UNA-NCA Snapshots
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UNA-NCA Snapshots

The Melting Arctic: A Frontier for Fossil Fuel Development

By Shiraz De Vreede, UNA-NCA Advocacy Fellow

Arctic sea ice is critical to our planet’s temperature regulation, as white snow and ice reflect sunlight back to space in order to keep the ocean cool and maintain a balanced global temperature. Greenhouse gas emissions have disrupted this delicate ecosystem by melting the ice at an incredibly rapid pace. Due to global emissions, we’ve lost 13 percent of Arctic ice every decade since 1980 plus 95% of the Arctic’s oldest and thickest ice in the last 30 years. This all amounts to nearly 4 million square kilometers of crucial sea ice in just 40 years.

The consequences of the Arctic ice melt have global implications — from more intense weather patterns and sea level rise impacting global food systems and coastal communities, to the dissolution of wildlife habitats and the melting of permafrost. However, as emissions rise unchecked, key Arctic states such as Norway and Russia view the environmental calamity as a frontier for economic development.

The Arctic contains nearly a third of the Earth’s oil and gas reserves — resources which are becoming more commercially viable in order to meet steady global demand. The extent to which resource extraction will occur in the Arctic is difficult to predict and several factors must be considered before drilling, including state reconciliation of energy and environmental security.

Russia is motivated to extract as much of its natural resources as possible, as its top energy politicians argue the industry must meet global demand for hydrocarbons through 2040. Arctic oil fields currently account for 30 percent of the state oil company Gazprom-Neft’s production. The Norwegian Arctic currently has one active oil field and several in development. The government aims to expand Arctic oil exploration and has awarded a number of licenses to oil companies this year, citing the central importance of the Norwegian oil and gas industry’s livelihood.

Fossil fuel development accounts for nearly three-quarters of greenhouse gas emissions. It has accelerated and exacerbated climate change, wreaking havoc on our natural environment and global health. Countless bodies, including the United Nations Environmental Program, proclaim that global reliance on this finite resource is unsustainable and are calling for a reduction in production to avoid catastrophic effects. Despite this, the majority of states have yet to demonstrate meaningful retreat from national dependence on fossil fuels.

The corporations currently positioned to drill in the Arctic, Norway’s Equinor and Russia’s Gazprom and Rosneft, are majority state-owned. As such, Norway and Russia are important examples in the Arctic context considering the energy industry’s interdependence in national economies. Corporate motivations for profit therefore become embedded in state motivations as they inform decisions in the Arctic, in particular with regard to securing energy resources in light of the environmental security risks.

Considering the positioning these circumpolar economies have toward the Arctic as a frontier for resource extraction, how do Arctic states reconcile the securitization of energy resources and environmental stability in the face of climate change? In addition, what are the roles of states, corporations, and their political economic landscapes in managing oil and gas development in the Arctic?

National Energy Security

Increasing global demand for energy, attributed to population growth, technological advancements in oil production, and financial incentives for oil as an energy source, make the Arctic a focus for hydrocarbon development. Modern industrialized states are undeniably dependent on fossil fuels for energy, including national economies such as Norway and Russia which are nearly entirely reliant on oil and gas sectors for growth, leaving them vulnerable to global boom and bust cycles. In the reality of a competitive global oil market, the survival of an oil business relies on the constant acquisition of new reserves, which is an unsustainable predicament as fossil fuels are a finite resource. Nevertheless, the increasing social and fiscal costs of global warming do not seem to indicate that the demand for oil and gas resources will reduce in the future as governments and market conditions continue to incentivize drilling. Though alternative energy sources may become more competitive in light of environmental concerns, they are still not yet economically incentivized over the status quo.

In order to move away from an international dependence on oil, some states have nationalized their energy industries to better control the management of hydrocarbon production. Nationalization, though granting security through independence, does not necessarily indicate a move toward more sustainable energy sources.

Norway has a reputation for sustainability, as nearly 98 percent of domestic energy use comes from renewable sources, namely hydropower. It is simultaneously one of the world’s largest producers of fossil fuels per capita. The national petroleum industry is the state’s greatest contributor to GDP, where half of the total value of its exports come from oil and gas and whose profits support Norway’s Sovereign Wealth Fund. As Europe’s top petroleum exporter, nationalization of the energy industry in Russia similarly supports national economic motivations, and does not indicate a move away from fossil fuel dependency. In neither case do we see a move towards the production of alternative energy, namely due to the lack of economic incentive for more sustainable forms of energy dependence. Although the securitization of energy resources is viewed as an economic activity, it occurs within natural, political, and social constraints that contribute to increasing security concerns considering the environmental consequences.

The Role of Energy Corporations

In addition to state governments, energy corporations are the main actors in the quest to develop the Arctic’s natural resources. Generally, transnational corporations (TNCs) have a highly involved role both formally and informally in the development of the regulations to which they are party. Through relationships with high-level lawmakers, membership in multinational corporations, and a vested state interest in corporate profit, TNCs actively inform the legal framework dictating their actions. As non-state actors, corporations have had a considerable impact on the development of international law, such as by influencing the European Union’s directives restructuring energy markets as competitive. Moreover, the fluidity of their international status immunizes TNCs from direct accountability to international legal norms and empowers them to find suitable national frameworks for their operations.

