A $70 trillion opportunity

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Hi,

For today’s piece, I’m syndicating an article I helped author for ARC on the invaluable climate regulatory functions of the Arctic ecosystem and how envisioning the opening of the Arctic as a boon for extractive industries and a logistics breakthrough is ass backwards. Eirini Malliaraki, a colleague of mine at ARC, was the lead here; I supported with editing and research. If you like this, be sure to subscribe to ARC’s Substack.

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OPINION

Seduction splashes across entire maps. Sharper lines that were once theoretical—shipping routes blocked by permanent ice, oil fields locked beneath permafrost—suddenly materialize. A new Northern Sea Route cuts 5,000 nautical miles off the trade route between Shanghai and Rotterdam. Reserves to the tune of ~90 billion barrels of oil and ~1,669 trillion cubic feet of natural gas become accessible underneath ice sheets and in seabeds. Rare earth elements in Greenlandic bedrock that was, until recently, covered by ice, portend a new “gold” rush.

These fantasies are framed as a new economic chapter. But they are just that. Fantasies. Fantasies that hinge on a profound oversight, one so egregious that it undermines any and all daydreams of a bountiful gold rush. The worldview described above will only come to fruition coincidentally with what could amount to the most expensive mistake in human history. It treats the destabilization of one of our planet’s essential regulatory systems as a cost-benefit analysis. The Arctic is not opening in a favorable fashion for commerce. It is breaking. The Arctic has heated up far faster than other parts of the planet, up to 4x faster than global averages since 1979, and as high as 7x intraregionally. This risks catastrophe, as the Arctic is crucial to Earth’s overall climate stability.

Celebrating symptoms that should cause serious concern

Transit through the Northern Sea Route has surged from 4 million tons of cargo in 2014 to over 38 million tons in 2024—almost a 10x increase. The route saves container ships 40% in distance, reducing fuel costs and valuable time compared to the Suez Canal. The route is only accessible because Arctic sea ice extent in a typical September has declined by ~13% per decade since 1979, a loss of 2+ million square kilometres, an area larger than Alaska. Ice older than 4 years made up ~33% of the Arctic sea ice cover in the mid‑1980s. Today, it accounts for only about 3–4%.

The Arctic is also estimated to hold 13% of the world’s undiscovered oil and 30% of the world's undiscovered natural gas. At Vostok Oil, a massive oil and gas project in the Arctic, Rosneft aims to produce 600,000 barrels daily by 2030. Similarly, the U.S. (under the Biden Administration, no less) approved ConocoPhillips’ Willow Project in Alaska in 2023, projected to produce 180,000 barrels daily at peak. Even today, it’s evident that there’s economic value inherent to developing industry in the Arctic. Tanya O’Garra (2017) provides a canonical top‑line estimate that the Arctic currently delivers about $281 billion per year (2016 USD) in combined ecosystem services and resource production (food, oil, minerals, tourism, hunting, cultural value, and climate regulation). Importantly, however, the lion’s share of this value comes from the climate regulation line item: Of that $281 billion per year, $216–217 billion per year, more than 75% of the total, stems from the Arctic’s climate regulatory functions alone.

Hence, what some see as an opportunity for significant resource extraction and a logistics breakthrough is, in reality, an ongoing collapse of one of Earth’s primary cooling mechanisms and, as a consequence, a core component of comprehensive Earth climate systems’ stability. That corporations want to extract these resources for short-term gain and trumpet the future benefit of doing so should come as no surprise. What should surprise us is the degree to which the calculus of potential gain omits other massive costs.

Steve Thur, NOAA’s assistant administrator for research and acting chief scientist, describes the essential dynamics here succinctly as follows:

The Arctic’s climate regulation capacity is most valuable

There’s a twisted logic inherent in treating the Arctic as a desirable site for resource extraction rather than recognizing its value as a pillar of Earth’s climate system’s stability. The Arctic isn’t valuable because of what it contains. It’s valuable because of what it already does.

