Climate change, trade and geopolitics – new risks in the Arctic
Climate change is driving the “Arctic opening”, giving rise to new shipping and trade routes. The economic and strategic potential of the region is growing. So too are the potential for environmental exposure and geopolitical frictions. These hamper cooperation and governance, creating new and emerging risks.
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Climate change opens new Arctic routes
The Arctic – the ocean and adjacent land north of the northern polar circle (66°32'N)1 – is warming two to three times faster than the rest of the globe.2 With this, the Arctic sea-ice cover is melting, becoming both less permanent and more penetrable. This is opening up new, short-cut shipping routes and opportunities for tourism. Marketing for exclusive north pole cruises is already happening.3 The Arctic opening also presents new areas for mining, oil and gas drilling, and fishing.
Arctic risks
All told, the Arctic opening also comes with many challenges and uncertainties. For example, the economic competitiveness of arctic routes over traditional shipping routes is not certain.4 And, with the rise of sustainability commitments and regulations, the value of mining and fossil fuel development in the region is also questionable.5
Fast environmental changes are also happening. Rising temperatures are releasing methane and other greenhouse gases formerly bound to the ground and ice, accelerating global warming further. Melting sea ice covers and permafrost threaten the foundations of buildings in the region, and livelihoods. Arctic populations are seeing their sources of marine and wild food disappearing, and their homes being destroyed.
The risk profile of many activities in the region will change as temperatures continue to rise. Among the effects are sea-level rise, which threatens settlements and industrial installations. Also, toxic waste deposited in prior decades in the course of military, mining and other adventures can be uncovered and dispersed, leading to environmental pollution.6 And, melting ice and thawing permafrost may result in release of infectious pathogens, new sources of potential epidemics and pandemics. Other threats are wildfires and heatwaves, and their effect on soil quality and nutrients. These also change the composition of the Arctic forests, which could render the latter less resilient.
Strategic competition and governance gaps
The trend of increasing environmental and economic risk is paired with the strategic interests and military ambitions of the eight nations with coasts on the Arctic sea: Norway, Sweden, Finland, Russia, the US, Canada, Denmark and Iceland. For example, Russia sees Arctic ice melting as a defence threat.7 Many nations have military presence and infrastructures in the region, and some are ramping up of said capacities, with Russia’s invasion of Ukraine having raised the risk of conflict in the region. This coincides with NATO’s integration of Finland (joined in April 2023) and Sweden (application pending).
The Arctic Council is the governance body for the region, representing the aforementioned eight nations. All Council decisions and statements require consensus of the eight member states.8 Russia is chairing the Council in 2022–23. After its invasion of Ukraine, the other seven member states declared a joint suspension of collaboration with Russia in the Council.9 Decision-making is therefore on hold, which is in turn blocking joint efforts in research, environmental monitoring and the establishment of common standards for shipping and oil and gas development. The coinciding increases in economic interests, environmental change and geopolitical tensions make the Arctic a hotbed for emerging risks and potential risk accumulation.
References
References
1 Definitions of the Arctic vary, depending on the measure applied. Through a climate zone lens, it is traditionally confined by the 10 degree Celsius July isotherm, an abstract line, north of which the mean temperature remains below 10 degrees even in the warmest month in a multi-year average. M. Paul and G. Swistek, Russia in the Arctic, Berlin 2022, p 9.
2 John P. Holdren, Climate change is rapidly transforming the Arctic: Why everybody should care, The Hill, 6 Sept, 2021.
3 For an example see https://en.ponant.com/destinations/north-pole
4 To navigate the geographically shorter northern passage ships need to be accompanied by icebreakers or to be equipped with icebreaking capability. This comes with higher fuel consumption also in open water. Competitiveness of Arctic shipping routes is thus depending on fuel prices and energy efficient ship design. New energy efficiency regulations for open water ships favor bow designs which are less effective in ice, thus putting a question mark behind arctic routes during cold seasons. Rob Hindley, Future of Arctic Ships, Aker Arctic 2022.
5 Industrial development in the Arctic | GRID-Arendal (grida.no).
6 Matt Simon, A toxic time bomb is ticking in the Arctic, WIRED 4 April 2023.
7 M. Paul and G. Swistek, Russia in the Arctic. SWP Research Paper 3, Berlin 2022,
8 About the Arctic Council | Arctic Council (arctic-council.org).
9 In June 2022, the governments of Canada, the Kingdom of Denmark, Finland, Iceland, Norway, Sweden, and the United States issued a joint statement to confirm limited cooperation – excluding projects involving participation of the Russian Federation: Joint Statement on Limited Resumption of Arctic Council Cooperation – United States Department of State