underpins global trade, carrying over 80\% of merchandise worldwide by volume while contributing nearly 3\% of global greenhouse gas emissions. As decarbonization policies advance, shipping costs are expected to rise by up to 80\% by 2050, potentially influencing inflation in countries highly dependent on maritime transport. This is particularly relevant for the UK, where 85\% of traded goods and 40\% of imported food rely on shipping. While prior studies confirm a link between shipping costs and inflation levels, their effect on inflation volatility remains underexplored. The aim is to investigate how shipping costs affect UK inflation volatility using a generalized autoregressive conditional heteroscedasticity-in-mean model with exogenous predictors (GARCH-MX). The analysis employs monthly data from 2001 to 2023, combining freight rate indices across major shipping segments (dry bulk, tanker, and container) with key macroeconomic indicators. The results show statistically significant positive effects across all segments, with containerized freight exerting the strongest influence. These findings suggest that shipping costs contribute to inflation uncertainty, particularly as the sector transitions toward net-zero emissions. Policymakers must therefore balance environmental objectives with macroeconomic stability to ensure a sustainable maritime transition without undermining price stability.
