The Economist – The Arctic: Climate change’s great economic opportunity

Key topics.Arctic ice melt opens new shipping routes and trade opportunities.Rich reserves of critical minerals emerge amid warming Arctic waters.Geopolitical and environmental hurdles challenge Arctic economic potential..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..From The Economist, published under licence. The original article can be found on www.economist.com© 2024 The Economist Newspaper Limited. All rights reserved..The Economist .An enormous prize is on offer. When might it be grasped?___STEADY_PAYWALL___.For bears of both the market and polar kind, a planet without an ice cap is a tragedy. The Arctic is warming four times faster than the world at large, causing ice to shrink by an area the size of Austria each year. Since the 1980s the volume of ice has fallen by 70% or more. The Arctic's first ice-free day may occur before 2030..A warming Arctic should yield enormous dividends. Retreating ice will create shipping shortcuts. Maritime access and melting glaciers will make it easier to extract minerals, just when the world craves resources from the Arctic's virgin geology. Warming waters may entice hordes of fish. This could up-end trade, energy and geopolitics. The prospect has sparked a rush of diplomats and miners. In December China set a world record, unveiling a "polar-ready" 58,000-tonne cargo ship. One red-hatted politician has talked of seizing Greenland. The obstacles, though, are as big as the opportunities. Last month Norway paused plans for deep-sea mining; Russia's own efforts have halted. Can the prize be grasped? And on what timescale?.One benefit already on offer is bigger catches. Some species, such as snow crab and Alaska's king salmon, are struggling in warmer, somewhat acidified water. And an international agreement has restricted fishing in the high seas. But this is more than balanced by the fact that species from southern and temperate waters, including Atlantic cod, are moving to areas such as the Barents and Bering seas. Nutrient-rich water could also help populations grow faster, while receding ice opens up new grounds and lengthens fishing seasons. Mackerel did not arrive off Greenland until 2011. By 2014 the oily fish represented 23% of the island's total export earnings..Read more: Expropriation Act fallout: SA institutions sound alarm over threats to property rights and economy.Such benefits may pale in comparison to those offered by new shipping routes. To grasp how climate change may transform them, see the map below. Melting ice could open three paths. The first, known as the Northern Sea Route (NSR), hugs the Russian coast to connect the Barents Sea with the Bering Strait. A second, dubbed the North-West Passage (NWP), runs along the North American Arctic coastline, from the Beaufort Sea to Baffin Bay. Last comes the Transpolar Sea Route (TSR), which runs over the North Pole..All three could shorten trips between Asia, North America and Europe, which account for most shipping, saving on fuel and wages. They could also avoid chokepoints such as the Panama and Suez canals, which are busy, charge fees and, in the case of Suez, link to dangerous waters..Exactly when these promises might be fulfilled depends on the route. The NWP, which runs through Canada's Arctic Archipelago, consists of narrow, winding channels. It is melting more slowly than the NSR. Although it stretches 1,500km, it has only one deep-water port and lacks emergency facilities. Canada claims the NWP is in its waters; America and Europe deem it an international strait. The route is also shallow, limiting the size of vessels..The TSR dodges many of these problems. It traverses the Central Arctic Ocean, which is much deeper. It avoids territorial waters, cooling the political temperature. And it provides the shortest route from the North Atlantic to the Pacific. Proponents foresee thousands of vessels a year shuttling between North America and Asia, stopping en route at Alaska's Dutch Harbour. Even when the ice is gone, though, the route will be littered with icebergs, making it navigable only by icebreakers. The vision of thousands of ships may have to wait until 2050 or so..Sea change.That makes the NSR the most promising option available. The route has been open to ice-resistant ships in the summer almost every year since 2005. Sections are navigable all year, albeit with the help of an icebreaker escort, which is expensive. Traffic is rising nevertheless: a record 92 ships navigated the NSR last year, up from 19 in 2016. As ice continues to melt, the NSR could appeal to two types of voyages. One is traffic focused on the transport of resources from Russia's far north. The country has long aimed to secure year-round energy exports by shipping liquefied natural gas to Europe in the winter (for heating) and Asia in the summer (for cooling). Although that grand vision receded after Vladimir Putin's invasion of Ukraine, when