Climate Change and Adaptation to Climate Mitigation Policy in

Remote Rural RegionsMatthew Berman

Institute of Social and Economic ResearchUniversity of Alaska Anchorage

U.S. Association for Energy EconomicsAnnual MeetingAustin, Texas

November 5, 2012

Climate change science has become irrefutable, yet no real progress toward effective climate mitigation in

the past 20 years.

This is not difficult to understand if you look at what is going on in the hinterlands.

U.S. Congress’ Approach to Addressing the Three Consensus Issues (based on signals from HB 2454)

• Climate – 17 percent emissions cut by 2020, including offsets. IPCC says insufficient to meet the 2°C target, even if met entirely with domestic emissions cuts

• Equity – We’ll make an 83 percent cut by 2050 (You bet!). Free emissions allocations to coal-burning utilities.

• Trade and economic activity – Free emission allocations to “energy-intensive and trade-intensive manufacturing industries” and maybe impose tariffs on non-participating nations. Smaller allowance handouts for petroleum refining, but no tariff protection from imports.

Implications for Alaska

• Climate – It is going to get warmer – a lot warmer• Equity – If Congress ever does anything, Alaskans will

take a hit (especially rural Alaskans).• Trade and economic activity (based on HR 2454)

– Relative price of natural gas will rise relative to oil– Alaska’s main industries – oil and gas extraction, commercial

fisheries, tourism, air cargo, mining – will all face significant cost increases

– Costs will rise for Alaska petroleum refineries

Alaska is one of the world’s most fossil-fuel-dependent ecomomies

• Per-capita carbon dioxide emissions exceed three times the U.S. average, and 14 times the world average.

Carbon Dioxide Emissions from the Consumption and Flaring of Fossil Fuels

19.8

9.1

4.6

1.2

4.5

0

5

10

15

20

25

UnitedStates

EU China India World

Met

ric to

ns p

er p

erso

n

Source: U.S. Energy Information Agency, 2006 estimates

Carbon Dioxide Emissions from the Consumption and Flaring of Fossil Fuels

19.8

9.14.6

1.24.5

64.9

0

10

20

30

40

50

60

70

UnitedStates

EU China India World Alaska

Met

ric to

ns p

er p

erso

n

Source: U.S. Energy Information Agency, 2006 estimates

What fuels produce high Alaska emissions?• Alaska uses less coal but much more oil and gas per

person than the nation.

Per-capita Energy Consumption, 2007

19

546

476

0 19 3

75 79134

28 8 110

100

200

300

400

500

600

Coal Natural Gas Petroleum Nuclear Hydro-electric

Otherrenew ablesEnergy Source

Mill

ion

Btu

per

per

son

Alaska United States

Source: U.S. Energy Information Agancy

Why are Alaska emissions so high?• Alaska residential and commercial energy consumption is similar to

that of other Americans, but per-capita industrial and transportation consumption is much greater.

Per-capita Energy Consumption, 2007

80 92

523

368

72 61108 97

0

100

200

300

400

500

600

Residential Commercial Industrial Transportation

End-Use Sector

Mill

ion

Btu

per

per

son

Alaska United States

Source: U.S. Energy Information Agancy

High petroleum industry and transportation energy use leads to high per-capita greenhouse gas emissions

Alaska Greenhouse Gas Emissions by Source Metric tons CO2 equivalent per person, 2005

Oil and gas , 32.5

Agriculture, 0.1

Methane from foss il fuel

production, 4.5

Electricity Production, 4.8

Was te Managem ent,

1.5

Res idential & Com m ercial, 5.9

Com m ercial aviation, 19.5

Indus trial Processes , 0.5

Other transportation,

9.1

Source: Roe et al. (2007)

Alaska’s transportation emissions nearly twice those of any other state

(note: the highest emission states are all red states)

T ra n sp o rta tio n CO 2 Em issio n s: S e le cte d sta te s a n d U.S ., a ve ra g e , 2010

20.8

11.7 11.29.7 9.4

6.5

0

5

10

15

20

25

A las ka South Dakota Louis iana Idaho W y oming United Sta tes

Met

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ns C

O2

per c

apita

S ourc e: E IA s tate energy data s y s tem

Re sid e n tia l a n d T ra n sp o rta tio n CO 2 Em issio n s: S e le cte d S ta te s a n d U.S ., Ave ra g e , 2010

