Big Business Wants to Take Advantage of Melting Arctic
Standing at a podium before the World Economic Forum, Leonardo DiCaprio briefly smiled as he received an award for his leadership in tackling climate change. Once settled under the spotlight, he quickly moved away from his grateful statements, and began railing on corporate avarice – how big business wants to ravage a melting arctic.
“We simply cannot allow the corporate greed of the coal, oil, and gas industries to determine the future of humanity,” said DiCaprio last week while at Davos, Switzerland, where some 2,500 top global business leaders, politicians, and intellectuals gathered to discuss politics, economics, and social issues.
Fossil fuels must be kept in the ground to avoid catastrophic climate change, he continued. “Enough is enough. You know better. The world knows better.”
But while DiCaprio was cheered Wednesday as he stepped off the stage with his Crystal award, the international business community appears interested in venturing into new areas despite potential ecological costs. In fact, a day after recognizing environmental leadership, a World Economic Forum advisory group launched the Arctic Investment Protocol, and with that came a tacit push for extracting resources from one of the least-developed areas of the world.
The Arctic Investment Protocol is a voluntary set of guidelines for nations looking to do business where diminished ice coverage from man-made climate change is allowing access to once-unreachable sea routes as well as vast mineral and fossil fuel reservoirs.
The protocol calls for building resilient societies through economic development, pursuing measures to protect the Arctic environment, and respecting and including local communities, to name a few. The Guggenheim Partners, a major global investment and financial services firm, quickly endorsed the protocol, saying the Arctic represents one of the last great economic frontiers.
With more than $240 billion in assets, Guggenheim Partners was the first major firm to endorse these guidelines. In doing so, it also gave a strong indication of where global business is headed as South America, Asia, and Africa receive increasing investment. “The Arctic Investment Protocol is an important step forward and a solid foundation upon which to build for the future,” said Scott Minerd, global chief investment officer of Guggenheim Partners, in a statement.
On the one hand, such a business trend would bring economic prosperity and infrastructure that experts say is lacking in many Arctic communities. On the other, human history shows that economic development is very often intertwined with ecological costs.
Warmer temperatures in the Arctic are raising concerns about the social and economic well-being of the people in those regions. Climate change is already having devastating effects on subsistence gathering in Alaska, Canada and Russia.
Exponential Arctic development thus raises serious environmental questions involving a region known for its fragile endemic species, where maritime environmental protection codes are in infancy, and so remote that pollution cleanup operations are difficult and costly. Not to mention the major role the Arctic plays in global climate since its already receding ice reflects a large amount of solar radiation, all while holding onto CO2 that if released would accelerate global warming.
And yet the northernmost region of the world has seen its share of development for many years. Researchers reached said the Arctic became part of the global economy at least two centuries ago with the emergence of the whaling industry, followed by oil and gas exploration. Researchers noted, however, that a new boom is taking place because the area is more accessible, and that Guggenheim could be a watershed for even more investment.
This comes as studies have found that Arctic ice is receding and thinning at an accelerated pace. Annual mean ice thickness has decreased from nearly 12 feet in 1975 to some four feet in 2012, a 65 percent reduction, according to a 2015 study. Moreover, the Arctic warms twice as fast (or more) than the Earth as a whole does.
“You can say that it is the era of [the] Arctic,” said Mohamed A. Essallamy, an expert in Arctic maritime issues and a professor at the Arab Academy for Science, Technology & Maritime Transport, via email to ThinkProgress.
In 2009, only five cargo ships went through the Russian Northern Sea Route, according to a recent study by the Council on Foreign Relations. By 2013, that figured climbed to 71. Meanwhile, investment in the Arctic could potentially exceed $100 billion within the next six years, according to a 2012 Arctic Opening report by Lloyd’s of London Ltd, the world’s oldest insurance market.
Profiting from the Arctic is costly, however. In a statement, Guggenheim Partners said the Arctic needs about $1 trillion in infrastructure. The firm said it’s working with international partners to establish the Arctic infrastructure inventory to identify and prioritize such needs across the region.
“There is a great need for infrastructure,” said Jessica M. Shadian, a researcher and professor at Iceland’s University of Akureyri, in a phone interview with ThinkProgress. Telecommunications, affordable energy, but also more basic infrastructure like sewage and potable water is lacking in many areas, she said.
“People want economic development in the Arctic, in the north, just as much as anyone does anywhere else,” said Shadian, who like many noted that local support for economic development is abundant, even if that development means unearthing fossil fuels.
Winter sunshine around Reykjavik, Iceland.
