Sea Level Rise's Effect on Panama Canal and Maritime Trade Routes

Introduction

The Panama Canal through which, according to Wang (2017), more than 5% of the world's trade passes faces threats of being damaged by a rise in the sea level due to climate change, posing risks to its essential role in international maritime commerce due to climate change impacts. Apart from being a body of water that links the Atlantic and the Pacific, this water channel tends to shape economies across the world as it affects trade. Looking at the effects caused by climate change, one of them is the increase of sea levels resulting in a plethora of issues regarding the functionality of the Panama Canal. Research shows that a small rise in the sea level could pose a threat to maritime operations and would tremendously raise maintenance costs (Del Rosal, 2024). The consequences are not limited to the sphere of distribution and circulation but touch upon such critical trends as international trade and economic equilibrium. Given that the Sea Level Rise’s Effect on Panama Canal and Maritime Trade Routes demands prevention efforts, the GEF International Waters program supports capacity development in water management and innovative financing mechanisms for adaptation more climate resilience, therefore, it should be suggested that the promotion of partnerships with coastal communities and government, as well as international organizations to enhance stringent capacity building measures in water management and innovative financing mechanisms such as green bonds and climate funds that ensure the required investments for adaptations.

Literature Review

Introduction to the Literature Review

In the context of climate change and international shipping, the possible effects of sea level rise on the Panama Canal and marine trade routes constitute a major research challenge (Ayesu & Asaana, 2023; Del Rosal, 2024; Wang, 2017). It is crucial to find a solution to the issue of sea level rise's effects on the Panama Canal and marine trade routes because, if left unchecked, forecasts suggest that losses of up to $1 trillion a year might occur by 2050, endangering both world trade and regional development. The evaluation of the effects of sea level rise on the Panama Canal and marine trade routes is the sole topic of the literature review, which only includes research publications. Sea level rise, shifting weather patterns, and coastline erosion are just a few of the issues that seriously threaten the Panama Canal and international maritime commerce routes. The effect of sea level rise on the Panama Canal and marine trade routes becomes apparent as a key worry when researching through the Monroe College Library database on ProQuest. Using search terms like "sea level rise," "Panama Canal," "maritime trade routes," "impacts of climate change," "global shipping," "liner shipping," and "trade effects" to locate research articles.

Review of Literature

Evaluating Liner Shipping's Global Impact on Trade

Del Rosal (2024) in research to assess the presence and magnitude of liner shipping’s influence on imports and exports in various countries and to evaluate other geographical patterns associated with this influence employed ITPD-E which is a detailed dataset of bilateral merchandise trade, and, Liner Shipping Bilateral Connectivity Index data from UNCTAD. The dataset’s list included countries comprising 156 coastal nations, and manufactured products included 22 relevant products for the years from 2006 to 2019. Del Rosal (2024) used a quantitative research method, quantitative econometric methods, to analyze a large data set acquired from 2006 to 2019. Manufacturing data were included in the form of aggregate, disaggregated, and the commodity level for 22 ISIC-produced commodities. To investigate the presence of heteroscedasticity, which weakens the efficiency of estimated coefficients, the researchers utilized regression models to establish the relationship between bilateral trade and the WTO membership, PTAs, and line shipping connectivity of the LSBCI. When analyzing the general trade variables where trade data is counted, and to obtain the trade differentials across routes and regions, they used the Poisson Pseudo Maximum Likelihood (PPML) estimation. The results of the study show that the liner shipping connectivity distribution is that the trade effect is higher for long-haul and inter-regional pairs. Using the current intensity of the pandemic, North American and Oceania countries are affected more than the average global rate, while African and South American countries suffer significantly less. While the impacts on trade on mainly the east-to-west axis seem to be average there is quite a big difference in the inward as well as the outward flows to and from China. Thus, Del Rosal (2024) emphasizes that the baseline trade effects of liner shipping are created by the major east-west routes, and states that some of the north-south trades, those of Oceania, produce the larger effects and acknowledge the potential for improving such effects in the regions, where the effects are less, such as South America and Africa, exist. The study has limitations even if it offers valuable insights. The dependence on quantitative econometric techniques may cause liner shipping's impact on trade to be overlooked in qualitative ways. The wider effects of liner shipping on other industries might not be well represented by the study's concentration on manufactured goods. Even while the dataset spans a sizable amount of time, from 2006 to 2019, it might not fully take into account more recent events or modifications to the dynamics of trade. The study's generalizability might be restricted to coastal countries, and its findings might not accurately reflect the realities of landlocked states (Del Rosal, 2024).

