Does government support to upstream oil and gas projects benefit local communities in the Arctic? That was the topic of a panel organized by the International Institute for Sustainable Development at the Arctic Energy Summit in Akureyri, Iceland, on October 9th. The panel discussion was led by six speakers: Stewart Wheeler, Canada’s Ambassador to Iceland; Mary Simon, Inuit Tapiriit Kanatami, Canada; Mikael Anzén, Ministry of Foreign Affairs, Sweden & Head of Delegation, Sustainable Development Working Group of the Arctic Council (Mr. Anzén spoke in his personal capacity); Pauline Gerrard, Hudson Bay Inland Sea Initiative, IISD, Canada; Mikhail Babenko, WWF Global Arctic Programme, Russia; and Hjalti Jóhannesson, University of Akureyri Research Centre, Iceland.

“Climate change, which is impacting the Arctic much faster than the rest of world, is opening up new opportunities for the development of extractive industry projects in the region,” said IISD’s Ivetta Gerasimchuk who moderated the discussion. “Local communities face these rapid changes, and it is important to ensure that they benefit people who live in the Arctic and that public money provided to expansion of upstream oil & gas activities in the Arctic does not undermine sustainable development.”

During the discussion it became clear that there is no ‘one-size-fits-all’ solution for deciding which projects government should or should not support in the High North; each case has to be considered individually. For this reason, it may make more sense for governments to establish dedicated financial vehicles (i.e., development banks or funds) to support social and business projects in the North rather than grant blanket subsidies based on the geographical location. Several indigenous people representatives have also spoken against cash handouts to the Northerners, stressing that those who work in the Arctic want decent jobs and opportunities to improve their lives.

The Arctic week in Iceland was followed by the highly anticipated inaugural Arctic Circle assembly in Reykjavik.  Mark Halle, IISD’s Vice President, addressed the Arctic Circle audience in a morning plenary session on October 12th. “Sustainable development of the Arctic is a challenge and an opportunity,” said Mr. Halle.  “It requires concerted international cooperation to agree on the policy and regulatory frameworks and to put them in place before large-scale operation come on stream.”

Fossil-fuel subsidies are an example of policy implemented mainly outside the Arctic, but which nonetheless influences the development of the region. Fossil-fuel subsidies, both for the consumption and production of petroleum products, total between US$ 600 billion and US$ 2 trillion per year globally depending on the methodology used to define and measure them. These subsidies make it cheaper to emit carbon, which drives climate change.

Like any other expenditure, fossil-fuel subsidies have an opportunity cost. Governments can choose to support other forms of energy development, including in the Arctic. In particular, the Arctic has abundant renewable energy resources in the form of hydropower, wind, geothermal and even solar resources.

Making decisions on what kind of projects governments should support in the Arctic requires careful consideration of each individual case in consultation with all stakeholders, first of all, people of the North. These policies should be transparent and can benefit from lessons already learned in the rest of the world.