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Global commerce thrives on access to goods at incredible scale, to precise timelines and – absolutely – as efficiently as possible. Over the past century, international trade routes have been refined to shave weeks, days and even hours off journeys. To achieve this took some of the world most amazing feats of engineering of their days, like the construction of the Suez and Panama canals.
Now, dramatic changes in our world are opening another trade route. As ice recedes from the Arctic Ocean for longer periods each year, it is becoming possible to significantly boost the efficiency of trade between two of the world’s most significant trading hubs, Europe and Asia while also reducing industry CO2 emissions. Through this new course, ships could cleave several thousand kilometers off the southern route currently used.
There is no doubt: the fact that climate change is creating these expanded shipping lanes is and must be a serious cause for concern. This new direction is not without its challenges. As melting ice brings increasing levels of navigability for longer periods of the year, some operators highlight that because climate change is causing the polar ice melt, one should stay clear of these waters. Somewhat counterintuitively, however, using these lanes to ship goods between Europe and Asia stands to significantly reduce the CO2 emissions that cause global warming.
Russia’s President Vladimir Putin has made opening the route a national priority, allocating $11 billion towards development and setting the benchmark for annual shipments at 80 million tons in the next four years. According to the Russian Northern Sea Route Administration, upward of 100 vessels were operating on the route at any given time during August 2019.
This polar silk road does not just provide an incremental improvement to shipping times – it will fully halve transit times and CO2 emissions for ships taking the new route. The shipping sector is responsible for around 940 million tons of carbon dioxide emissions each year. That’s 2.5% of all greenhouse gas emissions worldwide. With one third of the world’s trade flowing between Europe and Asia, cutting this route in half stands to make a meaningful dent in humanity’s overall greenhouse gas emissions.
The absence of queues at the natural bottlenecks of the world’s shipping lanes, plus a lower risk from piracy, create further efficiencies for shipping coming to or from Asia. Taken together, this could cut costs by an incredible 40%. That immense level of cost savings not only benefits shippers but can underpin the growth of whole industries and even economies. Looking at manufacturing, for example, lower freight prices are the gift that gives twice – both in sourcing raw materials and shipping finished goods. This allows products to be offered at a price point accessible to a wider customer base, while enabling companies to keep more profit. On a macro level, this cost-efficiency pattern creates incredible opportunities.
Economies will grow, new sectors will boom, and cities will be when the Northern Sea Route comes to full fruition. And, while the route is the direct result of environmental forces that are a serious cause for concern, utilization of the polar silk road will significantly lower CO2 emissions needed to complete the journey between two of the world’s busiest trade hubs.