From: University Of Maryland
Published October 17, 2007 09:25 AM

Hidden Costs of Climate Change: Major, Nationwide, Uncounted

The total economic cost of climate change in the United States will be major and nationwide in scope, but remains uncounted, unplanned for and largely hidden in public debate, says a new study from the University of Maryland.

The report, The U.S. Economic Impacts of Climate Change and the Costs of Inaction, is the first to pull together and analyze the previous economic research on the subject, along with other relevant data, in order to develop a more complete estimate of costs.


While much of the public debate has focused on the upfront costs of emission controls, there's been only limited research on subsequent expenses, such as rebuilding or preparing infrastructure to meet new realities and the ripple economic effects on the agricultural, manufacturing and public service sectors. In part, the report evaluates the "costs of inaction", how a failure to reduce greenhouse gases can make response and adaptation more expensive.

"The true economic impact of climate change is fraught with 'hidden' costs," the report concludes. It adds that these costs will vary regionally and will put a strain on public sector budgets. For example, even under current conditions, the combined storm impact for the nation since 1980 has surpassed $560 billion. More frequent and intense storms would raise the price tag even higher.

"Climate change will affect every American economically in significant, dramatic ways, and the longer it takes to respond, the greater the damage and the higher the costs," says lead researcher Matthias Ruth, director of the University of Maryland's Center for Integrative Environmental Research and the Roy F. Weston Chair in Natural Economics. "The national debate is often framed in terms of how much it will cost to reduce greenhouse gases, with little or no consideration of the cost of no response or the cost of waiting. Review and analysis of existing data suggest that delay will prove costly and tip the economic scales in favor of quicker strategic action."

Estimating a total price tag for all the hidden costs is impossible at the moment, say the researchers. The report finds that current techniques generally used by economists to measure the costs related to climate change are ill-suited to a situation so complex and pervasive. It recommends a new, immediate research effort to accompany initiatives designed to minimize the impact of climate change.

Findings: Five Lessons

Lesson 1: Economic Impacts Will Occur Throughout the Country
Climate change will affect all sectors of the national economy, especially agriculture, energy and transportation, says the report. It will also damage or stress essential infrastructures, many of them locally maintained, such as water supply and treatment. Climate change will also damage ecosystems. The specific effects, though, will vary by U.S. regions.

West and Northwest: Changes in precipitation patterns and snow pack are likely to increase the risk of forest fires. The cost of fire suppression and property damages will run in the billions.

Great Plains: Increased frequency and severity of flooding and drought will cause billions of dollars in damages to crops and property.

Midwest: Major impacts are expected on the manufacturing sector as shipping costs within the Great Lakes-St. Lawrence shipping route increase because of expected lower water levels along the system.

Northeast and Mid-Atlantic: Increased vulnerability to sea level rise and storms; even a single event can cost anywhere from $2 billion to $6.5 billion, depending on severity.

South and Southwest: Decreased precipitation will strain water resources for agriculture, industry and households. For the Central Valley in California alone, the economy-wide loss during the driest years is predicted to be around $6 billion.

Lesson 2: Economic Impacts Will Be Unevenly Distributed Across Regions and Economic and Social Sectors

Examples of unequal hardships:

Small niche industries, especially in the agriculture sector, may be devastated. Even though the losses represent a small part of the state and regional economy, these businesses are an essential element of local employment, history, culture and landscape.

Rising temperatures may cause greater health problems for poor and aged urban dwellers less able to resist scorching summers.

Lesson 3: Negative Climate Impacts Will Outweigh Benefits for Most Economic Sectors

In some regions and economic sectors, climate change may be temporarily beneficial. For example, some Mid-Atlantic farmers may temporarily increase market share as agricultural conditions worsen in other parts of the country. But eventually those gains will disappear as new costs and threats, such as frequent water shortages and new pest infestations, emerge.

Reduced energy demands in the winter for heating fuel will be offset by even greater demands for cooling in the summer.

Lesson 4: Climate Change Will Place Immense Strain on Public Sector Budgets

The cost of infrastructure maintenance and replacement will likely increase, while economic losses will likely translate into reduced tax revenues. As a result, public officials may need to raise taxes, cut services, or some combination of the two. For example, Alaska's infrastructure maintenance is expected to rise by $5 billion to $10 billon; by one estimate, sea-level rise could cause between $23 billion and $170 billion in property damage by 2100, depending on how high the sea rises; in Hawaii, sea level rise will require upgrades to drinking and wastewater facilities of nearly $2 billion over the next 20 years.

Lesson 5: Secondary Effects Can Include Higher Prices, Reduced Income, Job Loss
Indirect or secondary economic effects of climate change have rarely been quantified, yet are likely to be substantial, the report says. Increased costs for raw materials, energy and transportation will likely translate into higher prices and a loss of competitiveness that could trigger declines in entire economic sectors or regions.


The range and severity of the economic and social impacts of climate change are great, while the research on the subject is very limited. The report strongly recommends an immediate, large-scale, coordinated research effort to accompany policy steps designed to mitigate climate change and adapt to the unavoidable.

To this point, research has provided only limited economic snapshots looking at specific regions, industries or economic sectors, often using quite different methodologies and time frames for analysis, says Ruth.

"We've connected the dots as far as the data would allow," Ruth adds. "Now that the climatological picture about future conditions is becoming clear, research needs to provide the socioeconomic information to guide policy. This study offers the first comprehensive analysis. Next, we will need to carry out sector and region-specific research using new methodology. The traditional, narrow micro-economic approach used in current studies is simply not suited to this task."

Because of the scope and complexity of the recommended research, the report says that a consortium of university research centers, national labs and federal and state agencies would be uniquely positioned to take on the task.

"The potential costs of the climate impacts are so staggering that this would surely be a wise investment," Ruth says. "Yet current research on the full range of economic costs is sufficient to conclude that delayed action (or inaction) on global climate change will likely be the most expensive policy option. A national policy for immediate action to mitigate emissions coupled with efforts to adapt to unavoidable impacts will minimize the overall costs of continued climate change."

Expanding Climate Change Data

Efforts aimed at improving the collection and dissemination of climate change data have already begun. Ruth will further this discussion as a member of the organizing committee for an upcoming national conference organized by the University of Maryland in partnership with NOAA, NASA and the American Meteorological Association Oct. 22-23: Climate Information: Responding to User Needs.

Report Available Online:

The research was conducted by CIER, the University of Maryland's Center for Integrative Environmental Research. CIER addresses complex environmental challenges through research that explores the dynamic interactions among environmental, economic and social forces and stimulates active dialogue with stakeholders, researchers and decision makers. Researchers and students at CIER, working at local, regional, national and global scales, are developing strategies and tools to guide policy and investment decisions.

Support for this research was provided by Environmental Defense. Founded in 1967 as the Environmental Defense Fund, it tackles the most serious environmental problems with strong science, innovative markets, corporate partnerships and effective laws and policy.

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