The Winners of Climate Change — A new world map

The information for the article below comes from Windfall — The Booming Business of Global Warming, from author McKenzie Funk. Focused on the crucial fact that global warming, along with the humans it affects and who are affecting it, is global, this book means to provide an answer to the increasingly urgent question “What are we doing about climate change?”*


While Arctic countries will have access to vast expanses of previously unaccessible land, suddenly within reach from retreating ice, poorer countries will have their sovereignty contested, having their farmland acquired by foreign nations and corporations. In between, new countries will be formed, others will split, and yet others will become failed states. The landscape is being globally altered by climate change.

The Arctic

“Global warming is not as catastrophic for us as it might be for some other countries. If anything, we’ll be even better off. More of Russia’s territory will be freed up for agriculture and industry.”
Spokesman for the Ministry of Natural Resources of Russia

“We shall save on fur coats and other warm things.”
Vladimir Putin, President of Russia

The Arctic represents the first way to profit off climate change: expansion into virgin lands and virgin resources. In the shallow Arctic, nearly every patch of seabed could be claimed by someone. The less ice there is, the more petroleum there is within reach, and the more pressure there is to stake a claim. Carving up the Arctic is the last great imperial partition.

Ratification of the the UN Convention on the Law of the Sea—the so-called constitution of the oceans, a treaty signed at the latest count by 164 countries—has almost everything to do with oil and gas. While the treaty establishes navigational rules and each nation’s rights to the fish and minerals within two hundred nautical miles of its coastline, it also allows nations to claim further territory based on how far their continental shelves extend under the surface. “This is part of our land,” the basic argument goes. “It just happens to be underwater.”

This provision, Article 76 of the Law of the Sea, will allow the five nations with Arctic Ocean frontage—Canada, Denmark, Norway, Russia, and the United States—to divide and share the north, turning the world into a different place. The United States, through its foothold in the form of Alaska, would secure its share of polar petroleum—some $650 billion worth, by one count; in terms of seabed it could someday own, with its maritime borders extended and each of its island holdings surrounded by an oversize doughnut of sovereign ocean, would grow by 4.1 million square miles, surpassing China, Canada, and Russia, with their own expanded holdings, to become the world’s largest country.

Oil and gas

I think it’s important to recognize that this [melt] is also an opportunity.
Norway’s petroleum and energy minister

“As a noted historian said, ‘The wealth generated by [Alaska’s] Prudhoe Bay and the other fields on the North Slope since 1977 is worth more than all the fish ever caught, all the furs ever trapped, all the trees chopped down; throw in all the copper, whalebone, natural gas, tin, silver, platinum, and anything else ever extracted from Alaska, too. The balance sheet of Alaskan history is simple: One Prudhoe Bay is worth more in real dollars than everything that has been dug out, cut down, caught or killed in Alaska since the beginning of time.’ Yes, oil is everything to us.”
Barack Obama’s appointed director to the Alaska Gas Pipeline Project

According to the U.S. Geological Survey, an estimated ninety billion barrels of oil and 1,670 trillion cubic feet of natural gas, or 22 percent of the world’s untapped deposits, is thought to be hiding in the high north.

Shell’s chief Arctic strategist, Robert Jan Blaauw, explained the role of the Arctic within the global energy scheme: “Today, we share the planet with 6.9 billion people. By 2050, there will be 9 billion people. In order to meet rapidly growing demand, especially from China and India, diverse sources of energy need to be developed in parallel. Renewable energy, yes, in ever greater volumes. We need to reduce CO2 emissions. But also fossil fuels and nuclear. We need them all. As conventional oil and gas sources run out, we need to look at unconventional resources and unconventional locations. And that’s exactly where the Arctic comes in.”

Alaska’s Lease Sale 193 took place in 2008, the first offshore auction in the Chukchi Sea in seventeen years, under which 45,900 square miles of Arctic seabed would be offered up in 9-square-mile chunks. It would be the most lucrative lease sale in the history of the Arctic Ocean, and Shell would scramble ahead of its rivals with high bids totaling $2.1 billion.

