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Rapid and disruptive change in the Arctic environment presents uneven prospects for investment and economic development.
pdf Arctic Opening: Opportunity and Risk in the High North (10.85 MB, pdf)
Environmental changes, especially those linked to global climate change, are giving rise to a broad set of economic and political developments. Sustainable realisation of the economic opportunities that result from these developments depends on strong regulatory frameworks and corporate environmental stewardship.
There is a wide range of potential scenarios for the Arctic’s economic future, depending principally on local investment conditions and global commodity prices. Oil and gas, mining and the shipping industries will be the biggest drivers and beneficiaries of Arctic economic development.
Uncertainties and knowledge gaps exist around the nature of environmental change, the geological potential of the Arctic and environmental baselines, as well as seabed mapping, and how to deal with the risks of significant Arctic industrial activity. Governments, research institutes, non-governmental organisations and businesses can help close these gaps.
Many of the operational risks to Arctic economic development – particularly oil and gas developments, and shipping – amplify one another. At the same time, the resilience of the Arctic’s ecosystems to withstand risk events is weak, and political and corporate sensitivity to a disaster is high.
While particular risk events – such as an oil-spill – are not necessarily more likely in the Arctic than in other extreme environments, the potential environmental consequences, difficulty and cost of clean-up may be significantly greater, with implications for governments, businesses and the insurance industry.
Given the Arctic’s iconic status and sensitive environment, Arctic development is often politically contentious, with sometimes opposing interests and perspectives between local, national and international levels.
There are major differences between regulatory regimes, standards and governance capacity across the Arctic states. The challenges of Arctic development demand coordinated responses where viable, common standards where possible, transparency and best practice across the north.
Companies operating in the Arctic require robust risk management frameworks and processes that adopt best practice and contain worst case scenarios, crisis response plans and full-scale exercises. There are many practical steps businesses can take to manage risks effectively, including investing in Arctic-specific technologies as well as transferring some of the risks to specialist insurers.
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