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Hotter, Poorer and More Unequal

Kate Larsen, Mike Delgado, Shashank Mohan, Justin Simcock and Trevor Houser | June 29, 2017

Today, research from the Climate Impact Lab, a collaboration between the Rhodium Group, University of California Berkeley, University of Chicago and Rutgers University, was featured in the journal Science. This groundbreaking study uses state-of-the-art econometric research and localized climate projections to quantify the impact of climate change for every county in the US. Our team of economists and climate scientists assessed how a wide range of economic activity—agriculture, crime, health, energy demand, labor and coastal communities—will be affected by higher temperatures, changing rainfall, rising seas and intensifying hurricanes. The central finding: unmitigated climate change will make the US hotter, poorer and more unequal. The poorest US counties stand to lose between up to 20% of their income, compared to a fraction of that for the richest counties in the US.

Using Big Data to Quantify Climate Risk

Today’s release of the Climate Impact Lab’s pioneering study—nearly four years in the making—brings new insight into the ways in which climate change will impact the US economy. In recent years the scientific community has made dramatic advances in the detail and sophistication of global climate models. There has simultaneously been an explosion in econometric research using real-world data to better understand the ways in which temperature, precipitation and extreme weather impact our society and economy. And the ongoing revolution in big data and scalable cloud computing allows us to combine the two in a new system for predicting the impact of climate change community-by-community, sector-by-sector, across the world. This study highlights results for the US. In the weeks and months ahead, the Climate Impact Lab will be rolling out similar analysis for the rest of the world, building on the probabilistic global climate projections we released last week at www.impactlab.org/map/ which were featured in the New York Times.

The Inequality of Climate Impacts

This study is the first to provide a rigorous, evidence-based, probabilistic estimate of the cost of climate change to the US economy. For the six impact studies included in analysis, the team estimates for each degree Fahrenheit (0.55̊C) increase in global temperatures, the US economy loses 0.7 percent of GDP, with each degree of warming costing more than the last. If global emissions growth is not slowed, then the resulting 6–10°F (3–5C) of warming above 19th century levels projected for the last two decades of this century will have costs on par with the Great Recession—except they will be permanent and damages for poor regions of the US will be many times larger.

But the most important insight from the research – and one only possible because of the Impact Lab’s ability to project damages at the local level – is that the economic costs of climate change in the US will not be evenly spread.  States in the South and lower Midwest, which tend to be poor and hot already, have the most to lose, while some parts of New England and the Northwest could see net gains (Figure 1). Increased heat-related mortality, declining crop yields, and reduced labor productivity across the South could devastate local economies. Colder and richer counties along the northern border and in the Rockies may actually benefit, as health, agriculture yields and energy costs improve due to a reduction in the number of extremely cold days.

This inequality of geographic impact means unmitigated climate change will not only make the country poorer overall but will significantly exacerbate income inequality in the US. While the likely (66% probability) outcome for the richest 10% of counties is between a 3% loss and 0.4% gain in income by the end of this century relative to a future where the climate is not changing, the poorest 10% stand to lose between 9% and 20% of their income. Indeed, unmitigated climate change may result in the largest transfer of wealth from the poor to the rich in the country’s history.

What Comes Next

There is a great deal of analysis in the Science article beyond the headline findings presented above. In the coming weeks, we will be highlighting additional insights and will be making the underlying data available through our Climate Impact Map at http://www.impactlab.org/.

Because we use stringent selection criteria for the empirical studies we incorporate, there are many more sectors of the US economy for which no suitable studies exist and were thus omitted (e.g., non-mortality health impacts, worker productivity, and biodiversity loss). Over time, future studies will quantify climate impacts in these and other “missing sectors.” The Lab’s approach allows for updating based on new econometric studies or climate model projections, and our results should be interpreted as current best estimates that will be dynamically adjusted as research in the community advances.

The Lab has also been working hard to expand the geographic coverage of the sectors included in the Science article for the US. In the months ahead, we will be publishing this work and making the data available at http://www.impactlab.org.