24.7

16.6 15.914.4 14.0

10.5

0

5

10

15

20

25

A las ka South Dakota Louis iana Tennes s ee Nebras ka United Sta tes

Met

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apita

S ourc e: E IA s tate energy data s y s tem

Alaska’s main (supposedly) sustainable industries

Commercial Fishing Eco-tourism

Alaska’s main (supposedly) sustainable industries:

Tourism

Rural Alaska subsistence livelihoods are completely dependent on the two-stroke engine.

• Small scale, transportable• Simple technology – can be repaired in the Bush• Terrible fuel economy

Our fair share of global CO2 emissions: 4.5 tons per year(3 tons in 2050 because world population will be 50 percent larger)

What will one ton of CO2 buy in Alaska?

• Production and shipping of about 10 barrels of Alaska crude oil

• One round trip from Anchorage to Seattle on a commercial flight

• Harvest of 450 sockeye salmon assuming 300 hp, 2.56l/d/hp (Tyedmers2001), 1500 fish/day, based on average figures from ADF&G Bristol Bay management reports

• 7 hours heli-skiing with Chugach Powder Guidesassuming A-star helicopter @ 45 gph, share with 5 clients

• One family halibut charter day 350hp 2-stroke, 39gph, 20 miles @ 25mph, or 400hp 4-stroke @ 25gph, 30 miles out

• One hunting trip per month by snowmachine from a rural Alaska village, 50 miles round trip assuming 2-stroke engine, average fuel economy of ten miles per gallon

The cost of reducing greenhouse gas emissions will fall heavily on Alaska’s lower income rural residents.

High fuel prices in 2008 provide a window to such a future.

Annual Cost of Heating Fuel as a Percentage of Household Income, May 2008 Prices

Households with income $28,715 and below

61%

38%

62%

20% 20%

32%

Kenai and Mat-Su Mid-s ize and roaded Rem ote rural

averagemedian

Source: Saylor et al. (2008)

Why should Alaskans should support greenhouse-gas mitigation?

• Adaptation to warming will be relatively painless for the vast majority of Alaskans (and pleasurable for some)

• The costs of mitigation are very high.• The rational (cost-benefit) argument for climate policy will be lost on

most Alaskans (as on most Americans)• Cutting greenhouse gas emissions to a level that would actually

control climate change would be like undergoing chemotherapy to treat someone else’s cancer.

On the other hand• Adaptation to climate change will be exceedingly painful for the

world’s rural poor. • The case will increasingly be made that the developed countries and

especially the United States is responsible for these impacts. We may face trade sanctions from Europe and Japan. We will start getting blamed for environmental disasters in vulnerable nations, and accused of genocide.

Alaska, like much of the Arctic, is getting warmer!(and this is just a preview of what’s to come)

Temperatures increased by 3-5° F over much of Alaska in the last half of the 20th Century. Winter temperatures increased by as much as 10° F.

Effects of Climate Change for Alaska Communities

• Environmental change has consequences for infrastructure, economic activity, and livelihoods

• Effects felt most strongly in communities that depend on renewable resources for livelihoods

• Effects highly localized.

Several villages will have to be moved from barrier island locations due to coastal erosion from reduced sea ice protection from fall storms.

Cost: $100-$150 million per community

Melting permafrost reduces useful life and increases design costs of infrastructure.

One estimate of cost increase just through 2030: $3.6 to $6.1 billion, mostly from repair and reconstruction of remote water and sewer systems, airports, roads, and harbors (Larsen et al., 2007).

Solid permafrost and freshwater ice key to environmentally friendly, low-cost, and safe

surface transportation in a land without roads

• Ice road season steadily decreasing across Alaska’s North Slope. Replacing seasonal ice roads with permanent roads costs $3.5 - $4 million per mile.Source: cost estimate of $350-400 million for 102 mile road to from Prudhoe Bay to Nuiqsut. "Cost Estimates for Alternatives A, B, C, D, and F." Alpine Satellite Development Plan Final Environmental Impact Statement, Appendix J. Anchorage: U.S. Dept. of the Interior, BLM, 2005.