The Arctic functions as Earth’s primary cooling system through multiple interlocking mechanisms that together act as a planetary thermostat. The Arctic operates as a heat sink—it radiates more energy to space than it absorbs from the sun, cooling air and water masses that arrive from lower latitudes before sending them back equatorward, helping redistribute and reduce excess tropical heat. This cooling power stems, for one, from albedo effects: Sea ice reflects 50-70% of the incoming solar radiation that hits it; when it is covered with fresh snow, that can hit 90%. When that ice melts, it exposes the open ocean, which absorbs over 90%+. A heat sink becomes a heat trap and a reinforcing feedback loop. Darker ocean warms, melts more ice, creating more dark ocean.

Sea ice also acts as an insulating barrier between the Arctic atmosphere and the relatively warmer ocean below, limiting upward heat flux and helping maintain a shallow, cold boundary layer that amplifies the region’s role as a surface cooling chamber. Further, the Arctic also influences global circulation patterns. For instance, the Arctic significantly cools salty surface waters in the North Atlantic-Arctic sector, increasing their density and driving the sinking branch of the thermohaline circulation, which redistributes heat from the tropics to the poles and back at depth.

Further, the Arctic stores massive amounts of carbon. Permafrost contains 1,460-1,600 gigatons—equivalent to roughly 30 years of global annual greenhouse gas emissions on a CO2e basis. This accumulated over millennia as frozen plant matter, and the Arctic has largely stored it out of the atmosphere. Now it’s thawing, releasing CO₂ and methane, a greenhouse gas that’s 26-34 times more potent than CO₂ over a 100-year time frame. If permafrost releases just 10% of its stored greenhouse gases by 2100, that would represent 150-180 gigatons—or close to 3 additional years of current global annual emissions.

It’s also worth noting that the Greenland ice sheet contains enough water to raise sea levels 7.4 meters. It lost an average of 280 billion tons of ice annually between 2002 and 2021; in August 2021, rain fell on Greenland’s summit for the first time in recorded history. Freshwater from Greenland melt also contributes to disruption in the Atlantic Meridional Overturning Circulation (AMOC). Multiple studies show it’s already slowing, and some scientists project that the AMOC could collapse this century, which would cool Europe dramatically, shift tropical rainfall and disrupt monsoons, impacting billions of people.

In total, the Arctic’s cumulative cooling impact on the entire Earth has already decreased by 17-22% between 1980-88 and 2016-2023. For millennia, the Arctic Tundra operated as a carbon sink. Since 2023, it has turned into a net carbon source. As the Arctic warms, the jet streams that separate polar and mid-latitude air weaken. In turn, that jet stream disruption drives wavier, slower patterns that trap weather systems, including heat domes with severe consequences for billions. As one example, the 2021 Pacific Northwest heat dome event saw temperatures hit a staggering 49.6°C in British Columbia, not Bangladesh.

Risking the biggest accounting fraud of all time

When assessing Arctic projects, companies calculate revenues and costs, and perhaps tout increased employment opportunities and near-term economic benefits for local economies. Shell’s (now abandoned) Arctic drilling project was projected to cost $7 billion. The Willow Project’s budget is $9 billion and rising, and it’s forecast to generate tens of billions in revenue. What doesn’t appear in these calculations? The direct and indirect costs of greenhouse gas emissions, climate change, and climate system destabilization, which include but are far from limited to: Accelerated global warming as thawing permafrost releases greenhouse gases, continued and exacerbated economic disruption from severe weather, damages to infrastructure costs from sea level rise and changing landscape, and agricultural losses from shifting inter and intraregional climates.

Any of these alone, and certainly all taken together, vastly outweigh the value of Arctic extraction, regardless of how well any one project, or even all possible projects combined, performs. And the losses will be socialized globally, whereas the profits will be concentrated in a few. It’s a tale as old as time. At a macro level, a 2019 Nature Communications analysis calculated that cumulative damages from Arctic sea ice loss and the “cycle of unstoppable global warming” that loss could trigger could cost up to $70 trillion if the planet warms by 3°C by 2100, which current ongoing global greenhouse gas emissions risk tracking towards. That $70 trillion figure exceeds the U.S. stock market’s current total value. These costs are already accumulating and will continue to mount unless we take active protection measures.