While TNCs may have definitive influence on political outcomes, it is not without the help of states themselves. Governments have played an indispensable role in the globalization of capital, facilitating the successful operation of firms such that the state also benefits from corporate profit gains. Corporate participation in regulatory processes is noted as a source of concern since their orientation toward profit-maximization does not ensure that corporate involvement promotes humanitarian interest.

These concerns become blurred when the corporation is nationalized, such as the case of oil industries in Norway and Russia, as corporate interests are embedded in state interest.

In the Arctic context, national oil corporations (NOCs) are at an advantage for being granted operating licenses because of state interest in profits and the demand to meet sales obligations on the international market. Such market conditions, among other considerations discussed in the following section, are the primary factors in the development of hydrocarbon resources in the Arctic.

Reconciling Energy Dependence and Environmental Protection

Despite the present environmental and humanitarian danger, global economic and market conditions remain the primary concern in determining whether to pursue Arctic oil production since the cost of operations in the Arctic is substantial in light of the profit margin. The precariousness of Arctic weather conditions necessitates a large capital investment into research and development of suitable technology and rigorous disaster response protocols. Low energy prices and the current economic landscape, combined with the difficulties of Arctic hydrocarbon development have made Arctic drilling relatively unattractive. Yet as global reliance on oil is maintained and more accessible reserves continue to be depleted, the economic incentive for Arctic oil is catching up.

A critical component in whether resource extraction is pursued in the Arctic is the way in which corporate activity is nurtured through national political, economic, and legal institutions. Particularly, the nationalization of oil companies, characteristic of the only two countries currently involved in oil and gas extraction in the region, is a significant factor in this context. The allocation of resources toward hydrocarbon development in nationalized sectors allows for significant mitigation of the costs associated with drilling and provides an example for the conditions under which Arctic oil extraction occurs.

For example, the relationship between the Norwegian energy industry and its political economic institutions is one based on the public’s investment (through taxes), its Sovereign Wealth Fund, and citizen trust in the multi-party government to manage the industry in the best interest of the population. The embeddedness of state interest with petroleum’s interest demonstrates the state’s dependence on hydrocarbon resources. As such, the political economy of the Norwegian petroleum industry is oriented to best secure capital via oil revenues to maintain its state operations.

In Russia, a combination of personal relationships and the pursuit of research drive the political, economic, and legal landscapes informing the energy sector. When responding to the negative impacts of climate change, for example, proposals must be made in ways that appeal to economic and social benefits such that the state can maintain positive rhetoric and support from its populace.

Considering these factors, Norway and Russia are the only Arctic states committed to devoting the resources necessary to drill for oil in the Arctic, as their national economies depend on oil revenues. Through their national Arctic Policies, both states provide a market-oriented response in reconciling energy and environmental security concerns as they are motivated to develop their Arctic territories due to an expectation of economic prosperity.

Norway’s national Arctic Policy describes both the opportunity for resource development as well as the responsibility to respond to a changing environment. In reconciling energy and environmental security, Norway commits to safeguarding sound ecological status of the Arctic ecosystem by reducing greenhouse gas emissions and pollution “in line with national targets and international commitments” as well as strengthening their emergency response to increased activity in Northern Norway. Nevertheless, developing the northern region is maintained as a top priority of domestic policy-making and the national Arctic Strategy further outlines mechanisms for adapting development infrastructure as a “prerequisite for growth and the green transition.” While this represents a rhetorical commitment to sustainable drilling practices, economic development and safeguarding the ecological status of the Arctic environment are fundamentally at odds from a climate perspective. Arctic development in and of itself constitutes irreversibly altering the natural environment, resulting in consequences that even ‘sustainability’ can not avoid.

According to Russia’s national Arctic policy, the identification of energy and environmental security in the Russian Arctic policy is described as the former depending on the latter. To secure energy resources in the Arctic, Russia must ensure adequate infrastructure and environmental preparedness in order to develop the Russian Arctic as a “strategic resource base [to] speed up national economic growth.” The reconciliation of environmental and energy security in the Arctic for Russia is noted through a symbolic commitment to the well-being of northern populations. To “guarantee high living standards and prosperity for the people of the Russian Arctic zone,” including indigenous groups and migrant populations, is a source of national pride in the articulation of Russian Arctic motivations, as it is for Norway. The sense of pride to ensure such promises are related not only to goals associated with national economic growth, but also to the entitlement states feel over the territory to which they are sovereign.

Each states’ Arctic policies reflect rhetorical commitments to consider the environment in development plans, but neither state intends to refrain from the practice of extracting Arctic fossil fuels altogether. From the perspective of the Norwegian and Russian governments, reconciling energy and environmental security is presented as a motivation to develop their Arctic territories accompanied by various measures to prevent environmentally-destructive consequences associated with drilling.

