As the world continues to study and mitigate the effects of climate change, its uncertainty will have a significant impact on the global economy. Citing three Gies Business studies, the Congressional Budget Office (CBO), recently released many of those potential implications in its report, “The Risks of Climate Change to the United States in the 21^st Century.”

The CBO, which provides nonpartisan analysis to the United States Congress, considered the implications of scenarios outlined by the Intergovernmental Panel on Climate Change (IPCC). The IPCC suggests that even considering current policies implemented in recent years, including the 2022 Inflation Reduction Act, there is a 90-percent likelihood that average temperatures will be three degrees warmer in 2100 than they were in the late 1800s. Using those projections, the CBO investigated its potential effect on gross domestic product (GDP), real estate and financial markets, human health, biodiversity, immigration, national security, and others.

The CBO estimates that the likely scenario (a three-degree warming trend) is that the GDP will decrease by 4 percent, wildfires would be five times greater, and that damage from routine flooding would total $250 billion. In making its assessment of the effect of temperature change on GDP, the CBO cited a 2017 working paper co-authored by Gies associate professor Tatyana Deryugina titled, The Marginal Product of Climate Change (www.nber.org/papers/w24072). The authors estimate that a day with an average temperature of 29 degrees Celsius lowers county-level annual incomes in the US by about 0.065 percent, relative to a day with average temperatures of 15 degrees Celsius. This is a productivity loss of about 23.6 percent compared to an average day. The negative relationship between income and hot temperatures has not changed since the 1970s, indicating limited adaptation so far.

“I am happy to see that the CBO is taking the threat posed by climate change seriously and incorporating these and other state-of-the-art estimates in its GDP projections,” said Deryugina.

The effects on health, the CBO says, would depend on adaptability. Without further adaptation, a four-degree increase in temperature would result in mortality rates being 1.5 to 2.0 percent higher by 2100 than they would be without additional warming. However, when accounting for adaptation, death rates could either rise or fall by as much as 0.5 percent. The CBO notes that in a two-degree warming scenario, the impact on mortality would be minimal as reduced deaths from cold weather would roughly offset increased deaths from heat. Among the studies cited in this area included a 2021 report titled Adaption and the Mortality Effects of Temperature Across U.S. Climate Regions, co-authored by Gies professors Nolan Miller and David Molitor (https://doi.org/10.1162/rest_a_00936).

Citing several studies, including a 2024 study by Miller, Molitor, and University of Michigan researcher Eric Zou, titled, The Nonlinear Effects of Air Pollution on Health: Evidence from Wildfire Smoke (www.nber.org/papers/w32924), the report estimates the pollution from wildfire smoke would account for 0.2 to 0.9 percent of annual mortality.

Through its Health Care Research Initiative, which Molitor directs, Gies continues to be at the forefront of primary research with the goal of not only influencing behavior, but also informing public policy decisionmakers.

“Our research demonstrates that environmental conditions significantly impact population health and well-being,” says Molitor. “Through rigorous empirical evidence, we quantify these impacts and help policymakers develop effective strategies for protecting communities against environmental risks.”

APPENDIX

Garth Heutel, Nolan H. Miller, and David Molitor, “Adaptation and the Mortality Effects of Temperature Across U.S. Climate Regions,” Review of Economics and Statistics, vol. 103, no. 4 (October 2021), pp. 740–753, https://doi.org/10.1162/rest_a_00936.

Nolan H. Miller, David Molitor, and Eric Zou, The Nonlinear Effects of Air Pollution on Health: Evidence From Wildfire Smoke, Working Paper 32924 (National Bureau of Economic Research, September 2024), www.nber.org/papers/w32924.

Tatyana Deryugina and Solomon Hsiang, The Marginal Product of Climate, Working Paper 24072 (National Bureau of Economic Research, November 2017), www.nber.org/papers/w24072.