Let’s compare that to projected revenues from potential Arctic extraction and new logistics routes. Rosy projections forecast tens or even hundreds of billions of dollars of revenues generated annually from future tenable oil, gas, and mineral operations in the Arctic at peak production. Take the midpoint and call it $50 billion. Add $10-20 billion in shipping cost savings at full utilisation of new routes, if you like, and call it $70 billion per year, in optimistic scenarios, in additional revenue, concentrated over the next few decades (before infrastructure fails because it was built on a self-destructing foundation).

If we then hold that $70 billion annually in newly realized revenue (not profits, mind you) up against the estimated $70 trillion comprehensive cost of a destabilized Arctic ecosystem, it…

…yields a benefit to cost ratio of ~1 x 1,000.

What protection looks like

Trading a planetary life-support system for two decades of marginal resource access should be a non-starter. Beyond economics, if there are moral concerns inherent in conversations about whether and when to proactively intervene in ecosystems or Earth’s climate systems (moral hazards), surely one of the most profound moral obligations is to prevent Arctic collapse. Initial steps towards catalyzing meaningful movement towards meaningful protection include:

1. Require that every proposed development transparently quantify its costs, including the direct and indirect greenhouse gas emissions, induced emissions from permafrost destabilisation, albedo changes, ecosystem disruption, and other long-term climate damages, at the current social cost of carbon, before Arctic lands are leased. Any net negative value—which most extractive projects would show—should automatically disqualify projects.

2. Establish moratoriums on new Arctic fossil fuel extraction. We cannot stabilize Earth’s climate while continuing to increase greenhouse gas emissions, especially by expanding extraction in one of the most critically at-risk regions for planetary cooling. Every new Arctic oil project counteracts other climate efforts.

3. Invest in advanced research and interventions, and other protective measures. Surface insulation, hydrological management, ecosystem restoration, and other interventions could slow the destabilization of permafrost that’s already underway. A 2021 Environmental Research Letters study found that deploying surface shading across high-risk areas could cost $5-10 billion annually but prevent tens of gigatons of greenhouse gas emissions. Preventing 50 gigatons at an assumed social cost of carbon amounts to $10 trillion in avoided damages.

Other examples of potentially worthwhile interventions for additional research and potential deployment include strict black carbon regulations on shipping, research and development of other albedo-enhancing solutions, such as marine cloud brightening, and development of a comprehensive monitoring capacity to identify the highest-value protection zones.

Protect the Arctic: Simple arithmetic

We have two options:

1. Extract Arctic resources for two decades, generating ~$70 billion annually for a few key stakeholders. In turn? Trigger climate tipping points and reinforcing feedbacks that could cost $70 trillion in comprehensive damages from accelerated global warming.

2. Invest billions to further study, understand, and proactively protect the Arctic, thereby maintaining a critical component of Earth’s cooling system and avoiding trillions in damages, while buying time for the energy transition and other climate adaptation efforts.

The fact that we haven’t invested more to protect the Arctic isn’t evidence that protection is impossible or even impractical. It’s evidence that our existing economic systems catastrophically misprice the Arctic’s existing value. There is time to act, but the window is closing: Scientists project with high confidence that the Arctic Ocean could be essentially free of summer sea ice as early as the mid-2030s, and possibly as soon as 2027, under all future emissions scenarios. On the other side of that irrevocable change is a planet we cannot predict will support human flourishing to the degree even today’s planet and its climate do.

Protecting the Arctic is possibly the highest-return investment humanity can make today. 2026 needs to be an inflection point towards proactive, protective action to realize this potential.

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As always, keen to hear your thoughts on the Arctic piece and what we’re up to at ARC,

— Nick