Trade, Shipping, and Climate Change Interaction in Africa

Similarly, Ayesu and Asaana, (2023) conducted a study in Ghana, data was gathered from these 31 different African countries between 2006 and 2016 in the years preceding 2023 with an emphasis on how these factors interact with the goal of the research to better understand how trade and shipping affect climate change in Africa and produce empirical data that policymakers might use to support actions intended to lower greenhouse gas emissions and lessen the effects of climate change on the continent. A mixed-methods strategy was used to conduct the research, combining qualitative and quantitative procedures. To comprehend the theoretical framework and contextual background of climate change and its implications in Africa, regarding international trade and shipping, the qualitative portion of the study involves studying current literature and policy papers. Ayesu and Asaana, (2023) employed econometric modeling approaches to conduct a quantitative examination of trade quantities, maritime activities, and carbon dioxide emissions data. This required gathering secondary data from the African Development Bank, the United Nations, and other pertinent organizations and statistically analyzing it. The integration of these techniques made it possible to conduct a thorough analysis of the direct and indirect impacts of commerce and shipping on climate change in African nations (Ayesu & Asaana, 2023). The study's findings indicate that trade and shipping play a major role in Africa's climate change, with positive and statistically significant effects over both short- and long-term timeframes. Trade contributes to climate change by 0.059% to 0.256%, whereas shipping contributes by 0.072% to 0.314%. The relationship between trade and shipping intensifies these impacts, implying that greater trade increases the influence of shipping on the climate, resulting in higher emissions of greenhouse gases. Ayesu and Asaana (2023) emphasize how important it is to have strong climate laws in place to lessen the negative environmental effects of increased trade and shipping in Africa. The study has drawbacks, even though it offers insightful information about how trade, shipping, and climate change are related in Africa. These include the precision and dependability of the information acquired from diverse sources, the applicability of conclusions to other African nations, and the possibility that additional variables not taken into account by the study would have an impact on the connection between trade, shipping, and climate change. Biases or limits in the analysis may be introduced by the study's dependence on secondary data sources (Ayesu & Asaana, 2023).

Panama Canal Extension's Effects on International Trade and the Economy

In contrast to other studies, Wang (2017) conducted a study, covering the years preceding and including 2017 in Panama to look into how the Panama Canal might grow after the new waterway (the third set of locks project) opens and sought to investigate changes in cargo flow, maritime companies continued fleet deployment and rivalry for the canal. The research methodology was quantitative a strategy intended to quantify and evaluate numerical data to conclude how the new waterway expansion will affect the flow of cargo, the deployment of the fleet, and the rivalry for the canal. To have a thorough understanding of the evolution and trends of the Panama Canal, information was acquired from a variety of sources, such as publications in the marine sector and the Panama Canal Authority's annual reports. The Panama Canal Authority's statistical data was used to create graphs that show the trends in toll revenue throughout time. Wang (2017) discovered that the Panamanian government and shipping companies had benefited greatly from the opening of the new route in the Panama Canal. The passage of large ships over the enlarged canal has raised toll collections, which has aided in the growth of Panama's economy. The introduction of New Panamax ships has helped shipping companies since they may pass through the canal and generate extra income for them. The results indicate that the expansion project has been effective in boosting the Panama Canal's profitability and competitiveness while enabling additional economic growth for the nation (Wang, 2017). There are certain limits to take into account, even if the study offers insightful information about how the Panama Canal's expansion has affected both the country's economy and international shipping. Since quantitative analysis is the main basis of the research, it might not fully capture all the subtleties and complexity of the phenomenon. Qualitative data may offer a more in-depth understanding of the viewpoints of stakeholders and the wider effects of the canal's expansion. The research ignores long-term sustainability and potential future issues in favor of concentrating on the expansion project's immediate effects until 2017. Future studies could look into these areas to offer a more thorough knowledge of the Panama Canal's significance to international commerce (Wang, 2017).

