The increasing severity of floods, drought, wildfires, hurricanes and extreme heat due to climate change could cost the federal government trillions of dollars by the end of the century, according to a new report from the Office of Management and Budget.
“The fiscal risk of climate change is immense,” Danny Yagan, OMB’s chief economist, and Candace Vahlsing, OMB’s associate director for climate, energy, environment and science, said Monday. According to their analysis, the first of its kind, “climate change could lead to an annual Federal revenue loss at the end of the century of 7.1 percent, which in today’s dollars would equal $2 trillion per year."
The OMB report comes in response to an official request from President Biden last spring asking the agency, which prepares the president’s budget and works with government agencies to coordinate policy implementation, to examine the effect climate change could have on the federal budget.
Rapidly increasing costs: The analysis finds that climate change could force the federal government to spend an additional $25 billion to $128 billion per year in just six categories: “coastal disaster relief, flood insurance, crop insurance, healthcare insurance, wildland fire suppression, and flooding at Federal facilities.”
Buildings could be a particular problem. About 40,000 federal structures worth more than $80 billion sit in 100-year floodplains, which have a 1% chance of flooding each year and are considered high-risk by the Federal Emergency Management Agency. Another 60,000 worth nearly $500 billion sit on 500-year floodplains.
The report also says that the cost of fire suppression on federal lands could rise by as much as $9 billion per year, driving a nearly 500% increase by the end of the century relative to today. Spending on disaster relief could increase by $22 billion to $94 billion annually, and spending on crop insurance subsidies could rise by anywhere from 3.5% to 22% each year.
White House takes steps: Last year, Biden reinstated the Federal Flood Risk Management Standard, first established by President Obama but revoked by President Trump, which encourages federal agencies “to consider and manage current and future flood risks in order to build a more resilient nation.” The standard also established an interagency working group that includes more than 20 federal agencies to coordinate federal efforts.
In addition, Biden’s 2023 budget request, released last week, includes billions of dollars for programs that are intended to reduce the severity of climate change in the future, including funding for clean energy development and greenhouse gas emission reduction. “In total, the budget invests a historic $44.9 billion in discretionary funding to tackle the climate crisis, which is almost a 60% increase from the fiscal 2021 enacted level,” OM’s Yagan and Vahlsing said.
Although the White House budget has virtually no chance of passing in its original state, it does signal the president’s priorities, which will likely be addressed to some degree in the spending package eventually approved by Congress.
