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Lloyd's: Arctic Opening: Opportunity and Risk in the High North

Authors: Charles Emmerson, and Glada Lahn
March 12, 2013

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The Arctic region is undergoing unprecedented and disruptive change. Its climate is changing more rapidly than anywhere else on earth. Rising temperatures are causing a retreat of sea ice and changes to seasonal length, weather patterns and ecosystems. These changes have prompted a reassessment of economic and development potential in the Arctic and are giving rise to a set of far-reaching political developments.

Different regional and global economic scenarios suggest a range of possible future trajectories for Arctic development. Key uncertainties over future environmental conditions and the scale and accessibility of Arctic natural resources are compounded by uncertainty about the pace of technological development, the price of hydrocarbons, the future shape and demands of the global economy, and the political choices of Arctic states. Environmental disaster – whether due to a single event, or as a cumulative result of increased economic activity – could rapidly and significantly change the Arctic's political and economic dynamics. Still more acutely than elsewhere in the world, economic development and environmental sustainability in the Arctic are co-dependent.

If current patterns continue, however, investment in the Arctic could potentially reach $100bn or more over the next ten years, largely in the development of non-renewable natural resources, and in infrastructure construction and renewal ii. For some, this prospect represents a substantial business opportunity. But it also brings a unique and complex set of risks, and raises signifi cant policy dilemmas.

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