Insight: NEFCO in the Arctic

The Arctic region has attracted much global interest and is experiencing many of the most serious threats facing society and the environment. It is an area with a sparse population, of about four million, and a delicate eco-system where four major rivers drain large regions of Russia and Canada. The rivers provide about 3300 km3 per year of freshwater to the world’s largest continental shelf representing nearly 10 per cent of the river discharge to the world oceans. The Arctic also houses 17 of a total of the planet’s 67 Large Marine Ecosystems and thereby forms an essential link in the chain of northern ecosystem processes. Activities in the Arctic have increased dramatically since early 20th century and have resulted in a need to address about 3000 hot spots. The pathways of contaminants impacting the Arctic are diverse and need broad actions. The key industries include oil and gas, minerals and metallurgical industries, pulp and paper, energy generation, shipping and transportation, fishing and food processing, and tourism.

Cooperation within the Artic Council

NEFCO has been active in the Arctic work since its establishment, e.g. in the 1990s with the Arctic Monitoring and Assessment Programme (AMAP) in developing contaminant inventories and with the Arctic Contaminants Action Programme (ACAP) in implementation and establishment of the Arctic Council Project Support Instrument (PSI) as a mechanism to support implementation.

Responding to ACAP’s call in April 2001, the Senior Arctic Officials invited International Financial Institutions, including NEFCO, to present their activities in the Arctic and give their perspectives for future cooperation. The Ministerial Declaration (2002) envisioned a need of outside investments enabling the Senior Arctic Officials, in April 2003, to propose setting up of an Arctic Council trust fund and requesting NEFCO to assist in drafting a discussion paper on the matter. The Board of Directors of NEFCO also provided its support for an Arctic Council related financial instrument. The positive responses resulted in the Ministerial Declaration (2004) urging the Senior Arctic Officials to establish a pilot phase of the PSI. This was acted upon by the Senior Arctic Officials in April 2005 and on 8 May 2005, NEFCO was appointed as the PSI Fund Manager.

Since a major portion of the PSI Projects were expected to be carried out in Russia, a critical element in stakeholders’ funding of the PSI was the contribution of the Russian Federation. The period from May 2005 to the PSI operationalisation in July 2014 was spent on achieving the conditions for the PSI acceptable to all the contributors (Finland, Iceland, Norway, the Russian Federation, Sweden, the United States of America, the Sami Parliament of Norway and NEFCO) and in line with the guidelines for the PSI. In 2014, the PSI became operational under NEFCO management.

The PSI supports the work of the Arctic Council and provides funding for pollution mitigation and biodiversity-related projects approved by the Arctic Council working groups. Since its start, the PSI has funded 17 projects mostly from ACAP and Conservation of Artic Flora and Fauna (CAFF). Seven of these have been completed. Five projects are on track while five projects have delays. The projects address mitigation of climate change, hazardous waste management, and enhancing biodiversity. The programme has also recently undergone an evaluation and has started to enhance the communication of results achieved.
The mitigation projects, when implemented, are expected to reduce more than 6 million tonnes of CO2 annually. Additional environmental benefits are to accrue from management of hazardous waste, reduction of persistent toxic substances, non-methane volatile organic compounds and improved biodiversity.
The PSI pilot phase has been extended by the Senior Arctic Officials to 2021 and measures are underway to further improve the efficacy of the PSI and strengthen Arctic cooperation.

Cooperation in the Barents region

As regards the Barents region, NEFCO responded to the Barents Environment Action Programme of 1994 by commissioning the first NEFCO-AMAP Report of 1995. A total of 71 projects were identified of which 22 projects were short-listed to address non-radioactive contamination and nuclear safety in North-West Russia. The 1995 NEFCO-AMAP Report was welcomed by the Barents Euro-Arctic Council’s Ministers of Environment and the Barents Declaration (2003), by the Heads of Government of Denmark, Finland, Iceland, Norway, the Russian Federation, Sweden, and representatives of the EU, supported the instrumental role of NEFCO in implementing small and medium sized environmental and cleaner production projects. The 1995 NEFCO-AMAP Report was updated in 2003. The NEFCO-AMAP Update identified 42 environmental ‘hot spots’ which continued to be important. The Ministers of Environment acknowledged the list of 42 hot spots and in 2005 set a target to launch relevant investment projects by 2013 to eliminate these hot spots.

A 2013 Assessment reviewed the status of the 42 Barents ‘hot spots’ in the light of the target set by the Ministers of Environment. The conclusion of the Assessment was that initiatives had been launched at all 42 hot spots. The mitigation measures, however, have been of varying nature and much remains to be done before most hot spots may be fully excluded from the List.

A key endeavour for NEFCO is to generate positive, cost-effective, environmental improvements of interest to the Nordic region. The Arctic is of high priority including the sustainability work of the Arctic Council (AC) and the Barents Euro-Arctic Council (BEAC). Relevant public and private sector Arctic projects can access several mechanisms with NEFCO such as the Investment Fund, the Nordic Project Fund, the Barents Hot Spots Facility, and the Arctic Council Project Support Instrument (PSI).

Written by Husamuddin Ahmadzai
Former PSI Manager

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