Snøhvit, Norway Norway's Snøhvit, or Snow White, is the northernmost natural gas facility in the world—and some oil companies' model for the future of the Arctic. Source: McKenzie Funk

Snøhvit, Norway
Norway’s Snøhvit, or Snow White, is the northernmost natural gas facility in the world—and some oil companies’ model for the future of the Arctic.
Source: McKenzie Funk, http://www.mckenziefunk.com/book#gallery

Shipping lanes

The more ice retreats, the more the Northwest Passage—a frozen-over shortcut between the Atlantic and the Pacific—becomes a viable alternative to the Panama Canal. It is internationally accepted that Canada owns the land on both sides of the Northwest Passage, however the United States, supported by the European Union and China, claims that Canada does not own the waterway itself, but should be an international strait open to container ships and oil tankers from all nations—like Malacca, Gibraltar, Bab-el-Mandeb, the Dardanelles, and the Bosporus. This newly available shipping route will allow container ships traveling between China’ east coast and the United States’ east coast to save some four thousand miles and hundreds of thousands of dollars in transit fees and fuel costs.

Devon Island, Nunavut, Canada A Canadian soldier stands guard at the edge of the Northwest Passage, an emerging shipping lane as the Arctic melts. Source: McKenzie Funk

Devon Island, Nunavut, Canada
A Canadian soldier stands guard at the edge of the Northwest Passage, an emerging shipping lane as the Arctic melts.
Source: McKenzie Funk, http://www.mckenziefunk.com/book#gallery

A new nation is born

Greenland’s is an extreme case of the dilemma facing many citizens of the developed world: if climate change wouldn’t much hurt them personally—if it might even help—why not embrace it? Greenland, a colony of Denmark for three centuries, was now on the verge of an oil and mineral boom that could help it become the first nation created by global warming.

Thanks to the warming of the planet and consequent ice melt, Greenland’s following industries will benefit:

Industry Description
Oil and gas The nineteenth richest of the world’s five hundred known petroleum provinces lies in Greenland’s patch of the North Atlantic
Mineral extraction Massive deposits of zinc, gold, diamonds, and uranium
Fishing Valuable fish stocks—cod, herring, halibut, and haddock—are migrating into Greenlandic waters, moving north as oceans warm
Tourism Rush of disaster tourism, people coming to see the glaciers slide into the sea
Agriculture Expansion of the South Greenland agricultural season—already three weeks longer than it was in the early 1990s—meaning potato farms and carrot gardens and more grass for more sheep
Energy-intensive industries Plans for a new aluminum smelter—360,000 tons a year, the biggest in the world—to be built by Alcoa and run on hydropower from the island’s gushing rivers
Server farms Warehouses of computer processors working for Google or Cisco or Amazon, taking advantage of the cheap electricity and high latitude
Water exports The Greenland’s ice cap is the world’s biggest water reservoir, with estimated volume of 1.7 million km3

In a referendum in November 2008, which passed by 75.5 percent, Greenlanders established “self-governance”, a half-step towards full independence. Under the agreement with Denmark, Greenland will split mineral revenues with them after keeping the first $15 million. The more it warms, the more they drill, the more revenues will go up, and the $650 million annual grant that Denmark gives Greenland in subsidies will go down. Eventually, over five or ten or fifteen or twenty years the grant will hit zero, and Greenland will declare independence. Greenlanders will then be recognized as a distinct people under international law, and Greenlandic will become the official language of the country.

This is a secession at the speed of climate change, a slow burn.

Niaqornat, Greenland Betting on future mineral wealth as the ice recedes, Greenlanders voted 75.5 percent in favor of greater independence from Denmark in a 2008 referendum. Source: McKenzie Funk

Niaqornat, Greenland
Betting on future mineral wealth as the ice recedes, Greenlanders voted 75.5 percent in favor of greater independence from Denmark in a 2008 referendum.
Source: McKenzie Funk, http://www.mckenziefunk.com/book#gallery

Outsiders profit from the new nation

The first annual Greenland Sustainable Mineral and Petroleum Development Conference took place in May 2008, shortly before the referendum. Only one native Greenlander gave a talk, the other speakers, mostly Canadians and Australians and Brits and Swedes, discussed the island’s tough logistics but “world-class commercial terms”. They described the mineral rush:

  • West Greenland gold discoveries and South Greenland gold mining;
  • two-and-a-half-carat diamonds found by the Canadian firm Hudson Resources;
  • rubies drilled by the Canadian firm True North Gems;
  • open-pit molybdenum mines proposed by the Canadian firm Quadra Mining;
  • uranium and rare earth minerals finds by an Australian-owned, eventually Chinese-backed company with a local name, Greenland Minerals and Energy.

