Washington, D.C. — A new report from the Center for American Progress urges fiscal policymakers to consider the impact of climate change in the federal budget process.
Despite seeing the effects of climate change in real time and experts’ growing understanding of how it might affect the economy in future decades, little progress has been made in reimagining how to think about the fiscal impacts of climate change, the report says. While both the Office of Management and Budget under President Barack Obama and the Congressional Budget Office have taken initial steps to improve their understanding of these issues, the federal budget scoring process still largely ignores climate impacts.
The result is not only an incomplete understanding of the long-term fiscal picture, but also a political and legislative process that is likely to discourage investments to reduce carbon emissions. Applying fiscal rules of thumb to new estimates of how climate change is slowing economic growth, the report notes that these effects alone may be responsible for about $60 billion per year in higher deficits as soon as 2030, growing larger over time.
On top of that, climate change will make existing federal health programs more expensive, impose new costs as a result of natural disasters and federal property loss, and create security risks that may increase the cost of keeping the nation safe.
The report offers a framework for how federal policymakers might better consider climate policy and fiscal policy in tandem. It explores how existing conventions could lead to understating the fiscal impact of climate change in a business-as-usual scenario and therefore overstate the costs of climate action. The current process fails to adequately consider the effect of climate on baseline budgetary projections, focuses on shorter time scales, and largely ignore the risk of catastrophic outcomes.
“Given what we know about the reality of climate change, it is past time for policymakers to consider the potential impact it will have on the economy and the budget,” said Jacob Leibenluft, a senior fellow at CAP and author of the report. “As we consider the steps needed to address this existential threat, our fiscal debates must do more to take into account the costs of inaction.”
The report recommends that fiscal policymakers:
- Update fiscal and economic baselines to take the costs of climate change into account.
- Increase the capacity for climate modeling of new policies.
- Report a wider range of economic and public welfare outcomes resulting from climate policy.
Read the report: “Rethinking the Intersection of Climate Policy and the Federal Budget” by Jacob Leibenluft
For more information or to speak with an expert, please contact Sam Hananel at [email protected].