Europe cut some links with its neighbour, the NSR could still help Russia ship coal, gas and metals to China and India..The route may also lure some of the traffic connecting Asia to Europe. It is unlikely to be used much for container ships, which tend to hop along hubs in the Gulf or South-East Asia rather than travel the whole route between Europe and Asia, says Rasmus Bertelsen of the UiT Arctic University of Norway. The north's rough seas also risk thwarting the just-in-time logistics of the modern goods trade. However, it could reduce the distance between Rotterdam and Shanghai by 5,000km, or 25%, and slash the journey from 30 to 14 days. As a consequence, despite the route's defects, it could still boost overall trade between Asia and the EU by 6%, according to Eddy Bekkers, now at the World Trade Organisation, and colleagues..The Arctic's last prize concerns commodities. This used to mean hydrocarbons. The region is thought to hold 13% of the world's undiscovered oil and 30% of untapped natural gas. But its deposits are among the costliest to exploit—not ideal when demand for oil is flagging and a glut of natural gas, produced more cheaply in America and Qatar, is on the way..Read more: Trump returns to the global stage, announces the "golden age of America" has begun.Instead, the hope lies with the Arctic's "green" minerals, which global warming is making more accessible. They include cobalt, graphite, lithium and nickel, important ingredients in electric-car batteries; zinc, used in solar panels and wind turbines; copper, required for all sorts of things electric; and rare earths, crucial to many types of green and military equipment. Niche metals including titanium, tungsten and vanadium, used to make "super-alloys", are also prized. Greenland looks especially well resourced in this regard. The island has reserves of 43 out of 50 minerals deemed "critical" by the American government. Its known rare earths amount to 42m tonnes, some 120 times more than the world mined in 2023..Most of the Arctic's minerals have not been mapped out in detail, notes Per Kalvig, who co-wrote a geological survey of Greenland. As such, any exploitation could be at least a decade away. But the International Energy Agency, an official forecaster, reckons that the global market for such minerals will double in value by 2040, if countries stick to existing climate pledges. Western countries are also eager to discover new sources so as to bypass China, which dominates supply..Firms that use artificial intelligence to sift through historical and scientific data in order to identify deposits could speed up progress. Ice-capable rigs, autonomous mining vehicles, heavy-lifting drones and other technologies are being developed to withstand the Arctic. Miners must learn how to extract and process metals that are often found in low concentrations or mingled with others. Seven out of eight Arctic nations are members of NATO; they may have to reinvent China's techniques if they or their partners decide to limit its involvement in future projects..Cold comfort.Three types of people must also be convinced: investors, national governments and locals. Lumina Sustainable Materials, Greenland's sole mine, offers a preview of the challenges. Set up in 2013, it was first licensed to make a refined form of anorthosite, a light-coloured rock used in fibreglass and paint. Yet the delicate material was too difficult to ship. By 2020 the mine had exported little. It took a new deep-sea port, and sustained lobbying by the firm's new management—no longer in Vancouver but in Greenland—for Lumina to be allowed to export the rock in coarser form. Production is set to increase to 210,000 tonnes in 2025, up from 35,000 in 2019, all of which will be shipped abroad. The mine sits on a deposit of some 4bn tonnes..In recent history, the Arctic's allure has been as a place on which to put garrisons, spy devices and nuclear weapons. Plenty of obstacles may prevent its transformation into a modern El Dorado. Pooling the cash, tech and goodwill required to spark a boom will involve more time and effort than merely waiting for the ice to go. Competition without co-operation risks holding back progress. But the prize on offer is such that, over coming decades, the Arctic will surely become an economic as well as a geopolitical venue..Read also:.DA demands GNU reset: Steenhuisen declares formal dispute over NHI and Expropriation BillParks Tau's R100bn fund: Unconstitutional and destructive – Ivo VegterThe Economist: Donald Trump has rewritten the history of January 6th

The Economist – The Arctic: Climate change’s great economic opportunity

Related Stories

The Economist: Passport shopping, tax havens and a whole industry built around billionaire flight

SA's industrial slide hits the headlines - Morocco now Africa's top industrial economy

The weird, wild story of humanity’s obsession with gold

America is experiencing a productivity miracle, sans AI (as yet)