Effects of changing ice conditions on the economic viability of the Northern Sea Route
What do the results tell us?
Though the potential melting of Arctic ice is definitely a negative impact for global climate and the environment, it also holds an opportunity to shorten maritime trade routes and reduce fuel demand and emissions. Further development of the Northern Sea Route (NSR) is generally associated with shipment of primary materials and resources. Our results show that with the observed state of rapid ice melting in the Arctic, the NSR could be used as an express service for goods with a high value of time between Northern Asian ports (Yokohama) and European/Russian ports (Hamburg, Rotterdam, Saint-Petersburg), though it could face competition from the Eurasian (Trans-Siberian) Railways (TSR).
The Northern Sea Route is currently developed by Russia, mainly for domestic purposes, though Russia is aware of the potential for global maritime traffic. At the same time, investments in the Trans-Siberian Railways are also a Russian priority. We have seen that there is a potential for competition between both routes, especially for the valuable market niche of manufactured goods and chemicals. Ports in the North of Europe (Hamburg, Rotterdam, Antwerpen, Helsinki) would have small to medium benefits from the development of the NSR.
We show that there is a potential future for maritime container traffic on the NSR, but that it will remain a rather small market in terms of transported volumes between Europe and Asia, reaching a maximum of 2,5 million TEU (5.5% of the total Europe-Asia flows) in 2040 under optimistic circumstances (high trade growth and very good navigation conditions). Under more conservative estimates, the total volume on the NSR would not go beyond 1 million TEU or about 2.2% of the market and even less when competition with the TSR would be tough. Though this may be rather limited in terms of volumes, between 95-97% of the freight would be of high value (equipment, chemicals and finished products), which has a value of time up to 40 times larger than primary goods. This means that the economic value of the transported freight could far outweigh its limited contribution in terms of volume and could very well amount to over 10% of the value transported
What can we do with the results?
This case is special since it does not concern a defensive measure. Therefore, we could call the results ‘enhanced' automatic adaptation, though use of the NSR would require a number of investments. First of all, the type of (container) ship that could fully exploit the possibility of arctic shipping is not available, at least not with modifications to current vessels. Second, there are about 20 ports available along the route, but only small minorities of these are fully operational and adapted to containers. Thirdly, there is a severe lack of supporting services (icebreaking, search & rescue, early warning system, insurance) that would enable Arctic shipping.
The potential annual benefits from Arctic shipping are rather uncertain due to uncertainties in the pace of Arctic ice cover retreat, the potential for cost reduction of Polar class container ship building (or modification), the development of supporting services for Arctic navigation, and the competitive position of East-West rail links (Trans-Siberian and others).
Furthermore, the figures represent the net benefits of the shipping sector, but do not account for the extra cost of all kinds of public services needed along the route. The part of these extra cost, which is clearly attributable and chargeable – such as ice breaker assistance and weather forecasts – are taken into account, but costs of inspection and regulation authorities and of basic infrastructure not. The benefits can also easily stagnate or decline due to decadal variations in climate. On the other hand if actual cost savings can be generated via the Northern route, it is likely that indirect and induced effects, are significant in the long run.
How are the results obtained?
The feasibility of the Arctic Shipping was analysed using a transport modelling research tool, the World Container Model (WCM). This is (to our knowledge) the first time a model is used to allow a full comparison of the Northern Sea Route in comparison with other competing routes based on a comprehensive network allocation model.
What are the broader applications?
Unlike the defensive situations presented in other case studies, the use of Arctic routes for global shipping presents Europe with an opportunity. Besides this difference, the Arctic shipping case also presents Europe as a region within the global market. The use of the World Container Model or similar models illustrates the interdependence and resilience of European economy within the World economy. Since European economy is dependent upon stable global trade conditions - possibly jeopardized by climate change – this is of critical relevance.
Using a similar setting, it is possible to use the World Container Model to develop scenarios oriented at trade interruptions or confront the model with scenarios of impaired growth within and outside Europe. To some degree this was already illustrated in the SSP / RCP combinations used in the Arctic Shipping case. Our results show that a combination of favourable weather conditions, international cooperation and sufficient trade growth will be essential for full development of any maritime trade and in particular the Northern Sea Route (NSR). This is important, as discussions on the use of the NSR generally focus on weather conditions, while stable geopolitical relations and economic growth are at least as important. This is more likely to happen in cooperative SSP1 and SSP5 worlds than in more divided and defensive SSP4 world.
Strategy Robustness Visualisation Method (SRVM)
The Northern Sea Route (NSR) provides opportunities for maritime trade
Container transport in TUE for different goods under different climate scenarios
Competition between the Northern Sea Route (NSR) and the Trans-Siberian Route (TSR) for container transport in TUE under different climate scenarios
- RCP 2.6 / SSP1: a world with low to moderate economic growth sustainable world and a relatively open economy.
- RCP 4.5 / SSP4: a world challenged with moderate climate change and a more closed and fragmented economy. Growth in Asia is more limited and growth in EU moderate.
- RCP 8.5 / SSP5: a rapidly developing world with very high growth and (resulting) very high challenges in terms of climate change and adaptation. Both the EU and Asia grow considerably