CREDIT: Shutterstock
The Arctic Slope Regional Corporation and the Aboriginal Pipeline Group, she said, are just two large examples of organizations owned by Arctic communities that back resource extraction. Environmentalists in the Arctic and elsewhere have questioned development for years as well, saying extraction will industrialize land, pollute water, and generate greenhouse gas pollution.
Just last week, Greenpeace Norway director Truls Gulowsen told Climate Home that the group aims to challenge oil development in Norwegian courts. “We have already discovered more fossil fuels than it is safe to burn in a 1.5°C or 2°C scenario,” he said.
Last year governments agreed on a framework that puts the world on track to limit global warming to no more than 2°C, a threshold many in the scientific community say will prevent the most catastrophic effects of climate change. By some estimates, this threshold requires keeping as much as two-thirds of fossil fuel reserves in the ground.
For the Arctic, moreover, development may come at time of serious local environmental frailty. In recent research, Essallamy explained that many Arctic species live long and produce only a few offspring, making them particularly sensitive to any change that could affect mortality. He further noted that slow biological processes lead to slow revegetation, so for instance, impacts on tundra from heavy vehicles may be observed for decades. And then there are invasive species that ships could bring and the unavoidable leakages of lubricant and fuel oils.
All these effects would come as maritime environmental protection codes are barely developing, and when laws in the high seas are difficult to enforce to begin with. In fact, a code for ships operating in polar waters is yet to be applied. The International Maritime Organization has adopted regulations in the last couple of years and more are expected, Essallamy said, but the earliest polar code will come into force in 2017.
Still, the notion that the Arctic is lawless is deceptive, experts said. For more than two decades the Arctic Council, a high level intergovernmental forum including arctic governments and indigenous communities, has been meeting to promote coordination. It has eight member countries: Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States.
“The fortunate aspect about a lot of parts of the Arctic is that they are in highly developed countries,” said Shadian, “and so you are not going to really see just extracting resources at any cost because there are a lot of environmental standards.”
Drue Pearce, a former Alaska State senator, said in an email to ThinkProgress that in Alaska the National Environmental Policy Act of 1970 that regulates development, “and the rest of every permitting process, is more rigorous than anywhere else in the world.”
The Arctic region has nonetheless suffered ecological damages for years. Russia has struggled to enforce its environmental standards, although it holds stringent environmental laws, experts said. According to published reports, environmentalist and experts agreed that at least 1 percent of Russia’s annual oil production, or 5 million tons, is spilled every year. Much of the spillage reportedly happens in the oil-rich Russian Arctic.
Alaska too, has had its share of issues with oil, most notably during the Exxon Valdez oil spill in the 1980s. Responding to environmentalist catastrophes — and other emergencies — is quite difficult and costly, experts said, and many resources need to be concentrated in developing safety systems.
Two Russian oil workers use a boat and shovels to gather oil and mud from the waters of a small river, a tributary of the Kolva River, some 37 miles north of Usinsk, an Arctic town six miles from the Arctic Circle in Russia, Friday, Oct. 28, 1994.
CREDIT: (AP Photo/Alexander Zemlianichenko)
Yet Shadian said local communities that have inhabited the Arctic for thousands of years still don’t necessarily agree that their development should be discounted, particularly over climate change. The brunt of climate change, she said, didn’t originate in the Arctic. “What happens in the south doesn’t stay in the south, it goes straight to the Arctic.”
And with that, Shadian touched on how the world may be unfairly weighing on development and the environmental costs associated with climate change, an issue that has received increased attention in recent times. During the Paris climate talks for instance, the issue of how rich nations have benefited from fossil fuels while passing many of the costs to developing countries was front and center. This in turn emboldened the argument that resource demand in some areas drives resource extraction elsewhere, which when ill-managed exacerbates climate change and increases the risk for ecological disasters.
For the Arctic, this argument and the ecological paradox it carries is no different, and in part places the responsibility of what happens in the Arctic on the global consumer. That’s because economic theory says demand largely drives supply, and if that’s the case, then global demand will establish the rate of Arctic development, not the other way around.
Indeed, as commodity prices continue declining in value, costly Arctic development may very well be following the same trend, at least in the short term. “Right now mineral and oil and gas prices are so low that a little bit of a hype in the Arctic is dying down,” said Shadian, who like many others who’ve lived in the region, welcomed Arctic development, so long it’s environmentally responsible and sensible to local control.
“The Arctic is not any different when it comes to development or the right to do so,” said Inuuteq Holm Olsen, a Greenland diplomat, in an email to ThinkProgress. “For us, it is not a choice between development or the environment. The right to development is a universally recognized principle and that applies to the Arctic as well.”