Rapid and, in many cases, unprecedented Arctic climate changes are having far-reaching impacts on natural and human systems. Despite state-of-the-art climate models capturing the rapid nature of Arctic climate change, termed Arctic amplification, they significantly disagree on its magnitude. Using a regional, process-oriented surface energy budget analysis, we argue that differences in seasonal energy exchanges in sea ice retreat regions via increased absorption and storage of sunlight in summer and increased upward surface turbulent fluxes in fall/winter contribute to the inter-model spread. Models able to more widely disperse energy drawn from the surface in sea ice retreat regions warm more, suggesting that differences in the local Arctic atmospheric circulation response contribute to the inter-model spread. We find that the principle mechanisms driving the inter-model spread in Arctic amplification operate locally on regional scales, requiring an improved understanding of atmosphere-ocean-sea ice interactions in sea ice retreat regions to reduce the spread.