Economic Valuation of Ecosystem Goods and Services in a Melting Arctic

Abstract:

The Arctic region is composed of unique ecosystems that provide a range of goods and services to local and global populations. However, Arctic sea-ice is melting at an unprecedented rate, threatening many of these ecosystems and the services they provide. Yet as the ice melts and certain goods and services are lost, other resources such as oil and minerals will become accessible. The question is: how do the losses compare with the opportunities? And how are the losses and potential gains likely to be distributed?

To address these questions, this study provides a preliminary assessment of the quantity, distribution and economic value of the ecosystem services (ES) provided by Arctic ecosystems, both now and in the future given a scenario of sure climate change. Using biophysical and economic data from existing studies (and some primary data), preliminary estimates indicate that the Arctic currently provides $357m/yr (in 2014 US$) in subsistence hunting value to local communities, of which reindeer/caribou comprise 83%. Reindeer herding provides $110m/yr to Arctic communities. Interestingly, ‘non-use (existence/cultural) values’ associated with Arctic species are very high at ~$11bn/yr to members of Arctic states.

The Arctic also provides ES that accrue to the global community: oil resources (North Slope; ~$5bn profits in 2013), commercial fisheries (~$515mn/yr) and most importantly, climate regulation services. Recent models (Whiteman; Euskirchen) estimate that the loss of climate regulation services provided by Arctic ice will cost ~$200 - $500bn/yr, a value which dwarfs all others.

Assuming no change in atmospheric temperature compared to 2014, the net present value of the Arctic by 2050 (1.4% discount rate) comes to over $9 trillion. However, given Wang and Overland (2009) predictions of ice-free summers by 2037, we expect many of these benefits will be lost. For example, it is fairly well-established that endemic species, such as polar bears, will decline with sea-ice melt. Estimation of such losses is ongoing for the present study.

Increased opportunities include oil and mineral extraction, and increased shipping. The economic values associated with these potential opportunities (including environmental and social costs) are currently being assessed for the present study.