At the beginning of this new millennium, regional economies are confronting momentous changes. The globalisation of trade and economic activity is increasingly testing their ability to adapt and maintain their competitive edge. Market integration and cross-border agreements play a prominent role in the development of many regions. Rapid technological change and greater use of knowledge are offering new opportunities for local and regional development but demand further investment from enterprises, reorganisation of labour and production, more advanced skills and environmental improvements.

The NORA region comprises the Faroe Islands, Greenland, Iceland, and the coastal counties of Norway, a group of North Atlantic territories linked by shared characteristics and challenges, as well as by historical, institutional and cultural links. Remoteness, sparse settlement patterns, physical barriers between communities and extreme climatic conditions create significant difficulties in terms of communications and accessibility. These factors complicate the region’s trade, economic diversification and provision of public services. However, these territories have managed to cope with their extreme conditions. The region’s rich, relatively unspoiled and unique environment offers a range of opportunities linked not only to fisheries, but to energy and mineral production, eco-tourism, and research on the Arctic environment and climate change. The importance of the Arctic is increasing, and the NORA region occupies a strategic position between Europe and North America, as an entryway to the Arctic.

The NORA territories have a relatively high GDP per capita (only Greenland falls well below the OECD average) and economic performance before the crisis was solid. Yet these territories are highly dependent on a reduced number of primary commodities, mainly fisheries, but also oil and gas. The public sector is relatively large and a major employer in the region. At the same time, this region is characterised by its extreme peripherality, by the sparse settlement pattern and by significant difficulties in terms of communications and accessibility. These factors complicate the region’s trade, economic diversification and provision of public services. This chapter starts with a definition of the unit of analysis of this review: the NORA region. It then assesses the major socio-economic and demographic trends in the region. Finally it underlines four main challenges for the region: geographic peripherality; ensuring sustainable development of the fisheries sector; economic diversification; and adaptation to climate change.

Reinforcing economic competitiveness and a sustainable development process in the NORA region will largely depend on its capacity to overcome different challenges related to the remote location of the region, its vulnerability to climate change, and its narrow productive base. The chapter is divided into four sections. Section 1 provides recommendations for improving accessibility and for coping with the peripherality and demographic challenges of the region. Section 2 focuses on the future productivity and sustainability of the fishing industry, as one of NORA’s main economic sectors. The third section identifies the opportunities for diversifying the economic base, and the crucial role that innovation plays in the region. The fourth section considers the challenges of climate change for the main economic activities of the region and the crucial role of adaptation measures to confront the effects of climate change.

Chapter 3 focuses on the potential of transnational co-operation in the NORA region. The similarities in framework conditions and challenges shared by the NORA regions, the small size of markets and the limited resources within each of the NORA territories argue for collaborative efforts, exchange of know-how and best practices, and transnational co-operation to confront some of the main challenges of the region. The chapter starts with a description of the wide and complex web of territorial co-operation already present in the NORA region. The second section explores both the range of potential benefits of transnational co-operation, and the main barriers that regional co-operation faces. The third section describes the main areas in which there is potential for transnational co-operation. Finally, the fourth section provides a series of recommendations to overcome the barriers to co-operation and to maximise the contribution of transnational co-operation in the NORA region.