ICYMI: CBO Budget Outlook Warns Of GDP Losses From Climate Change
A new report from the Congressional Budget Office warns that climate change will reduce GDP as well as output on labor productivity. However, successful investments in mitigating climate change are expected to produce federal budget savings and benefit the private sector.
Source: Congressional Budget Office, “The 2022 Long-Term Budget Outlook,” July 2022
- CBO determined that “climate change will reduce GDP,” with real GDP in 2052 being 1% lower than it would have been if climatic conditions from 2022 – 2052 were the same as they were at the end of the 20th century.
- Climate change is expected to reduce output on labor productivity, labor supply, and the private sector’s production costs:
- Total factor productivity (TFP) is set to grow more slowly over the next 30 years than it did in the past 30 years, in part, due to climate change.
- CBO estimates TFP growth over the 2022–2052 period will be lower by on average 0.02 percentage points per year due to climate change. As a result, TFP will be about 0.7% less and GDP about 0.5% less in 2052 than would have been without the effects of climate change.
- The report noted that “though CBO’s extended baseline projections incorporate some effects of climate change, unexpected and significant changes to the climate still pose a sizable risk to the federal budget.”
- Increased frequency and severity of climate disasters could require increased funding, in the form of emergency disaster relief or infrastructure protection, for example, above amounts projected by the CBO.
- CBO determined that successful investments in mitigation or adaptation are expected to produce federal budget savings by reducing physical damage, increasing land and outdoor labor productivity, and lowering health care costs.
- Efforts to mitigate or adapt to climate change could provide long-lasting budgetary savings, as well as deliver benefits to the private sector and other governments. Ineffective policies could impose costs on all levels of government without yielding budgetary savings or other benefits.