Opportunities and challenges: economic, social, and political impacts of climate change in the Arctic

written by Eleonora Milazzo – ACCEL European Fellow

Photo credit: NASA
Photo credit: NASA

In the last post we examined the true nature of climate change in the Arctic. Building on what we learned, this post details the broader consequences of melting ice and increasing temperatures.



  1. Economic impacts


Opportunity or threat?

From a strictly economic point of view, climate change represents a major opportunity for the Arctic. In many circumpolar regions, it will bring warmer winters and extend the periods of ice-free waters. Sea ice retreat will improve accessibility to Arctic ports, reduce costs of oil and mineral exploration and exploitation, and open up faster transport routes connecting the Atlantic and the Pacific.[1] Tourism will also increase, with more and more tourists cruising to polar regions.[2]

Let us now look at key sectors of Arctic economy and try to find pros and cons of the Arctic change.

Photo credit: Ramil Sitdikov, RIA Novosti
Photo credit: Ramil Sitdikov, RIA Novosti


Economic impact sector by sector

The first Arctic 101 blog post already offered an overview of the importance and the volume of oil and gas production in the Arctic. We will address the challenge of resource extraction later. For now, it is enough to say that off-shore exploration and extraction will benefit from reduced or thinner sea ice. Nevertheless, costs of facing increased wave force and wave movement off-shore will remain high, as well as costs of onshore production due to thawing frozen ground.[3]

Climate change is expected to impact shipping by opening up new navigable routes. Some of these like the Northwest Passage and the Northern Sea Route would considerably improve connections between the Atlantic and the Pacific Oceans, cutting the price of shipping. Industry (fishing, mining and resource extraction) would be the first to benefit from such developments. The problem is that new weather conditions will increase the presence of icebergs floating around and vessel traffic intensification is likely to have negative counter effects on the marine ecosystem.[4]

The Arctic harbors a rich reserve of minerals, including nickel, copper, platinum, diamonds, gold, lead, zinc and many others. As mining is usually conducted on frozen ground, thawing permafrost and erosion is likely to increase challenges and thus also the costs for the industry in the future.[5]

Climate change will also affect marine fishing, a fundamental source of income in the circumpolar world, with total fish catch in the Arctic accounting for 10.1% of the global catch.[6] Warmer waters will increase stock productivity for some species but will also cause some others to migrate further north, whilst still others would decline, mainly due to competing species or changes in nutrient conditions due to currents.[7] Migration and declines in stocks will consistently change harvesting sites, meaning that fishing will not be possible for some communities anymore.[8] Yet, complex as it is, it is hard to say what the overall effect will be and very hard to predict the evolution of this trend.

Tourism will benefit from improved access to ports and longer seasons, while remaining highly dependent on attractions that are endangered by climate change. If Arctic wildlife, landscapes and ecosystems are increasingly disrupted, the circumpolar region is likely to lose its appeal to tourists.

But what about the people who are living with this change? What will their role be? Will they benefit or suffer from it?



  1. Social impacts: living with the change, driving the change?

    Photo credit: Alamy
    Photo credit: Alamy


Climate change, coupled with globalization, is deeply affecting circumpolar societies who are experiencing unprecedented shifts in their livelihoods.[9] Their culture, traditions, knowledge, and their lives have developed in harmony with surrounding ecosystems. Local economies make no exception. Shrinking sea ice, thawing permafrost, changes in vegetation and wildlife, are all altering the structure of local economies.[10]

The Arctic economy has two facets: firstly, it comprises income generated by extractive industries, which tends to ultimately flow away from the Arctic. Another component results from a combination of subsistence activities and transfer payments from the government.[11] It follows that, on the one hand, the economy is narrowly-based and, on the other, it is largely exposed to fluctuations and instabilities of the global market.[12] Subsistence harvesting is at risk due to climate change; whale hunters, and caribou and reindeer herders, for example, are experiencing unfamiliar conditions and unprecedented changes in their surrounding ecosystem.[13] Shrinking sea ice and thawing permafrost also hamper traditional means of transportation on ice.

