The Rising Costs of Climate Change and the Need for Green Government Spending

The costs of climate change are mounting, with the U.S. alone experiencing a record number of climate-related disasters in 2020, each costing $1 billion or more. These expenses are primarily borne by cash-strapped governments. Additionally, governments are faced with the responsibility of protecting military bases, critical infrastructure, and nuclear facilities against increasingly chaotic weather, while also combating forest fires and supporting farmers and ranchers.

One of the major fiscal impacts of climate change on governments is the increase in healthcare spending. Unabated climate change is projected to lead to a 2.2% annual boost in government spending, primarily driven by higher healthcare costs. Hotter weather exacerbates chronic conditions such as heart disease, diabetes, asthma, and mental illness, while also facilitating the spread of infectious diseases. Moreover, hotter weather negatively affects worker productivity and cognitive development in children.

The economic consequences of a warming planet are significant. One study suggests that global GDP could be 20% lower by mid-century due to climate change. Another study indicates that climate change may have already reduced global GDP by 37% since 1970. This reduction in economic activity results in a loss of tax revenue for governments.

Delaying climate spending now will only lead to higher costs and more urgent needs in the future. Achieving zero global emissions by 2050, to avoid the worst climate outcomes, is estimated to cost $215 trillion. While this may seem like a substantial investment, it pales in comparison to the costs of inaction. However, the benefits of green spending may not be immediately tangible, making it a challenging political sell.

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