INTERNATIONAL POLITICAL ECONOMY OF ENERGY IN THE ARCTIC – ROBERT. B. WILLOWS

Image: Annie Spratt (Unsplash)

Much focus has been on the environmental consequences that global climate change has brought to the Arctic, both on the melting of glacial ice and the effects on the ecology. The declining extent of sea ice has renewed attention to shipment routes from countries within and outside of the Arctic. Limited infrastructure, unpredictable weather and high environmental and safety regulatory burdens as stipulated by the International maritime organisation pose difficulties to shippers in the transportation system of the arctic. Search and rescue along with law enforcement remain limited due to extreme remoteness and harsh climate conditions. No Arctic nation has reached their 200 nautical mile Exclusive Economic Zone (EEZ) limit in resource extraction because of the high expenses associated with it. International interest in the Arctic includes scientific research and continues to be such, especially around Svalbard and shipping routes that China are conducting through their Belt and Road Initiative (BRI).

A good place to begin understanding energy in general is by distinguishing the diversity of energy sources in the world, these includes much more than just oil. Oil is often discussed more than any other energy source. A easy categorisation is to distinguish between primary and secondary fuels, where primary fuels are resources such as oil, gas, coal and renewables such as solar photovoltaics (PV), onshore and offshore wind and biofuels. Secondary fuels are produced from primary sources such as petrol and electricity. Fossil fuels continue to dominate the worlds energy supply with up to 32% of the worlds energy consumption. Coal is estimated at 27%, gas at 22%, biomass 10% and electricity at 9% . The production of crude oil and gas continue to grow with the main producers remaining; Saudi Arabia, the United States of America (USA), Iran and Russia. The forecast is that the demand for gas will continue to grow, which is partly caused by campaigns targeting the removal of coal as a means of energy production and the switching of coal powered electricity generation facilities to gas and renewables. Globally the demand for energy is growing, notably this is connected to economic growth in developing countries such as China, India and South Africa. Moreover demand in the USA, Japan and Europe has decreased, as a result of energy efficiency polices. There will be increased pressure on states to reduce pollution and invest in cleaner energy as a result of rising demands. Many countries resort to demand side policies with no enthusiasm, unfortunately. 

Large scale resource extractions remain a key feature of the formal market-based economy of the Arctic. The extraction of these resources rely on companies outside of the Arctic and more often than not, these extractions harm the environment and remain unrewarding to the locals. The dependence of local economies on external markets can explain the lack of benefits. Another distinct feature is the traditional based economy, such as subsistence fishing which is one of many activities affected by increasing activity in the Arctic.

The economic potential due to climate change has renewed Russia’s focus the Northern Sea Route (NSR) and resource extraction. Russia has always known the importance of the NSR regarding economic security, its military operations as well as its unique global position. This is evident in its policies to drive successful development of the region, with regional challenges shaping its development. The first Arctic specific policies highlighted resources for internal use, exporting, promoting peace and security, preservation of the ecosystem and the use of the NSR as the nationwide transport infrastructure as part of Russia’s modernisation plan. The year 2013 yielded a state program which highlighted socio-economic development, science and technology, environmental security, international cooperation and military security. Ultimately, creating support zones as a way to develop the Arctic Zone of the Russian Federation (AZRF) and the NSR. Many of these state programs lack in the development of local socio-economic circumstances. Post 2014 brought about Russia’s’ annexation of Crimea and heightened its role in the Syrian conflict resulting in sanctions from the west and exclusion of sharing western technology for resource extraction. Continued friction between Russia and the west encouraged them to look at eastern countries for investment which gained interest from China. The NSR is a major cog in Russia’s Arctic foreign policy with increased international attention to the route requiring an updated military infrastructure to protect the region.

Despite China having their own oil resources, rapid growth has placed concerns on its future energy security. The first project within the Polar Silk Road conducted in the Arctic is the Yamal Light Natural Gas (LNG) project, that has the potential to export gas to China. The activities of China in the Arctic, is comparatively small to their involvement in other parts of the world. The recent drop in oil prices brought about by the COVID-19 pandemic is making oil extraction from the Arctic fields too expensive to profit from. The uncertainty of China’s exact interests in the Arctic makes observers nervous. Additionally, China is looking at the Arctic for new shipping routes particularly the NSR. 

The main forum that is used for negotiation in the Arctic is the Arctic council. This council is comprised of eight member states, six permanent participants representing indigenous Arctic people and lastly observers, of which non-Arctic states and international organisations are included. Arctic states play a key role in shaping policy in the region, they oversee regulations and standards for safe resource extractions by industries and provide a framework for assessment measures including environmental and social issues. Sub-national governments shape oil and gas policy in their territories. Native corporations manage oil and gas profits, this is transferred from the state to the natives, this forms part of the Alaska Native Claims Settlement Act (ANSCA). Prominent to Canada, co-management boards oversee and review environmental impacts of all projects that may influence the environment in their territory, these boards are established through regional land claim agreements. NGOs (Non-Governmental Organisations) tend to be effective in pushing for regulations and raising public awareness of Arctic energy developments. They work directly with community members to organise resistance against extraction projects and promote small scale renewable energy projects in the Arctic. Essentially these forums are used to address environmental and social issues that arise from companies who fail to take into account the negative impacts of their projects, be it environmentally, socially or economically for indigenous communities.  

A study conducted in many emerging economies has concluded that nuclear energy, while being the most expensive to develop and invest in, provides a positive impact in reducing CO2 emissions. While renewable energy provides greater economic growth, it still has a negative impact on CO2 emissions for a multitude of reasons. Knowing this, there is a need for more viable options for sustainable and environmentally friendly energy in the Arctic. The need for robust policies to mitigate environmental and social risk while enhancing the benefits for communities and the environment in the Arctic is vital to its sustainability. The past decade’s policy discussion in the Arctic has been centred around ensuring research and development that benefit the regions indigenous people. The fact that many northern economies across the Arctic are still dependent on oil and gas development is an issue that needs addressing especially with the rapid pace of climate change. 

Robert Willows is a Political Science and International Studies student at the University of Pretoria. International relations interests him and he wishes to further his studies on this subject, especially in security and economic policy.

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