British company Angus and Ross‘ CEO Nick Hall evidenced how the fortunes of his company were directly linked to climate change. In 2003 Angus and Ross took over the lease to mine mountain of marble above a giant fjord called the Black Angel. Its zinc deposit had been one of the richest on the planet but, by 1990, it had been exhausted, polluted and abandoned. In 2006 two geologists on a day hike discovered a deposit as pure as the original at the edge of the retreating South Lakes Glacier, which before the melt had been hidden by a hundred-foot-thick wall of glacial ice. It was the “upside of global warming,” as Hall freely admitted.

After his presentation, Nick Hall was surrounded by Australian financiers in pressed suits handing him business cards representing British money, while a Canadian would offer him the services of her logistics company: nurses, medics, and other camp staff. Hall himself was evidencing an uncomfortable truth for the northern “winners” of global warming, be they Inupiat, Greenlandic, Icelandic, or Canadian: local residents did not have the capital, expertise, or population base to transform the Arctic on their own. There was the danger that they would get most of the change and most of the degradation, and wealthier outsiders would get most of the profits.

Black Angel Mine, Greenland As Greenland’s glaciers recede, revealing mineral deposits, mines like Black Angel are expected to help fund its push for independence from Denmark. Source: McKenzie Funk

Black Angel Mine, Greenland
As Greenland’s glaciers recede, revealing mineral deposits, mines like Black Angel are expected to help fund its push for independence from Denmark.
Source: McKenzie Funk, http://www.mckenziefunk.com/book#gallery

Farmland grabs

Due to the effects of climate change, some countries find that their land is not enough to support their own population. While the Arctic nations can expand into previously unoccupied land, other countries do not have such a luxury. In a territorial shift unseen since the colonial days, happening quietly and bloodlessly behind closed doors, they are appropriating poorer’s countries land in what has been called the global farmland grab.

2008 was the year of the “food crisis”. Australia’s Murray-Darling basin, along with most of its rice and wheat exports, was decimated by drought. In China’s grain-growing north, fifty million acres and six million people suffered the worst water shortages in five years. Big banks, Goldman Sachs in particular, would soon be accused of distorting commodities markets, overwhelming the grain exchanges of the American Midwest with speculation. Prices were becoming volatile. “If food stocks are low, a small shortfall in production can cause a big jump in price,” explained Nicholas Minot, a senior fellow at the International Food Policy Research Institute. “Demand for food is inelastic. People will always pay to keep eating.” In spring food prices suddenly spiked worldwide: soybeans had doubled, corn and wheat tripled, rice quintupled, and the world’s grain stockpiles shrank to a two-month supply. The governments of Vietnam, Cambodia, India, and Brazil banned food exports; hungry rioters took to the streets in countries worldwide. The panic was already beginning.

The 2008 food crisis triggered in earnest the farmland rush:

Country Land leased/seeking to lease, in acres
China
  • 3 million in the Philippines
  • more than 2 million in Kazakhstan
  • 25,000 in Cameroon
  • 200,000 in Russia
  • untold tens of thousands in Brazil
Korea
  • 670,000 in Mongolia
  • nearly 2 million in Sudan
  • 3 million in Madagascar—a deal that failed after it helped spark a coup
India
  • 850,000 in Ethiopia
  • more than 1 million in Madagascar
  • more than 20,000 in Paraguay and Uruguay
Qatar
  • 100,000 in Kenya
Kuwait
  • 300,000 in Cambodia
Saudi Arabia
  • 1.2 million in Indonesia
  • 1.2 million in Tanzania
  • 1.2 million in Ethiopia,
  • the first 25,000 of 250,000 acres of wheat and corn in Sudan
United Arab Emirates
  • 800,000 in Pakistan
  • as many as 250,000 in Ukraine
  • as many as 125,000 in Romania
  • a million in Sudan

Overall, rich countries and corporations acquired an estimated 200 million acres of land—the equivalent of the combined cropland of Britain, France, Germany, and Italy, or almost 40 percent of arable Africa, or every inch of Texas—, mainly in Sudan, Ethiopia, Ukraine, Brazil, and Madagascar.

Profiting from food shortages

“I would not be surprised if in a day or a week oil goes to $150 a barrel. Like that: Boom! We’re seeing the death knell of the financial instrument—of the paper world. We’re going to see the rise of the commodity. A bushel of corn can’t be $15.”
Phil Heilberg, former Wall Street trader, currently one of the largest private landholders in Africa

South Sudan is a symbol of what can happen the more populations boom, temperatures rise, rivers run dry, and food prices—and thus the value of farmland—shoots through the roof.