Late freeze-up of rivers makes travel dangerous for village residents.

Impacts to Livelihoods from Changes in Marine Environments

• Commercial fisheries – providing food for the world and supporting Alaska’s coastal communities

• Subsistence fisheries and marine mammal harvests – sustaining cultures, putting food on the table, and providing extra cash in rural Alaska

Bering Sea Pollock: America’s Largest Fishery($1 billion per year)

Fish are moving northwest towards Russia as waters warm and sea ice melts earlier.

Distribution of harvests in 1993

Distribution of harvests in 2007Source: NMFS Alaska Region, Fisheries Observer Program

Marine mammals dependent on sea ice are

rapidly losing habitat

Walrus provide important source of supplemental income from sale of ivory carvings as well as food for Northwest Alaska communities.

Ecological Consequences of Ocean Acidification Poorly Understood

What is known bodes ill for Alaska fisheries

Pteropod (butterfly snail): major food source for many coldwater marine fish – up to 50% of pink salmon diet – is highly vulnerable to acidification.

Benefits of Climate Warming for Alaska

• Benefits for industry: longer operating season for marine transportation and increased arctic shipping

Benefits of Climate Warming for Alaska

• Benefits for households and local businesses: reduced heating costs, greater local food production

Warming over the next 40 years is expected to reduce heating degree-days by 10%, saving Alaska households $200-400 annually. (Based on data from Saylor, Haley, and Szymoniak, 2008)

Climate Impacts Summary

• For four out of five Alaskans – those living in or near urban areas and Southeast Alaska – the benefits of warming likely exceed the costs.

– Little infrastructure at risk– Big savings in heating bills– Enhanced economic opportunities and quality of life

• Climate change brings significant risks for the one of five Alaskans living in remote communities in Western and Northern Alaska

– Marine ecosystem changes affecting livelihood systems– Infrastructure damage from coastal erosion and permafrost melting– Savings in heating costs not enough to offset environmental costs– Even so, on a day to day basis, concerns about environmental change will be

dwarfed by issues such as the market prices of fish and the cost of gasoline.

The cost of an illness includes the cost of measures taken to treat it.

If global warming is a cancer, then mitigation measures are the chemotherapy.

For most Alaskans, climate change is someone else’s problem.

Alaska has experience with fixing tragedy of the commons:

Lessons from fisheries “rationalization”

• Halibut-sablefish Individual Transferable Quota (ITQ)• Pollock cooperatives (American Fisheries Act)• Bering Sea crab ITQ

In each case, all participants aware of serious problems with the open-access regime

• Halibut – short season destroyed value of harvests• Pollock – race for fish meant costs kept rising• Crab – the “deadliest catch”

How was privatization accomplished?

• Overall quota set administratively by conservation rules

• Quota share allocations set by regional councils, not Congress

• Extensive public participation and transparent rules• Each program different: no one size fits all.

– Halibut -- individual rights, no corporate rights– Pollock -- an industrial fishery, so let companies figure it out

(industry cooperatives)– Crab -- fishers and processors both received allocations:

controversial

Divide up the spoils among participants.

How it might this approach apply by analogy to emissions control?

• Create permanent property right to CO2e defined as fixed shares of a potentially variable emissions quota

• Congress sets broad rules, does not try to hash out details• Overall quota set administratively through transparent process• Shares allocated to states on basis of historical emissions• Congress leaves it up to states to distribute state quota shares

under broad rules (such as at least half distributed to individuals)– Note: Alaskans have some experience in this (Permanent Fund)

Is this fair?

Fairness is in the eye of the beholder

Conclusions:Lessons from privatization of common fisheries

(Alaska fisheries quota shares are all cap and trade schemes)

1. Precondition: participants must be keenly aware of problems withcurrent regime

2. Set overall quota independent of allocation process3. Create immediate benefit – property right – for participating4. Don't try to legislate allocations (Congress stay out!) Instead,

legislate transparency of the process, decentralize allocation and administration

5. If you want to get something done that needs to get done and youknow is going to hurt people, you buy acceptance from the people, not corporations!