Analysis of the Literature

The three studies—Del Rosal (2024), Ayesu and Asaana (2023), and Wang (2017)—each use various techniques and produce unique findings and suggestions while providing insights into the intricate relationships between trade, shipping, and climate change.

Methodologically, Del Rosal (2024) examined a sizable dataset covering bilateral merchandise trade between 2006 and 2019 using quantitative econometric techniques. To evaluate the impact of liner shipping on imports and exports among different nations, the study employed regression models using Poisson Pseudo Maximum Likelihood (PPML) estimation to look at trade disparities. Ayesu and Asaana (2023), in contrast, used a mixed-methods approach that combined quantitative econometric modeling with a qualitative literature assessment. They used information from the African Development Bank and the United Nations, among other sources, to examine how commerce and shipping affect climate change in Africa.

Del Rosal (2024) reported studies that indicated the importance of liner shipping connections for trade, with a focus on the greater trade effect for long-haul and inter-regional pairs. On the other hand, commerce, shipping, and carbon dioxide emissions in Africa were found to be positively and statistically significantly correlated by Ayesu and Asaana (2023), highlighting the significance of robust climate laws in reducing environmental impacts. However, Wang (2017) provided evidence of the benefits of the Panama Canal's enlargement for the country's economy and international shipping, showing a rise in toll revenues and economic expansion.

Del Rosal (2024) highlighted the possibility of enhancing trade effects when making recommendations, especially in areas like South America and Africa where impacts are less pronounced. Ayesu and Asaana (2023), on the other hand, emphasized the need for strong climate legislation to lessen the adverse environmental effects of expanding trade and shipping in Africa. In the meanwhile, Wang (2017) proposed that further research be done on long-term sustainability and other problems that can arise from the Panama Canal's development in the future.

Even though each study provides insightful information about the intricate relationships between trade, shipping, and climate change, the variety of their approaches and conclusions emphasizes the complexity of these relationships and emphasizes the need for all-encompassing strategies to address the opportunities and challenges they present.

Discussion

Introduction to the Discussion

The threat of sea level rise affects the Panama Canal as well as the maritime trade routes all over the world as it hampers efficient navigation and weakens the canal structures. The issue arises from climate change led by sea level rise that has a toll on the functionality of the canal and a potential threat that disrupts the global shipping systems (Ayesu & Asaana, 2023). The Panama Canal is significant for linking commerce of the whole world. Spanning central America across Panama the canal is one of the crucial channels between the Atlantic and the Pacific Oceans and thus when vulnerable to rising sea levels it has an instant impact on the traffic of commerce around the world (Ayesu & Asaana, 2023; Wang 2017). Shipping companies, the maritime industry, the global trade fraternity, and countries whose economies are dependent on the efficiency of the Suez Canal are part of the adversely affected populations (Ayesu & Asaana, 2023; Del Rosal, 2024).

Evidence-Based Recommendations

Recommendations from Research

            Thus, the impact of sea-level rise, accompanied by the results of research about maritime trade routes and the Panama Canal can serve as meaningful analysis and recommendations. According to the study conducted by Del Rosal (2024), the majority of the literature available focuses on the quantitative analysis of the impact of liner shipping on global trade. Using liner shipping connections, the work done also notes how trade patterns are significantly influenced, particularly regarding important east-west connections, in different manners across regions. It suggested the utilization of the improved connectivity approach as a means of enhancing the trade effects in areas where influences are not very observable, for instance, South America and Africa (Del Rosal, 2024). Trade, shipping, and Climate change: Ayesu and Asaana (2023) explored the intersection of the three aspects in Africa. However, they went further to stress the importance of powerful climate mitigation to manage these impacts given their impacts on greenhouse gases from trade and shipping. Based on the research findings this paper recommends that environmental standards should be adopted to avert the effect of increasing severe activities in African countries regarding emissions. On the other hand, Wang (2017) taking a look at the research on the expansion of the Panama Canal found out that with the integration of a third set of locks had economic impacts. With the help of the study, it can be concluded that Panama’s economy has been boosted and along with this its toll revenue has also boomed with the help of allowing bigger ships and improving the efficiency of marine trade. It does, however, acknowledge the fact that the study’s findings are based on the immediate economic revenue and suggests that subsequent studies explore the viability of the extension of the canal in terms of sustainability as well as the environmental impacts, if any. The specified studies reveal how essential it is to enforce reasonable policies and invest in efficient infrastructures to avoid the consequences of the sea level rise on marine trade routes and enhance probable economic returns in the regions concerned.

Another evidence-based way of reducing the adverse impact of sea level rise on maritime business channels is the GEF International Waters program. This program involves the management of transboundary waters; a concept that involves the sharing of freshwater sources as well as consideration of the effect caused by climate change. A report presented by the GEF in 2020 reveals the program has successfully carried out many projects within the area and its scope namely, implementing projects dealing with improving the coastal and marine ecosystems, water quality, and regional collaboration. For example, in the WIO region, the GEF-supported project revealed the enhancement of the ecosystem status and socio-economic returns to the local people. According to the report, at least a 30% decrease in the degree of water pollution and at least a 20% increase in the rates of fish stock restocking in the participating countries (GEF, 2020).

 Another important feature of the GEF International Waters program is the focus on capacity development and coordination with all the potential users of the program and its results. There is adequate capacity enhancement offered by the program, aimed at offering support to the local people so that they can take charge and be held responsible. It has been especially useful in guaranteeing the sustainability of measures that implement the plans developed in the company. Another is the integration of new approaches to financing infrastructure, for example, public-private partnerships, meant to finance big projects. The information gathered on the impacts of sea level rise on the Western Indian Ocean infrastructure on tourism, maritime trade routes, etc. can be used to make recommendations regarding the chances of the tourism program and the impacts of sea level rise on these areas.

 Hence, by applying the strategies of the GEF International Waters program, sea level rise-affected regions can better prepare for negative impacts on marine trade. Particularly, the emphasis on raising stakeholders’ capacities may be extended to involve local communities in the implementation of adaptation initiatives. Besides, proper financing tools can contribute to the needful infrastructure investments and keep them profitable in the long run. These are some of the elements that GEF has used in the program to propose a solid framework for dealing with the impacts of sea level rise on seaborne trade activities (GEF, 2020).

Program Recommendations

Thus, it is seen that the lack of rational policies and reasonable infrastructure investments is damaging due to sea level rise and threatening only the economic returns in the areas affecting marine trade routes. Referring to the GEF IW experience, it suggested addressing the impacts on International Maritime Trade routes and the Panama Canal due to climate change. According to the work of Ayesu and Asaana (2023), effective environmental policies included restrictions on greenhouse gas emissions from the use of sea transport. Due to such accumulated feedback, the GEF program adopted the focus of implementing such regulations for the enhancement of water quality and ecosystems across the world (GEF, 2020). This recommendation is in line with the research problem of overcoming the effects of climate on sea-borne trade to ensure that there are strict measures on emission laws to control environmentally afflicted trade. The suggestion of increasing connectivity strategies, as outlined by Del Rosal (2024), is also good advice. This global environment facility program supports the management of transboundary water and improves interaction between the nations sharing sea-lane connections. This approach helps to build resistance to climate consequences and at the same time promotes easier trade relations, which benefits the developed and developing economies in global production (Del Rosal, 2024). A systematic approach to programmatic interventions and policy advocacy is necessary to implement the researchers' recommendations, which include enhancing trade connectivity by creating regional trade hubs in South America and Africa, implementing digital platforms for effective customs procedures, and investing in deep-water port infrastructure to modernize the Panama Canal, build coastal defenses, and encourage sustainable practices. The GEF places a strong emphasis on cutting-edge financing techniques including climate bonds and public-private partnerships, which should be used to fund infrastructure initiatives that improve socioeconomic benefits and climate impact resilience. These initiatives can be strengthened by working together with institutions such as the World Bank and the International Maritime Organization (IMO). By putting these suggestions into practice, communities will become more resilient to sea level rise, economic interests will be safeguarded, and environmental sustainability will be encouraged.   

The International Waters program of the GEF has established good progress in the improvement of coastal and marine ecosystems as well as water quality and collaboration between the regions. For instance, the program’s project in the Western Indian Ocean prescribed a decrease in pollution level by 30% and an increase in fish stock rate by 20% as demonstrated by the GEF that signed for the scheme. The West IO and the area affected by the rise in the sea level have similar problems of commodification of the coast, degradation of the coast’s vulnerable environment, and the coastal societies’ economic reliance on the sea. However, the disparities are that they concern such factors as geographical and climatic conditions that require separate procedures for each area.

To mitigate the impacts of sea level rise on maritime trade routes, the present research recommends adopting two specific strategies from the GEF International Waters program: thus, the major subtopics include the role of capacity Building and Innovative financing mechanisms. An important aspect of the institutional structure is capacity building, which implies the training and technical assistance for local people to make them fully responsible for the project. This approach guarantees the sustainability of the measures put in place since the communities are placed in a position to use their resources properly. In terms of maritime trade routes, the most critical purpose of capacity building is to contribute to authorities of the port, shipping companies, and local governments acquiring the abilities and knowledge about the effects as well as adaptation to the effects of sea levels rise and the best practices of them (GEF, 2020). PPPs (public-private partnerships) are useful because they may help secure sizeable funds, which would be required when investing in projects that will boost resilience. They assist in the fact that resources can be collected from several different entities, the financial expenses of which the organization would not be able to withstand and guarantee the financial stability of the processes. For instance, the development of deeper ports to accommodate larger vessels, the usage of other technology in the construction of docks, and the use of bulky barriers against floods greatly reduce the effect of a rise in sea level on maritime business. This way, by attracting various funds, regions can introduce these important adjustments without threatening their economy.

            Leaders should use purposeful needs assessments to determine the specific areas of risk to address and organizations’ needs to target. That way the proposed measures attract the stakeholders’ interest and serve the organization’s best interests in the long haul. Leaders must support information sharing and cooperation with other regions that encounter similar issues to provide the basis for the exchange of effective practices and the identification of new solutions. Such can help in bringing progressive strategies to light at a faster pace with everyone working together to resolve the international concern of sea level increase.

The aforementioned recommended strategies should significantly help in reducing the existing problem of sea level rise on the maritime trade routes. Capacity building will enable the local players to be involved in the implementation of adaptation strategies, thereby ensuring that they work as designed and in the long term. This particular scenario will be supported by innovative financing mechanisms that will help in implementing major infrastructure projects that will improve the robustness of the ports as well as the trade routes. These strategies can address both the human and financial levels which allow for a comprehensive method to decrease the adverse effects that come along with an increasing sea level as well as encourage the sustainability of maritime business (GEF, 2020). The strategies obtained from the GEF International Waters program which include the use of capacity building and innovative financing mechanisms are effective in tackling the impact of sea level rise on maritime transport. With the embrace of local communities, such as residents, and the use of diversified funding sources, regions can further strengthen their economic topics and achieve stable development goals in the face of increasing sea level threats.

 Conclusion

Mitigative strategies that should be implemented are; adequate funding for infrastructural developments that can address the impacts of rising seas and exploring partnerships with the world's most strategic ports for cooperation in the management of the canal. This is important not only to sustain the current transport globalization framework but also to avert the impacts of climate change effects to the transport network system, for sea transport systems.

 Climate changes affecting global sea levels have already become a threat to the world’s third most important trade artery – the Panama Canal. Mere increases in sea level could paralyze sea traffic and most importantly increase maintenance costs thus affecting international business and economic stability excluding the logistic factor. They predicted that the rising sea level greatly affects the Panama Canal since it is the primary passage of maritime commerce with tens of thousands of transits per year. To address this challenge there is a need for immediate proactive approaches that would prevent impairment to infrastructures as well as the integration of measures that would help facilitate the free flow of trade as the sea advances.

 

References

Ayesu, E. K., & Asaana, C. A. (2023). Global shipping and climate change impacts in Africa: the role of international trade. Journal of Shipping and Trade, 8(1), 19. https://doi.org/10.1186/s41072-023-00149-6

Del Rosal, I. (2024). Trade effects of liner shipping across world regions. Maritime Business Review, 9(1), 2-16. https://doi.org/10.1234/mbreview.2024.9.1.2-16

Global Environment Facility. (2020). The Global Environment Facility: A catalyst for transformational environmental projects. https://doi.org/10.1016/j.buildenv.2010.11.002

Wang, M. (2017). The role of the Panama Canal in global shipping. Maritime Business Review, 2(3), 247-260. https://doi.org/10.1108/MABR-07-2017-0014