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Climate economics

State of Play:

Climate change is now a driver of the world’s economy. The impact is profound:

  • Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
  • Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
  • Investment in carbon capture and storage technologies is increasingly rapidly.
  • Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases. 

On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”

Are there estimates of the economic impact of climate change?

The impact of climate change will be felt worldwide, but nonetheless will have different impacts on different regions. In addition, many of the changes will be far-reaching and some likely unanticipated or poorly understood in advance. As a result of all this, economic projections are difficult, and researchers emphasize the importance of using such projects more as guides than as concrete statistics.

A Congressional Research Service report states: “According to a 2017 report of the U.S. Government Accountability Office (GAO), a “small but growing number of researchers” are developing the methods used to project the potential economic effects of climate change within the United States. To date, these methods have been primarily applied to certain economic sectors for which data are readily available and evidence for the relationship between climate and impacts is considered robust. These include human health, labor, energy, agriculture, water resources, infrastructure, and coastal property. Currently, no studies purport to produce a comprehensive estimate of the effects of climate change on the entirety of the U.S. economy.”

Two studies — a 2017 report of the Climate Impacts and Risk Analysis project, coordinated by the U.S. Environmental Protection Agency, and a 2017 study published in Science, building on a 2014 report of the Rhodium Group — estimate billions in economic losses by the end of the century, with differing scenarios tied to the level of international action to limit greenhouse gas emissions.

Climatic Change: National attribution of historical climate damages (July 12, 2022)

Climate Policy Initiative: Climate Finance Innovation for Africa (Aug. 11, 2022)

Congressional Research Service: How Climate Change May Affect the U.S. Economy (April 4, 2022)

Congressional Research Service: Projected Economic Impacts of Climate Change (March 28, 2019)

Congressional Research Service: Climate Change Risk Disclosures and the Securities and Exchange Commission (Feb. 17, 2022)

Congressional Research Service: U.S. International Climate Finance: A Primer (Feb. 7, 2022)

Government Accountability Office: Limiting the Federal Government’s Fiscal Exposure by Better Managing Climate Change Risks

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