In 2014 the captain and owners of the freighter Nordic Orion made an historic decision: instead of carrying their load of coal from Vancouver, Canada to Finland via the Panama Canal, they headed through Arctic waters for the Northwest Passage. It was the first time a freighter chose the Canadian Arctic route over the Panama route, based entirely on business logic. ALAN ATKISSON says that voyage marks the start of a transformation in the Arctic economy.
WHILE IRONIC that the first freight to traverse the Northwest Passage for cost-saving reasons was environmentally unfriendly coal, the voyage indicates warming Arctic waters are opening the region for development.
The Northwest Passage — when experiencing lighter-than-usual ice conditions — is shorter and cheaper. The risks have become manageable and insurable. Plus, the Nordic Orion’s owners knew the ship could take a 25% larger load, while saving USD $80,000 in fuel costs. Many of the factors driving change in the Arctic economy, as well as the many associated opportunities and risks, are described in an upcoming report from WWF looking at the Arctic’s economy in marine, maritime, and coastal development terms — the “Blue Economy.”
Investors believe that over USD $1 trillion will be heading to the Arctic in coming years, principally to develop infrastructure: roads, ports, airports, hotels, housing, hospitals, schools and other facilities. Guggenheim Partners, a global investment and advisory financial services firm, has estimated that over USD $500 billion in infrastructure is already being planned.
This combination of warming physical conditions and increasing investment is not only changing the Arctic, it is changing how humanity sees the Arctic. No longer a remote and inaccessible place dominated by nature and impenetrable ice, visited only by researchers and adventurers, the Arctic is fast becoming a tourist destination, an aquaculture development zone, a real estate opportunity, an Internet cable route, a shipping shortcut and more. The speed of change is likely to catch many people by surprise. Some Arctic researchers I’ve spoken to are inclined to dismiss these trends, saying for example that expectations for the opening of the Arctic to shipping or mining are greatly exaggerated. But those who doubt that an unstoppable wave of economic investment is heading to the Arctic should take a closer look at the investment intentions of large players such as China. Transformative change often starts slowly but builds with surprising speed.
Most of the Arctic economy, including tourism, is linked to its ocean and coasts. Iceland received well over two million visitors last year, an increase of about 400 per cent in one decade. Svalbard tourism increased by 100 per cent over the same period. Last year a tour company operating out of Murmansk was offering five different departures for the opportunity to ride an icebreaker to the North Pole, while Norway’s national tourism agency has produced a YouTube campaign on how to hike in Arctic coastal regions to better prepare tourists for vacationing in extreme Arctic conditions.
The Arctic is an increasingly attractive item on the “bucket list” of many tourists. While this helps improve knowledge and hopefully, concern about the Arctic environment, tourism increases environmental risk.
Other Arctic Blue Economy sectors are experiencing similar growth and challenges. Norway’s salmon aquaculture industry grew by 500 per cent from 1997-2016, and by 31 per cent from 2015-16. About 40 per cent of that growth happens in Arctic coastal waters; and Norway has also begun investing in Icelandic aquaculture.
The Arctic currently produces 10 per cent of the world’s oil and 25 per cent of its natural gas, mostly from onshore sources. It is believed to hold 22 per cent of the world’s undiscovered reserves under the Arctic Ocean. These sectors tend to dominate reporting on Arctic economic development issues.
Many articles on the Arctic economy focus on developing energy and mineral extraction; but a closer look at recent trends underscores that the Arctic is “open for business” in a much broader sense with significant conservation consequences. While there is much we don’t know about the economic trends that will shape the Arctic’s mostly “Blue” environments, it’s time to take the expectations of rapid growth more seriously. One helpful resource is WWF’s widely-cited Principles for a Sustainable Blue Economy, which have also been recognized by the World Bank and the United Nations. They can provide a starting reference for an Arctic adaptation to help steer these bold new investment plans in more sustainable directions.
Momentum keeps building. At the end of January 2018, the President of China, Xi Jinping announced he wants to extend China’s enormous “Belt and Road” infrastructure development project — which is principally an enormous investment fund — to the Arctic. “China hopes to work with all parties to build a ‘Polar Silk Road’ through developing the Arctic shipping routes,” said the country’s official State Council Information Office.
China sees enormous economic opportunity in the Arctic and intends to commit a great deal of new infrastructure investment in the far north. So do many other countries. The time to start preparing for this wave of change is now.
ALAN ATKISSON is president of AtKisson Group, consultants on sustainable development.