In late-2008, former Wall Street trader Phil Heilberg leased a million acres of land in South Sudan, turning him into one of the largest private landholders in Africa. Irrigated by an offshoot of the Nile, it was level and fertile, safe from drought, and largely free from land mines. What little agriculture that existed in South Sudan was mostly small-scale: families with a few cows, tiny plots planted with sorghum and corn.

Heilberg knew he was betting not on a bubble but on something real: an actual food shortage. He imagined the landscape transformed by American-style agribusiness, complete with irrigation and fertilizers and four-hundred-horsepower combines. He planned to farm the land with joint-venture partners and sell crops locally before selling internationally. There was a local market for it: Sudan was in the midst of a long-running famine, neighboring Kenya had an accelerating drought, and aid groups were willing to pay top dollar for food.

Juba, South Sudan As food prices spiked, the hedge fund manager Phil Heilberg (right) cut a deal with Gabriel Matip, the son of a feared South Sudanese general, for millions of acres of farmland. Source: McKenzie Funk

Juba, South Sudan
As food prices spiked, the hedge fund manager Phil Heilberg (right) cut a deal with Gabriel Matip, the son of a feared South Sudanese general, for millions of acres of farmland.
Source: McKenzie Funk, http://www.mckenziefunk.com/book#gallery

Farming moves northward

“Climate change means some places in Africa will be drier and others will be wetter. We’ll be looking to take advantage of that.”
David Murrin, manager at London’s Emergent Asset Management

The savviest farmland buyers saw global warming as a double boon. While in the short term it was fueling droughts that destroyed entire harvests in China, Australia, and the American Midwest and causing food prices to spike, in the longer term it was expanding farming to higher-latitude countries like Ukraine, Russia, Romania, Kazakhstan, and Canada, which become more productive as the climate heats up.

“You don’t need to be a rocket scientist to suggest that production belts in the Northern Hemisphere are shifting northwards,” said Carl Atkin, the head of agribusiness research at the British real estate behemoth Bidwells. He enumerated the richest areas in the world, as they appear in the USDA’s Inherent Land Quality Assessment: “You’ve got a splotch in North America. A splotch in South America. Pockets in the U.K. But the main interest is this black soil going up through Russia and the Ukraine: some of the best soil in the world.” Political and environmental factors—frigid winters and short growing seasons—had kept prices low; a hectare of black earth in Romania was a fifth of the price of a hectare in England. Overlay a climate-change map on the soil map, Atkin said, maybe add population data, and you could make a fortune. Bidwells had been bringing financial clients to Romania for big land purchases, done plot-by-plot. “We reaggregate small plots that were reallocated to everybody post-Communism,” he said. “You’re getting loads of villagers in a room with the mayor, and the mayor is saying, ‘All right, who wants to sell their plot, and who doesn’t?’”

As climate change pushed farming to higher latitudes, the money followed:

Company Investment
Farmland investors British-run Landkom and Swedish-run Black Earth Farming hundreds of millions of dollars in agricultural operations in Ukraine and Russia
British-run Agrifirma $20 million to buy or option 170,000 acres and survey another 6 million in Brazil
World’s largest asset manager BlackRock $250 million in British farmland
France’s Pergam Finance $70 million into former ranches in Uruguay and Argentina
Canada’s Agcapita $18 million into the country’s future corn belt
Grain and cattle venture One Earth Farms  $100 million, partnering more than forty First Nations tribes covering more than two million acres across Alberta, Manitoba, and Saskatchewan, in Canada.

In addition to farmland investors, banks with prominent climate-change funds, such as Deutsche Bank and Schroders, also have separate farmland funds. And even universities have their endowments invested into farmland. In 2011 it was revealed that Harvard and Vanderbilt were invested in London’s Emergent Asset Management, which had, by one rough estimate, sunk more than $500 million into agriculture projects everywhere from Mozambique and South Africa to Zambia. Emergent is run by J. P. Morgan alumni David Murrin, who prophesied a global-warming-fueled commodities crisis that would trigger an armed conflict between a declining West and a rising China over Africa. With its African farmland fund and a new climate-change fund focused in part on water projects, Emergent’s funds are, according to Murrin, the best way to profit in the meantime.


*McKenzie Funk spent six years reporting Windfall, traveling around the globe interviewing people who, driven by ideology, fear, or hard-nosed realism—or all three—, thought they were doing the necessary thing to come out ahead in a new, warmed world, people who thought climate change would make them rich.

McKenzie Funk and his book, Windfall

McKenzie Funk and his book, Windfall

Featured image by dirkb86.

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