The Economic Consequences of Ignoring Climate Change

The price of climate change is high—and the bill is only getting steeper as temperatures continue to rise, economists say. 

A recent report compiled by risk management experts with the Institute and Faculty of Actuaries and the University of Exeter in England found that the global economy could experience a 50 percent loss in gross domestic product between 2070 and 2090 due to climate change, based on current emissions trends. 

But this isn’t just a far-off risk. Economic shocks from climate change are already rattling markets around the world. 

In the U.S. alone, extreme weather costs roughly $150 billion each year from direct impacts such as damage to infrastructure, agricultural losses and widespread injuries, according to a 2023 federal assessment. The impacts of warming trickle down to a number of industries, from insurance to healthcare. Climate change is even jacking up your grocery bill as farmers struggle to grow crops in fluctuating conditions. 

Despite mounting evidence of this staggering price tag, the Trump administration released a memo earlier in May directing federal agencies to stop considering the economic damage caused by climate change when writing regulations, unless it is explicitly required by law. When countries don’t account for these economic costs, it has dangerous consequences for their citizens, warns André Corrêa do Lago, the Brazilian diplomat who will head this year’s UN climate summit. 

Tallying Up the Bill: The most acute losses caused by climate change are typically related to storms and wildfires. 

Let’s take a look at the numbers: When Hurricane Helene hit the Southern U.S. last September, the damage was catastrophic. Severe flooding, landslides and their aftermath killed at least 250 people, damaged tens of thousands of homes in western North Carolina and hindered businesses across the region that rely on tourism dollars. Shortly after, Hurricane Milton hit Florida and tore through agricultural areas and buildings, including Tropicana Field, where the stadium’s fabric roof was ripped clean off by high winds. 

Combined, the two storms caused an estimated $113 billion in direct damage, according to the National Oceanic and Atmospheric Administration.

The fires that burned through Los Angeles County early this year caused an estimated $250 billion in direct damages, one of the costliest weather-related disasters in U.S. history, The Los Angeles Times reports. In response to increasingly severe hurricanes and wildfires, insurance companies have jacked up premiums across the country for homeowners in recent decades, which I wrote about in April. Meanwhile, longer-term climate risks such as the spread of ticks and mosquitos, which carry illnesses such as Lyme disease and West Nile virus, have triggered a rise in costly medical visits, research shows. 

As these impacts unfold, economists and actuaries are sounding the alarm. Since climate change pervades nearly every facet of society, it can be difficult to calculate warming’s exact economic impacts over the long term. But in recent years, financial experts have developed complex models and analyzed historical data to start adding up the bill. 

The January report authored by the Institute and Faculty of Actuaries and University of Exeter found that the world is facing an increasing risk of “planetary insolvency,” when ecosystems become so degraded that they can no longer help prop up human society. 

“You can’t have an economy without a society, and a society needs somewhere to live,” lead author Sandy Trust, former chair of the IFoA’s sustainability board, said in a press release. “Nature is our foundation, providing food, water and air, as well as the raw materials and energy that power our economy. Threats to the stability of this foundation are risks to future human prosperity which we must take action to avoid.”

Another key metric in climate economics is known as the social cost of carbon. This calculation measures the dollar cost of damages that ensue when one extra ton of carbon dioxide is emitted into the atmosphere. The Obama administration formally introduced this concept into U.S. regulatory policy, measuring the social cost of carbon at about $40 a ton. 

So what does that look like in practice? One example is fuel efficiency standards. Though they can be costly to enact, the social cost of carbon analysis shows that the benefits to society outweighed the expense. That calculation was part of the rationale behind the Obama administration’s decision to finalize efficiency standards at 54.5 miles per gallon for cars and light-duty trucks by model year 2025. 

Shifting Policies: Not every president has the same approach when it comes to the social cost of carbon. During the first Trump administration, the social cost of carbon was dropped to less than $5 per ton. During former President Joe Biden’s term, it was upped to $190 per ton to reflect inflation and worsening climate change. 

Now, the White House has ordered federal agencies to scrap the metric altogether, unless it is “plainly required” by law, according to a recent memo issued by Jeffrey B. Clark, the acting administrator of the White House Office of Information and Regulatory Affairs. In the memo, Clark said too many uncertainties come with this metric, including “whether and to what degree any supposed changes in the climate are actually occurring as a consequence of anthropogenic greenhouse gas emissions.”

A number of economists and environmental groups condemned the move and this rationale, which they say goes directly against the abundance of data that reflects the economic hits countries have taken in the face of global warming, E&E News reports. Ignoring the social cost of carbon in regulatory decisions could have major real-world consequences, David Cash, the former New England regional administrator for the U.S. Environmental Protection Agency, said in a recent interview with the public radio program Living on Earth. 

