Arctic human settlements experience formidable challenges from accelerating climate change and environmental transformations. While these towns have demonstrated adaptive resilience, the looming threat of local climate extremes raises concerns about the results of adaptation and mitigation efforts. With the further development of Arctic settlements, it is necessary to consider changes in local climatic conditions, shifting the adaptation focus from regional to local scales. The local climate perspective in this literature synthesis study is built upon constraints from physical climatology, focused on the climate and environment within and around the town of Longyearbyen, Svalbard. The study provides insights into Longyearbyen’s local climate dynamics, including physical mechanisms, climate localisation, factors and trends, as well as their implications. Three model pathways for development are discussed, centred on (1) industrial development, (2) public services, and (3) tourism and conservation. This categorisation is introduced to distinguish development scenario sensitivity to the local climate effects. The synthesis indicates that any development concentrated spatially will amplify local warming and climate change, as positive climate feedback predominate. The study emphasises the need for a comprehensive understanding of the environmental factors sustaining local climatic anomalies.