Economics of Climate Change

Climate change is no longer a distant threat; it’s a present reality exerting a heavy economic and human toll on the United States. Since 1980, the nation has witnessed an alarming increase in severe weather events, with each costing over $1 billion in damages. According to the National Oceanic and Atmospheric Administration (NOAA), as of 2023, the United States has experienced 371 such events, resulting in a cumulative economic impact exceeding $2.535 trillion and causing thousands of fatalities. This increasing frequency and intensity underscore the urgency of proactive climate action to prevent further devastation. We should have listened to Al Gore.

Recent studies suggest that the number and cost of billion-dollar weather events have increased dramatically over the past decade. For example, in 2020 alone, there were a record-breaking 22 such disasters, setting a new benchmark for the financial burden and human costs associated with climate inaction. Experts, including climatologists at NASA and the World Meteorological Organization, attribute this uptick to the intensification of extreme weather due to rising global temperatures, sea-level rise, and atmospheric changes. These factors increase the risk of droughts, wildfires, hurricanes, and severe flooding, often impacting the nation’s most vulnerable regions.

Robert Reich, former U.S. Secretary of Labor, has critiqued the idea that the U.S. “can’t afford” climate action, calling it fundamentally misguided. Reich’s perspective, shared by numerous economists, reframes climate investments as necessary measures to curb far greater future costs. A 2019 study by the Union of Concerned Scientists estimated that inaction could cost the U.S. $224 billion per year by 2090, purely from damages to real estate along coastlines due to sea-level rise. This doesn’t account for the indirect economic impacts, such as lost productivity and disrupted supply chains, which are harder to quantify but equally damaging. How much longer can we procrastinate before this terrible group project of a world completely fails?

Economically, the rising costs of repairing infrastructure, homes, and businesses after each disaster place an enormous strain on federal, state, and local budgets. In the past five years alone, NOAA reports that these expenses have skyrocketed, with an annual average of 15 climate-related disasters costing over $20 billion each. Federal disaster relief funds, which frequently support areas devastated by hurricanes, wildfires, and floods, are being depleted at unprecedented rates, diverting money from essential public services such as education and healthcare. Local governments often resort to increased taxes and cuts to public services as they struggle to cover these soaring costs.

The impact on the private sector is similarly severe. An analysis by McKinsey & Company found that climate-driven disruptions—especially those affecting agriculture, manufacturing, and distribution—pose significant risks to GDP. In California, for instance, wildfires have led to enormous insurance losses and diminished agricultural productivity, affecting both the national food supply and insurance rates. Many companies face rising insurance premiums and operational costs from extreme weather, which also contributes to inflation and, consequently, higher costs for consumers. And whoever is buying Florida real estate is an eternal optimist in climate change.

The human toll of climate-related disasters is equally profound. From 1980 to 2023, thousands of lives have been lost, and countless more have been displaced due to the worsening climate crisis. In states like Louisiana and Florida, frequent hurricanes have forced many families to relocate, resulting in what experts call “climate migration.” According to a report from the Internal Displacement Monitoring Centre, climate-related displacement is expected to increase globally, with as many as 143 million people predicted to be climate migrants by 2050.

The psychological effects of climate-related events are often long-lasting and complex, contributing to a rise in mental health issues in affected communities. The American Psychological Association reports that individuals impacted by climate-related disasters experience higher rates of anxiety, depression, and post-traumatic stress disorder (PTSD). These mental health challenges necessitate additional resources and create a further economic burden on healthcare systems. Poor Gen Zs; at least we millennials are depressed from day-to-day life and not from world-ending stuff.

Reich’s argument emphasizes that investment in climate solutions is not merely an environmental measure but a critical economic strategy. Transitioning to renewable energy sources, building disaster-resilient infrastructure, and adopting sustainable agricultural practices offer tangible economic returns. A recent report by Project Drawdown highlighted that investments in renewable energy yield long-term savings by reducing dependency on fossil fuels, thus stabilizing energy prices and reducing greenhouse gas emissions.

The renewable energy sector is a significant avenue for job creation and economic growth. According to the U.S. Bureau of Labor Statistics, jobs in renewable energy fields, such as wind and solar technology, are among the fastest-growing occupations. The Solar Foundation’s annual job census reported that as of 2022, solar energy alone employed over 250,000 people in the U.S., with projections for steady growth as more states adopt clean energy mandates. Beyond energy security, the sector’s expansion provides opportunities for innovation in battery storage, electric grid management, and sustainable fuel technologies, making the U.S. a potential leader in the global green economy. Maybe ESG can save the day. HAHAHAHAHA.

Strengthening infrastructure to endure extreme weather is vital. Investments in resilient structures like elevated roadways, fortified coastal barriers, and advanced stormwater management systems can significantly reduce repair costs post-disaster. The American Society of Civil Engineers (ASCE) estimates that by investing in infrastructure resilience, the U.S. could save up to $4 per every $1 invested, illustrating that these upgrades have a high return on investment. Additionally, improving emergency response systems, such as early warning networks and evacuation protocols, can prevent loss of life and minimize disruption.

Sustainable urban development also plays a crucial role in climate adaptation. Incorporating green building practices, utilizing permeable materials for flood control, and preserving natural ecosystems like wetlands and forests are practical, cost-effective ways to protect communities from climate-related events. For instance, New York City’s Green Infrastructure Plan has invested millions in green roofs, permeable pavements, and stormwater management systems to protect against flooding, setting a model for urban climate resilience.

Beyond protection, these measures contribute to urban cooling, improve air quality, and enhance biodiversity, offering holistic benefits to society. By investing in renewable energy, disaster-resilient infrastructure, and sustainable urban planning, the United States can protect lives, secure livelihoods, and lay the foundation for a prosperous, sustainable future. These initiatives are not just solutions to today’s climate challenges but are essential strategies for a resilient, economically secure nation.

Or maybe we can live on Mars or the Moon or something. Who cares, we’re all hurtling toward the grave.