Climate Change: Information on Potential Economic Effects Could Help Guide Federal Efforts to Reduce Fiscal Exposure
Fast Facts
Climate-related impacts, such as coastal property damage, have already cost the federal government billions of dollars, and these costs will likely rise in the future. We found that information on the economic effects of climate change is developing and imprecise, but it can convey insights into the nation's regions and sectors that could be most affected.
As an initial step in establishing government-wide priorities to manage climate risks, we recommended that the Executive Office of the President use information on economic effects to help identify significant climate risks and craft appropriate federal responses.
Examples of Potential Economic Effects of Climate Change by 2100
Map of the United States showing potential effects of climate change.
Highlights
What GAO Found
Methods used to estimate the potential economic effects of climate change in the United States—using linked climate science and economics models—are based on developing research. The methods and the studies that use them produce imprecise results because of modeling and other limitations but can convey insight into potential climate damages across sectors in the United States.
The two available national-scale studies that examine the economic effects of climate change across U.S. sectors suggested that potential economic effects could be significant and unevenly distributed across sectors and regions. For example, for 2020 through 2039, one study estimated between $4 billion and $6 billion in annual coastal property damages from sea level rise and more frequent and intense storms. Also, under this study, the Southeast likely faces greater effects than other regions because of coastal property damages (see figure).
Examples of Potential Economic Effects of Climate Change by 2100
Information about the potential economic effects of climate change could inform decision makers about significant potential damages in different U.S. sectors or regions. According to several experts and prior GAO work, this information could help federal decision makers identify significant climate risks as an initial step toward managing such risks. This is consistent with, for example, National Academies leading practices, which call for climate change risk management efforts that focus on where immediate attention is needed. The federal government has not undertaken strategic government-wide planning to manage climate risks by using information on the potential economic effects of climate change to identify significant risks and craft appropriate federal responses. By using such information, the federal government could take an initial step in establishing government-wide priorities to manage such risks.
Why GAO Did This Study
Over the last decade, extreme weather and fire events have cost the federal government over $350 billion, according to the Office of Management and Budget. These costs will likely rise as the climate changes, according to the U.S. Global Change Research Program. In February 2013, GAO included Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks on its High-Risk List.
GAO was asked to review the potential economic effects of climate change and risks to the federal government. This report examines (1) methods used to estimate the potential economic effects of climate change in the United States, (2) what is known about these effects, and (3) the extent to which information about these effects could inform efforts to manage climate risks across the federal government. GAO reviewed 2 national-scale studies available and 28 other studies; interviewed 26 experts knowledgeable about the strengths and limitations of the studies; compared federal efforts to manage climate risks with leading practices for risk management and economic analysis; and obtained expert views.
Recommendations
GAO recommends that the appropriate entities within the Executive Office of the President (EOP), including the Office of Science and Technology Policy, use information on potential economic effects to help identify significant climate risks and craft appropriate federal responses. EOP entities and the Environmental Protection Agency did not provide official comments on the report.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Executive Office of the President | The appropriate entities within the Executive Office of the President, including the Council on Environmental Quality, Office and Management and Budget, and Office of Science and Technology Policy, should use information on the potential economic effects of climate change to help identify significant climate risks facing the federal government and craft appropriate federal responses. Such responses could include establishing a strategy to identify, prioritize, and guide federal investments to enhance resilience against future disasters. (Recommendation 1) |
As of May 21, 2024, the Executive Office of the President has not fully implemented this recommendation. Some emergent efforts are underway across the government to characterize climate-related financial risks, but these have yet to be clearly linked to climate resilience investment decision making. GAO also has ongoing work related to the potential economic effects of climate change.
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