Climate Change Already Impacting U.S. Economy, Study Reveals
The economic effects of climate change are not just a future concern; they are already significantly impacting the United States, reducing national income by an estimated 12%. This is the conclusion of new research led by Derek Lemoine, APS Professor of Economics at the Eller College of Management.
Lemoine, who also co-directs the university’s Consortium of Environmentally Resilient Business, emphasizes the importance of understanding the current economic impacts of climate change for effective policymaking and business investment decisions.
“If we can’t figure out what climate change is already costing us with the data we have, projecting the future becomes almost hopeless,” said Lemoine, whose study was published in the Proceedings of the National Academy of Sciences.
Previous research often underestimated the economic impact by focusing narrowly on short-term local weather changes. Lemoine’s model, however, accounts for the persistent and widespread nature of climate change and its economic interconnections across regions, resulting in a substantially larger estimated income loss of about 12%.
“A lot of the real cost comes from how temperature changes across the whole country ripple through prices and trade,” Lemoine noted. “It’s not just about the weather where we live. When every region is affected at the same time, the economic consequences add up quickly.”
A New Approach to Measuring Impact
Lemoine’s research involved using climate models to simulate conditions with and without human emissions to determine weather variations in the absence of climate change. He combined this with county-level data on temperature and personal income from 1969-2019 to assess how temperature shifts affect income across the U.S.
He highlights the significance of evaluating climate change’s impact on a national scale, given the interconnected nature of the economy. “Places are linked through trade, so temperatures in California or Iowa can influence income in Arizona. Those cross-state connections turn local weather changes into nationwide economic impacts,” Lemoine explained.
Importantly, the study focuses on routine temperature variations rather than extreme weather events, making temperature a reliable measure to assess climate change’s economic impact.
The Importance of Measuring Economic Impact
Understanding climate change as a continuous economic factor can alter how businesses approach the financial landscape, affecting prices, productivity, and energy demands. Recognizing losses already incurred underscores the need for resilience planning, which can influence decisions on business location and insurance.
“If you want to decide where to direct adaptation resources, you have to know what’s already happening on the ground,” Lemoine stated. Measuring current economic effects helps businesses and policymakers pinpoint emerging risks and prioritize adaptation funding.
Moreover, Lemoine suggests that a framework like his could assist in regularly publishing economic costs of climate change, akin to other economic indicators, guiding more informed policy decisions.
This research aligns with the goals of the Arizona Institute for Resilience, which provided early-stage funding and focuses on creating systems that adapt to global changes.
Real-Time Insights for Future Action
Lemoine aims for his research to offer a data-driven perspective on real-time climate damages. As more data becomes available, the calculations could be refined and expanded globally.
“We would love to know how this number is changing over time,” Lemoine said. “That’s exactly why I think its calculation should be institutionalized, so that we calculate numbers like this every year.”
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