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04 Jul 2013

Arctic diplomacy

Wai Shin

by Wai-Shin Chan

Climate Change Strategist, HSBC

Efforts by China to become more involved in the Arctic’s future have begun in earnest

Efforts by China to become more involved in the Arctic’s future have begun in earnest

The Arctic’s resources are attracting growing interest from China and others, and some think the shrinking of sea ice could eventually clear the way for new shipping routes. But the Arctic helps to stabilise the Earth’s climate and opening it up could accelerate global warming.

Efforts by China to become more involved in the Arctic’s future have begun in earnest. Along with India, it recently joined as an observer state to the Arctic Council, which deals with issues faced by Arctic governments and their people.

The Council met in Kiruna, Sweden, for its Eighth Ministerial Meeting in May. The resulting Kiruna Declaration sought to improve economic and social conditions in the Arctic, act on climate change and protect the Arctic environment.

As China seeks to lower its carbon use, it is looking to limit coal consumption and consume more gas

Of the nations who attended, China and India have the fastest-growing demand for oil and gas. As China seeks to lower its carbon use, it is looking to limit coal consumption and consume more gas. It signed a free-trade agreement with Iceland in April; it agreed to lend USD2 billion to the Russian oil company Rosneft in return for joint exploration of offshore oil in the Arctic with the China National Petroleum Corporation. In addition, Russia’s Gazprom expects to close a gas deal with China by the end of the year to supply 1.3tcf of gas annually from 2018 via pipeline.

The patterns of global trade are constantly evolving as emerging nations grow and new routes open up to challenge long-established highways and seaways. Last summer, the Arctic sea ice was at its smallest in 33 years of satellite monitoring. Many climate models predict that the Arctic could be ice-free, at least during the summer months, within a few decades. This could open up the necessary transport options for oil and gas development in the Arctic as well as the possibility of new shipping routes. Like so much global economic change in the 21st century, this development is being driven by the expansion of trade with China.

Graphic showing the change in the arctic map

Source: HSBC

Currently, there is limited transport infrastructure in the Arctic because the prevailing situation makes it costly. Even as the ice melts, Arctic routes are likely to be ice-free for only a few summer months and even then there may still be pieces of rogue ice. Any development would require vessels – icebreakers – with the capability to sail through any residual ice. In August 2012, the polar research icebreaker Xuelong (Snow Dragon) became the first Chinese ship to cross the Arctic.

Finding more efficient transport routes is a priority for China and its trading partners – with about 90 per cent of China’s trade going by sea. The shrinking ice in the Arctic could potentially open up the Northern Sea Route (NSR) and the Northwest Passage (NWP) which, in theory, would considerably shorten the Asia-Europe trade route.

The effects of this on climate could be far-reaching. The Arctic helps to stabilise the Earth’s climate and slows the rate of climate change. For example, the ice and snow reflect solar energy back into space (the albedo effect) rather than absorb the energy, and the cold, fresh waters in the Arctic absorb carbon dioxide more quickly.

Temperatures in the Arctic have been rising at twice the rate of average global temperatures, in what has been described as a tipping point for the Earth’s climate. The potential increase in emissions from shipping activity in the region from oil and gas development or increased trade would decrease the albedo effect – feeding back into the warming cycle.

The next meeting of the Arctic Council is in 2015, the same year as the climate change negotiations in Paris where a legally binding treaty must be agreed to keep the world on its path to limiting global warming to 2°C. The debate between those who want to open up the Arctic region and those more concerned about the climatic and environmental effects seems set to intensify.

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