The Economics of Living at the Top of the World

Letter from Svalbard

The Reindalen Valley in the Norwegian archipelago of Svalbard, April 29, 2015. NASA / Reuters

Norway’s Svalbard archipelago, which sits some 700 miles from the North Pole, is barren when it comes to people but abundant in coal. For decades, anyone who settled there was primarily in the area to mine, but in 2013, hit by low oil prices, coal became unprofitable and Norway decided to diversify away from fossil fuels. It committed to developing more renewable energy sources, transitioning slowly from oil to gas and selling off coal stocks from its $900 billion sovereign wealth fund, the largest in the world. Against this background, Norway closed its main coal mine in Svalbard early this year, sending shock waves through the economy of the largest town on Spitsbergen, the only permanently inhabited island in the archipelago. All this comes at a time when climate change and melting sea ice make Svalbard, perched at the Arctic crossroads between Russia and the West, an increasingly important foothold for managing Arctic Ocean resources.

Last January, just before Norway closed Svea, its main mine on Spitsbergen, I visited the island to see how the government’s new policies had changed it. Of the three settlements there, the largest is Longyearbyen, also the archipelago’s administrative center. The tiny research town of Ny-Ålesund lies farther north, and just 22 miles southwest lies Barentsburg, a former Soviet settlement, which is Svalbard’s most peculiar settlement. It is a throwback to the Cold War, a reminder of less peaceful days when the Soviet Union maintained one of the largest encampments in Svalbard and got into frequent spats with Norway over how the island was used.

In Barentsburg, I was the sole guest at the only hotel in town, a small settlement of less than 500 trying to transition away from coal mining into tourism. Svalbard was granted special economic status by the 1920 Treaty of Svalbard, which means that the 40 nations that have signed it, including Russia, can use the land for a variety of nonmilitary, economic pursuits: fishing, coal, tourism, and research, but within the bounds

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