Against this background of nationalized incentives for Arctic economic development, international legal obligations also play a role in guiding Arctic state behavior with regard to environmental protection.

International Legal Framework Governing Arctic Activity

While the global and national economic incentives are the driving force in fossil fuel development, departing from fossil fuel dependence is not possible without robust international cooperation. International law plays an important role in establishing norms to govern Arctic activity, yet the contemporary legal framework in the Arctic consists of several different instruments. These include conventions under the United Nations Charter, contractual agreements between states and corporations, multilateral international organizations, and the Arctic Council. Their functions range from outlining the acquisition of territories to state responsibilities yet there exist no single comprehensive treaty exclusively governing Arctic affairs.

The closest comprehensive international body existing to facilitate multinational Arctic communication is the Arctic Council, established in 1996 and headquartered in Norway. The Arctic Council is a high-level international forum, whose Member States include the eight circumpolar nations plus thirteen non-member Observer States, as well as six Arctic indigenous councils who are granted Permanent Participant status and consultative rights on all matters discussed by the Council. Since the Arctic Council is not a formal legal organization, its responsibilities largely include conducting research, convening discussions, and offering guidance on Arctic affairs. As such, the Arctic Council has no effective power to enforce shared international standards for oil and gas activity. Nonetheless, the Council conducts research and develops recommendations to encourage communication between stakeholders and maintain peaceful precedent in the region.

The United Nations Charter (UN) is the primary international legal body outlining the responsibilities of states in the global arena. Though not exclusive to Arctic affairs, the UN Convention on the Law of the Seas (UNCLOS) is the most extensive international legal document applicable to the region. The convention came into effect in 1994 and currently has 157 signatories, including Norway and Russia yet not the United States. UNCLOS Article 194 commits states to establish measures to manage pollution of the marine environment by encouraging signatories to adopt legislation to control offshore drilling activities.

Beyond international regulations on drilling itself, the Universal Declaration on Human Rights (UDHR) and subsequent regional conventions such as the European Convention on Human Rights (ECHR) outline the responsibility signatories have to provide a safe and healthy environment for their citizens.

At the end of 2020, Norwegian activists and environmental groups appealed to human rights law demanding the right to a clean environment in light of the government’s Arctic hydrocarbon development. The Norwegian Supreme Court dismissed the case, ruling that the government was not violating the constitution nor the ECHR since Norway was not responsible for the emissions created elsewhere from the oil it exports. Despite growing political pressure to halt offshore drilling in Norway, the government argues they can fulfill their obligations to the Paris Climate Agreement without changing their oil policy. The climate activists who failed in the Norwegian Supreme court are now taking the case to the European Court of Human Rights.

Challenges and Hopes

Corporate activity in the Arctic is not merely of concern to Arctic states but has international implications that have a vital bearing on the global economy and the well-being of humanity. The view of the Arctic as a frontier for resource exploitation and economic development has been rhetorically employed by governments, industries, and financial institutions to legitimize commodity production at the expense of the environment and local populations. Yet, the current political and legal mechanisms that exist to govern the world’s dependence on oil is a product of the industry itself and seems incapable of addressing the urgency of the events that will end it, climate change.

The choice to drill for oil in the Arctic is primarily driven by state motivations to develop resources in pursuit of profit. Considering the substantial capital and technical capabilities necessary to drill, not to mention the limited productive capacity of hydrocarbon development in the Arctic, those who are willing to dedicate investment in research and development will extract resources in the region so long as the incentive remains. Norway and Russia are positioned to benefit from drilling practices despite the ever present environmental and humanitarian risk fossil fuel development poses, due to their embeddedness in the global oil-based economy.

Our global economic incentive system must adapt to the environmentally precarious world we are now facing and reorient motivations toward long-term preservation, safety, and stability over short-term profit. Thankfully, there are states contributing to the precedent of denying opportunities for profit which come at the expense of the environment. In June 2021, Greenland cited climate concerns and environmental protection as a central consideration in deciding not to drill for oil in the Arctic. In addition to considering the high cost of drilling, the Danish territory ultimately reversed its issuing of new licenses for oil and gas exploration to support its goal to be powered by 100% clean energy by 2030. Greenland demonstrates how centralizing state motivations toward environmental and humanitarian protection can outweigh the incentive to develop sovereign resources despite potential profit.

Conclusion

As the consequences of extractives-led growth contribute to a melting Arctic, the orientation of states toward the region as a frontier for economic development represent a contradiction embedded deep within global capitalism. Though the embeddedness of market- and growth-oriented decision-making in state institutions is not a particularly unique observation, in the context of Arctic oil drilling, it illuminates how the market imperative is misaligned with protection of the environment. While some states have yet to transition away from fossil fuel dependency, we are approaching the inevitable end of the oil-based global market system. The world is using up petroleum fields faster than the discovery of new supplies, and though discovering new fields for development can provide tremendous economic promise (such as in the Arctic), the future for oil is fragile and the prosperity of our natural environment depends on our departure from it.

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