Economic costs of climate change effects

The United States National Oceanic and Atmospheric Administration (NOAA) has calculated that in 2022 the largest economy in the world has lost $162 billion to extreme weather events including hurricanes, temperature rise, drought, and snowstorm. The carbon emissions were indeed higher compared to the previous two Covid years when they were at a low, but is not a matter of much solace.

Not many organisations in other countries have a system of climate change accounting in economic terms like the NOAA. The figures bring home the harsh fact that climate change is not any more an issue of environmental experts and non-governmental organisations (NGOs) raising the false alarm. The American political establishment in the last 25 years and more had been in a denial mode over the climate change issue. The only difference between a Republican, or a Democrat, in the White House has been really nominal. The US pulled out of the 1997 Kyoto Protocol which set the target of reducing greenhouse gas emissions by 5.2 per cent of 1990 levels when Bill Clinton was the president. George W Bush, Clinton’s successor, argued that he would not commit the US to any climate protocol that would impact the country’s economic growth. Barack Obama only misled the world at the Copenhagen Climate Summit in 2010. Donald Trump is only the most extreme example of America’s refusal to accept the reality of climate change.

The break-up of the economic costs of the extreme weather events is the most striking part of the NOAA report. Hurricane Ian is reckoned to have caused damages of $112.9 billion, and the drought in the Midwest and the west coast cost the country $22.2 billion. If the severe snowstorm of December is included, the total cost could go beyond $170 billion. Adam Smith, the applied climatologist and economist with the NOAA, told the Associated Press, “Climate change is supercharging many of these extremes that can lead to billion-dollar disasters.”

Perhaps it would be useful if other countries were to quantify the costs of extreme weather events because then it will become clear to politicians, people in general and economists of all hues that climate change is a serious issue, and its costs would impact the growth rate of global economy. For a long time, those who talked of climate change and its negative impact spoke only in terms of the economic effect it would have on poor countries and underdeveloped and developing economies. They demanded that the rich and industrialised countries should pay the costs of climate change because the poor countries are paying the price for the excesses of the rich countries.  

It was in many ways a rhetorical and self-defeating position. What was needed were hard facts of the kind made public by NOAA. The leaders of rich countries adopted stances of generosity towards the poor and the vulnerable people of the world, and they promised meagre aid which they never delivered to adopt green technologies, and which they never delivered. The shoe is literally on the other foot for the advanced economies and they are feeling the pinch of environmental disaster reflected in the 2022 figures of NOAA.

It was only after the 2015 Paris climate summit that it dawned on everyone that climate change will affect the whole world and not just the poor countries. But as has been witnessed in the 2021 Glasgow climate summit and the Sharm El-Sheikh summit in 2022, promises made by rich countries have remained unfulfilled. It would seem that the world is not yet ready to accept that there is an economic cost to climate that can be felt here and now. The NOAA report is a reminder of the clear and present danger posed by climate change.