“It would allow the [EPA], for example, to diminish the effectiveness of regulations so that cars could pollute more, factories could pollute more,” he said. “Gas plants and coal plants could produce more. All of which would increase the chance of greater storms, greater flooding, greater wildfires, greater drought, greater incidence of incredibly hot days in the summer where people will get more cases of asthma, more respiratory disease—all of those kinds of things. It will have a real world impact.”

I reached out to the White House to ask about the motivation behind this decision.

“For decades, the federal government has prioritized vague climate change goals over real disaster resilience and mitigation – policies that can prevent devastating tragedy during natural disasters,” White House spokesperson Taylor Rogers said in an emailed statement. “Prioritizing policies like forest management and flood mitigation is far more impactful than obsessing over vague climate change goals. The Trump administration is preventing short and long-term damage to families, communities, and our economy.” 

Since Inauguration Day, the Trump administration has made cuts to programs that help support state efforts to protect homes and other buildings from extreme weather. That includes the termination of the Building Resilient Infrastructure and Communities program, which has helped cities and towns prepare for disasters through measures such as raising roads to protect against flooding, The Associated Press reports. 

On the forest front, President Donald Trump issued an executive order in early March to increase domestic timber production, which my colleague Kiley Bense covered. Conservation groups warn that this move—which will expedite the permitting process—could increase wildfire risks and hurt ecosystems’ ability to absorb carbon emissions.

Meanwhile, NOAA announced earlier this month that it will no longer update a database that tracks the economic toll of climate-related weather events that cause billions of dollars in damages. A NOAA spokesperson told me that the decision was made in “alignment with evolving priorities and staffing changes.” 

At times, Trump has argued that climate impacts could be positive for people in the U.S.

“The biggest threat is not global warming, where the ocean is going to rise one-eighth of an inch over the next 400 years … and you’ll have more oceanfront property,” Trump said in an August discussion with Tesla owner Elon Musk. The Hill pointed out that sea levels are projected to rise between 10 to 12 inches over the next three decades, according to a 2022 federal report. 

Other countries such as Australia and Russia have also failed to comprehensively incorporate climate change’s costs into national policies, environmental groups say. 

Corrêa do Lago said in a recent interview with The Guardian that “economic denial” is the latest opposition strategy to climate action. He plans to make a push for governments to remodel the economy to transition away from fossil fuels and toward renewable energy, partially to avoid economic hits.

“Most of the answers have to come from the economy,” Corrêa do Lago told The Guardian. “Because we have now enough science, enough demonstration of how climate change can affect people’s lives. Now we need answers [in the form of policy measures]. We need economists to rally.”

More Top Climate News

On Wednesday, a large piece of rock and ice from a glacier collapsed in Switzerland, triggering a landslide that smothered most of a hillside village, Tammy Webber reports for The Associated Press. Scientists say the rock above the Birch Glacier had become unstable as permafrost on the mountain melted, making the formation too heavy to hold. The local government in this area had evacuated the village, located in the Valais region, earlier this month as a precaution, but authorities say that a man is still missing in the wake of the landslide. 

The collapse occurred on the same day a regional civil court in Germany dismissed a Peruvian farmer’s claim that he and his community—threatened by melting glaciers—have been harmed by climate change driven by a German energy company’s emissions. But the court said German law does permit these types of claims.

A U.S. Supreme Court ruling on Thursday could narrow the scope of environmental reviews required for major infrastructure projects such as pipelines and railways, my colleague Lisa Sorg reports. The case centered around a proposed 88-mile railway in Utah, which was approved by the Surface Transportation Board in 2021 after they conducted a review of its potential harms to the environment, a requirement under the National Environmental Policy Act. Environmental groups and a Colorado county sued the agency, claiming that their assessment did not consider all the risks to nearby ecosystems, such as oil spills and wildfires. 

“A 1970 legislative acorn has grown over the years into a judicial oak that has hindered infrastructure development,” Justice Brett Kavanaugh wrote in an opinion for five of the justices. (Three others signed on to a concurring opinion.) “Fewer projects make it to the finish line. Indeed, fewer projects make it to the starting line.”

Environmental groups such as Earthjustice and the Sierra Club are dismayed at the outcome and say it could open the door for more projects that hurt the environment and local communities. 

Pharmaceutical company Moderna announced on Wednesday that the Trump administration canceled a $590 million federal contract to develop a bird flu vaccine for humans, Reuters reports. The contract was awarded by the Biden administration in January to prepare response efforts to the rapidly spreading, highly pathogenic H5N1 influenza, which has transferred from animals to humans several times within the past year. 

A spokesperson from the U.S. Department of Health and Human Services, headed by vaccine skeptic Robert F. Kennedy Jr., told Reuters that the project had not met scientific standards or safety expectations. I wrote in November about the ways that climate change increases vaccines’ importance—and undercuts them.