The True Costs of Climate Change

As world leaders gather in Copenhagen to discuss possible responses to climate change, debate continues within the United States about what this country's role in fighting global warming should be. Underlying the entire debate is the question of what we are prepared to pay to reduce our own emissions.

Before we decide how much we're willing to spend to mitigate climate change, we need to know what it will cost if we don't. The conventional view in policy circles is that climate change will cost the United States somewhere between 0 and 2 percent of GDP by the year 2100. But a more thorough accounting points to a much heavier price.

In a new study of this question, published in the Columbia Law Review, Harvard Law School Professor Jody Freeman and I try to incorporate several costs that are difficult to estimate and, for that reason, left out of most existing studies.

For example, most studies don't calculate the cost of catastrophic weather events such as hurricanes and floods. However, climate change is certain to increase the frequency and ferocity of these extreme weather events, and Hurricane Katrina taught us how devastating such storms can be. Putting such hard-to-estimate costs to one side may make sense in an academic assessment. But policy-makers do not have that luxury.

Another factor often excluded from climate change studies is the human cost associated with the loss of other species. A 2004 study by biologist Chris Thomas, published in the journal Nature, estimates that 15 to 40 percent of all species of all species will be extinct by 2050 if current trends continue. Species loss on this scale would have dramatic and unpredictable consequences for humanity, including the destabilization of ecosystems we depend on for our survival.

Most economic estimates also ignore the reality that we live in an interdependent world. The United States will experience economic costs as other countries suffer from climate change. U.S. exports are sure to decline when climate change damages foreign economies.

Yet another factor is productivity. As climate change slows the U.S. economy, it will also slow the rates of investment and innovation. This will reduce productivity gains, long an engine of economic growth in the United States.

What does all this mean? If you add up all the impacts we examined, the annual expected cost of climate change jumps to somewhere between 10 and 20 percent of GDP. To put these numbers in perspective, 20% of today's GDP is about 2.8 trillion dollars. This annual loss is enough to make the mortgage payments of every American homeowner. In fact, it's enough to do so three times over. Even this estimate is almost surely too low because it excludes costs for which we were unable to produce useful estimates, including the impact on national security, international financial markets, and increased migration and disease.

The Stern Report, the best known and most thorough economic report on climate change, estimates that the total worldwide cost of avoiding the harmful impacts of climate change is about four percent of U.S. GDP - much less than the cost the United States will face.

Perhaps more important than the costs of American action taken in isolation is that fact that the United States has long stood in the way of meaningful efforts to fight climate change. Demonstrating a willingness to act will encourage others - including China and India - to join the battle.

Andrew Guzman is Professor of Law and Associate Dean for International and Executive Education at Berkeley Law School. He holds a Ph.D. and a J.D. from Harvard University. The full study discussed above is available in the Columbia Law Review. Direct contact: