Climate Change

This paper examines how climate-induced water shortages in the Panama Canal act as non-tariff trade barriers, reducing U.S. trade by up to 8.4% during extreme droughts. Using a structural gravity model, it quantifies the economic impact of localized climate shocks on trade flows through a critical global chokepoint.

This study quantifies the economic impact of climate change on Panama Canal traffic using a two-stage least squares model. Lower Gatun Lake levels—driven by ENSO—significantly reduce daily vessel transits. Results highlight the need for adaptation strategies, including water conservation, infrastructure upgrades, and alternative trade routes to safeguard global commerce.