Disruption of subsistence and commercial harvesting and fishing will impact not only the economy but will also upset other aspects of Arctic communities, like their diet and identity. The fact that some species will no longer be available will affect the ability of these peoples to maintain their wellbeing, their social structure and allocation of labour.[14]

Economic development connected to climate change poses yet another challenge to circumpolar communities: to what extent will these communities be allowed to drive this development, or they will just witness it? The opening up of new shipping routes potentially represents an opportunity for indigenous peoples. Industries like mining could become part of their economies. The crucial issue, then, is that, as industry develops, indigenous peoples’ right to land and sea must be recognized, together with their right to free, prior, and informed consent on all issues that affect their lives.[15]

To sum up, these are the words of the Inuit Circumpolar Council (ICC):

Because of the Arctic’s unique physical and metaphoric importance to climate change, the ICC should call on world leaders to designate the minimizing of climate change impacts on the Arctic as one of the key benchmarks for effectiveness of a post-2012 process. The ICC is deeply concerned about the current and potential impacts of climate change on the culture, health, spirituality and economy of Inuit throughout the Arctic. Inuit are concerned about the health of the Arctic environment, which not only sustains Inuit livelihood, but also plays a vital role in keeping the earth’s systems healthy as a whole.[16]


What kinds of solutions are available? Find out soon, in the next post about indigenous people!



  1. Political impact: new challenges, stronger synergies

    The Xue Long, a Chinese icebreaker. Photo credit: Xinhua
    The Xue Long, a Chinese icebreaker. Photo credit: Xinhua


There is no doubt that the opportunities mentioned here will not outweigh the extreme and long term consequence of climate change on the global scale, including – as we showed – biodiversity loss, extreme climate scenarios, increased pollution, and social problems.[17] Nevertheless, Arctic 101 already anticipated that new opportunities connected with melting sea ice have renewed the global attention to one of the most remote places in the world, fanning the flames of the ‘Arctic debate’.

Increased access to natural resources will require all levels of Arctic governance to readjust and cope with new challenges. As all these changes will be of an essentially transboundary nature, and no global power will be able to act alone to face them, Arctic states will be called to coordinate among themselves and with an increasing number of non-Arctic states and non-state actors. This will also include synergies with lower levels of governance, especially regional and local levels. Also, it will be important to maintain a fruitful climate of cooperation at all levels to attract the most keenly needed investment for development, disaster prevention, and adaptation. On this point, another challenge will be to improve on the relationship between the science and policy. Arctic change calls for modern technologies and improved infrastructures to accompany development and reduce risks for the environment.

This being said, we anticipate three matters that will necessitate an international effort for cooperation. Issues like oil spill pollution prevention, shipping regulation in the Northern Sea Route, and fisheries management will be paramount for the future of the Arctic and will require unprecedented effort of the global community.



[1] Tol, R. S. J., 2009. The Economic Effects of Climate Change. Journal of Economic Perspectives. Vol. 23(2), pp. 43-44.

[2] Ibid.

[3] Eskeland, G. S. and Flottorp, L. S., 2006. Climate change in the Arctic: A discussion of the impact on economic activity. In Glomsrød, S. and Aslaksen, I., eds., 2006. The Economy of the North. Oslo: Statistics Norway. P. 86.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid., p. 83

[8] Ibid.

[9] See also Nordic Council of Ministers, 2010. Arctic Social Indicators Report.

[10] See also United Nations Permanent Forum on Indigenous Issues, 2009. Indigenous peoples, Indigenous voices. Factsheet.

[11] Nordic Council of Ministers, 2010. Arctic Social Indicators Report. P. 22

[12] Ibid.

[13] Ibid.

[14] Ibid., p. 52

[15] United Nations Permanent Forum on Indigenous Issues, 2009. Indigenous peoples, Indigenous voices. Factsheet.

[16] Inuit Circumpolar Council, 2009. Inuit Arctic Policy.

[17] Tol, R. S. J., 2009. The Economic Effects of Climate Change. Journal of Economic Perspectives. Vol. 23(2), p. 44.


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