Interesting top line analysis from Stratfor on the balance between energy development and conservation on the heels of Obama's visit to Alaska this week.
Alaska Exemplifies the Climate Change Debate
U.S. President Barack Obama headed to Alaska today for a three-day trip to speak at a conference on climate change organized by the United States. That climate change is the main agenda item at the conference highlights the tension that Alaska — and the rest of the world — faces between the production and consumption of energy and its environmental impact.Obama's trip to Alaska tops off a month during which his administration introduced several environmental regulations. On Aug. 3, the president unveiled a new set of regulations to fast-track reductions in carbon emissions from power plants and to give U.S. states slightly more than a year to propose their plans. Later in the month, Obama announced new plans to increase renewable energy access and energy efficiency for U.S. households.
The U.S. moves to implement programs to combat climate change are part of preparations for the 2015 U.N. Climate Change Conference, to be held Nov. 30-Dec. 11 in Paris. There, the international community intends to sign binding pacts designed to fight climate change. Ahead of the summit, countries are finalizing their pledges. The United States has set a target to reduce greenhouse gas emissions by 26-28 percent below 2005 levels by 2025. China is aiming to cut emissions per unit of gross domestic product by 60-65 percent below 2005 levels by 2030.
The Paris climate summit may bring up the most comprehensive international agreement to combat climate change since the Kyoto Protocol. The extent and success of the pact, however, will face the same constraints. Developing countries like China, India and Argentina will require more energy as they continue to develop over the next couple of decades, and their emission levels will increase in tandem. For poor or developing countries, "dirty" energy like coal remains the cheapest source of energy; more expensive sources are detrimental to their development. The conflict between core interests and requirements to reduce energy consumption and/or use more expensive renewable energy is also an issue for businesses, especially in the developed world.
Alaska is perhaps the place where these conflicting interests are most apparent. The Obama administration allowed Shell to begin drilling in the Arctic Sea this summer, and some of Alaska's most prominent politicians have been steadfast supporters of the oil and natural gas industry. Sen. Lisa Murkowski has been a vocal proponent of approving the Keystone XL pipeline, crude oil exports and more favorable terms for oil companies looking to explore the Arctic. And of course, 2008 vice presidential candidate and former Alaskan Gov. Sarah Palin became known for the slogan, "Drill, Baby, Drill."
This should come as no surprise. The oil and natural gas industry is the source of more than 80 percent of Alaska's state taxes. The Alaskan economy is built on the production and sale of natural resources, among which energy resources are the most important and valuable.
However, climate change will continue to challenge Alaska as well. The Arctic region is an important part of the Earth's climate system. Melting polar ice caps and increasing freshwater runoff would affect ocean circulation and the freshwater intake of the Arctic Ocean. Snow, vegetation and ice also play a role in reflecting light and radiation from the sun.
However, each of those processes is long term. The Arctic polar ice cap's average extent may be melting over time, but its impact will be gradual — decades, perhaps generations long — which means the issue will not suddenly become more urgent for companies and voters. It is unlikely that an event will occur that can be clearly or immediately connected to climate change and that will cause politicians or companies to suddenly enact radical measures that go against their core interests. Drastic oil, natural gas and energy regulations have been passed, but typically only in response to a disaster like the 1989 Exxon Valdez oil spill in Alaska or the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. Developing countries have even more constraints than their developed counterparts in introducing proactive measures.
The world's industrial development has one crucial input: energy. That is unlikely to change anytime soon. Moreover, during the last century, energy supplies have become one of the world's most important resources in geopolitics because of their indispensable role in industry. Most alternative energy sources remain more expensive — quite significantly, in some cases — than their traditional hydrocarbon-based sources, making the economic pain of switching enormous. This will not always be the case: Breakthroughs are occurring already in alternative energy sources and energy storage that could cause them to reach cost equivalence with other sources in the not too distant future. Once that happens, a comprehensive plan of action to fight climate change will become more appealing.
For now, though, the consequences of overhauling a country's energy demand are enormous and politically charged. Obama is using his Alaska visit to promote his climate change action plan, but Alaska is caught between immense benefits from energy production and some of the most serious consequences of energy use.
Read the article online at Stratfor here: https://www.stratfor.com/geopolitical-diary/alaska-exemplifies-climate-change-debate
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