Climate change in Alaska has caused regionally disparate economic effects. The infrastructure and community relocation costs, along with potential adverse effects on fisheries, accrue predominantly to rural communities. While both urban and rural communities benefit from reduced space heating costs, the urban communities bear few of the costs and risks. The profound and diverse climate-driven changes in Alaska’s physical environment and ecosystems generate economic impacts through their effects on environmental services. These services include positive benefits directly from ecosystems (for example, food, water, and other resources), as well as services provided directly from the physical environment (for example, temperature moderation, stable ground for supporting infrastructure, and smooth surface for overland transportation).213 Some of these effects are relatively assured and in some cases are already occurring. Other impacts are highly uncertain, due to their dependence on the structure of global and regional economies and future human alterations to the environment112 decades into the future, but they could be large.
Threats to infrastructure in Alaska from coastal and riparian erosion caused by the combination of rising sea levels, thawing permafrost, reduced sea ice, and fall storms are well known.214,215 A study published in 2008 projected that the cost (for 2008–2030) associated with early reconstruction and replacement of public infrastructure (roads, public buildings, airports, and rail lines) caused by damage from these threats was estimated to be between $3.6 and $6.1 billion (in 2008 dollars).20 Assuming the 2.85% annual real interest rate used in these studies, the cost translates to an average of $250 to $420 million per year (in 2015 dollars). A more recent study estimated a somewhat smaller annual cost of $110–$270 million between 2015 and 2060 for maintenance and repair costs to mitigate or remediate damage to public infrastructure from climate warming (in 2015 dollars, discounted 3%) under the lower scenario (RCP4.5) and higher scenario (RCP8.5), respectively.11,91 Projecting these costs to the end of the century, cumulative effects amounted to $3.7 billion under the lower scenario (RCP4.5) to $4.5 billion under the higher scenario (RCP8.5) for reactive repair and replacement, but $2.0 to $2.5 billion for proactive adaptation costs, depending on the climate change scenario11 (in 2015 dollars, discounted 3%). The lower cost assumes that funding will be available for maintenance and repair before facilities require replacement, which is not guaranteed.216,217 Both studies excluded losses to commercial and industrial buildings and private homes.
Coastal and riverine erosion and flooding in some cases will require that entire communities, or portions of communities, relocate to safer terrain. The U.S. Army Corps of Engineers identified erosion threats to 31 communities requiring partial or complete relocation.123 Relocation costs for seven vulnerable communities identified in a 2009 U.S. Government Accountability Office study ranged from $80 to $200 million per community (dollar year not reported).122,218 Beyond financial cost, additional challenges of relocation involve legal and policy obstacles, as well as deep cultural ties to landscape and place. Construction of rock walls, use of sandbags and riprap,219 and replacement infrastructure for communities that are partially relocated123 represent additional costs, as would loss of productivity and income from lack of access to utilities and drinking water and temporary displacement of residents when water and sewer lines rupture.220,221,222
Ice Road Transportation
In rural Alaska, where surface transportation infrastructure is extremely limited, snow and ice offer a low-cost alternative for moving people, goods, and heavy industrial equipment. As the climate warms, the resulting shorter and milder cold season reduces the season length for ice road use, increases the risk of travel on river ice, and increases the wear and tear on snow machines. Loss of overland winter transportation raises costs for extractive industries (such as oil extraction and logging) and rural Alaska households. A 2004 report estimated the cost of ice roads on the North Slope of Alaska at $100,000 per mile, versus as much as $2 million per mile for a gravel road (in 2003 dollars; $127,000 per mile for ice roads and $2.5 million for gravel in 2015 dollars).223 Costs of foregone economic activity103 and increased risk of winter travel are more difficult to quantify.224
Marine Vessel Traffic
Reduced seasonal ice has been associated with increased marine traffic in the U.S. maritime Arctic.225 A longer ice-free shipping season could reduce the cost of shipping ore from the Red Dog mine and other mines in the region,154,226 as well as increase certainty of shipping production facilities and equipment to North Slope oil fields. Adverse navigability effects of reduced river discharge227 could offset beneficial effects of an extended ice-free shipping season on the cost of barge service to communities in western and northern Alaska.
Northward progression of the late-summer sea ice edge creates opportunities for increased vessel traffic of various types (including cargo and tanker ships, tour boats, and government vessels, including military)226 to pass through the Bering Strait to or from the Northern Sea Route, the Northwest Passage,228 and, by mid-century, directly across the Arctic Ocean.229,230 As the Arctic Ocean opens, the Bering Strait will have increased strategic importance.231 Lack of deep-water ports, vessel services, search and rescue operations, environmental response capabilities, and icebreaking capacity will impede expansion of vessel traffic.225,226,230,232,233 Significant effects are likely several decades away, and new transarctic shipping will likely have little economic effects within Alaska in the near term but would bring environmental risks to fisheries and subsistence resources.234 New oil and gas exploration and development in new areas within the U.S. economic zone are unlikely, as the Arctic Ocean waters that are not already accessible are generally off the U.S. continental shelf.
Increasing winter temperatures have reduced the demand for energy and associated costs to provide space heating for Alaska homes, businesses, and governments. Heating degree days (a measure of the energy required to heat homes and other buildings) have declined substantially in most parts of the state as compared to mid-20th century levels, including 5% in Sitka, 6% in Fairbanks and Nome, and up to 8% in Anchorage and Utqiaġvik (formerly known as Barrow; Figure 26.8).238
Unlike in other regions of the United States, increased cooling degree days (a measure of the energy required to cool homes and other buildings) from warmer summer temperatures provide only a small offset to the beneficial effect of lower heating costs. Applying 2017 retail fuel prices to data on energy use for space heating for Alaska regions, annual expenditures for space heating in Alaska are estimated at about $1 billion (in 2015 dollars).239,240 Future energy prices are highly uncertain, but the figures suggest that every 1% decline in heating degree days could yield $10 million of annual savings in heating costs.