On November 15, the Office of Management and Budget (OMB) released a report assessing the fiscal risk of climate change to the federal government. OMB assessed five specific programs that are directly affected by climate change and quantified the increase in annual expenditures estimated in 2050 and 2080 for those programs based on unmitigated and mitigated greenhouse gas scenarios.
The five programs analyzed in the report are crop insurance, health care, wildfire suppression, hurricane-related disaster relief and federal facility flood risk. OMB selected these programs to assess as they are directly influenced by climate change, have strong links to the federal budget and have available quantitative scientific and economic models describing likely climate impacts.
OMB estimates that if no actions are taken to mitigate climate change, the fiscal impact could be as much as “15 percent of total federal discretionary spending by late-century." Keeping global average temperature increases below 2 degrees Celsius (relative to a 4 degree increase) could yield more than $2 trillion (in real terms) in avoided damages annually by 2100.
OMB’s assessment was developed in collaboration with the White House Council of Economic Advisers. The report begins with two conclusory findings; first, that the government’s understanding of the fiscal risks of climate change is formative, limited in scope and therefore subject to significant uncertainty; and second, that evidence available to date suggests that the government will face significant financial risks over the next century unless actions are taken to reduce GHG emissions and adapt communities to climate change impacts.
In a blog post, OMB associate director Ali Zaidi said that although mitigating the risk will not be easy, the government could work to develop policies and regulations to curb global GHG emissions, which could reduce the country’s fiscal risks. “Ultimately, when it comes to protecting our economy and the only planet we’ve got, the cost of inaction is simply too high,” Zaidi wrote.