Climate Change Could Cost Each American Born Today $500,000

Projected losses under the high-emissions scenario would fall into two categories: Cost-of-living increases and reduced earnings. 

ICF expects climate change to raise the cost of living over a lifetime by some $255,000 in 2024 dollars. The biggest chunk of that, $125,000, is housing-related, due to increased maintenance, operating, and insurance costs. Energy costs are next, at $88,000 over a lifetime, resulting from a combination of higher gas and electricity prices and people consuming more energy to keep their homes comfortably heated and cooled. 

The next largest, food, will add another $33,000 in costs over a lifetime. The reason: Warmer temperatures, extreme weather events, and changes in precipitation patterns are expected to challenge farmers, interrupt food supplies, and increase retail prices. Although some food-producing regions could benefit from warming temperatures, climate models consistently predict an overall negative effect on food production. (Healthcare and transportation are projected to add another $5,000 and $4,000 in lifetime costs, respectively.) 

Climate change will hit the other side of the balance sheet—earnings—as well. One large bite out of future paychecks will come in the form of higher taxes, a result of growing government expenses (on stressed healthcare systems and damaged infrastructure, among other things) and decreasing government revenues (because of reduced personal and corporate earnings that lead to lower tax collections). All told, taxes are projected to increase by 15 percent over the course of a lifetime, reducing lifetime take-home pay by some $200,000.

Income from employment is also expected to decrease due to climate change, a result of reduced labor hours due to extreme weather (especially for people working outdoors) and growing health risks. Over a lifetime, lost wages will amount to about $25,000.

Losses from higher housing, energy, and food costs, increased taxes, and reduced income total nearly $500,000. But ICF researchers say the number nearly doubles if you count the loss of investment income that many Americans would suffer as climate change takes a bite out of their retirement savings. 

Many Americans today have been unable to save much at all for retirement. But those Americans born in 2024 who are able to sock away money are likely to see a dramatic reduction in the growth of those funds, according to the study, as the value of corporate securities experiences a range of climate-related drags. These will include higher costs to purchase increasingly stressed supplies of raw materials; additional spending to keep facilities cool in hotter climates; productivity declines as workers have to take more breaks during heat waves; expenses to repair damage from extreme weather; and costs associated with transitioning to low-carbon power sources.

The ICF report says that even the shrinking number of American workers covered by traditional defined benefit pension plans will likely be affected because the corporate securities underlying such pension plans are also sensitive to climate change.

ICF emphasizes throughout the report that its projections are based on numerous assumptions and conjectures and in many cases were extrapolated from specific data points chosen as representatives of broader expense or earnings categories. 

For example, the projected cost-of-living increases were based partly on academic or government studies that anticipate rising prices for a hypothetical “market basket” of goods and services that include food, housing, energy, transportation, and healthcare. Food prices, for instance, were extrapolated from data in four studies conducted over the past decade that project corn and wheat crop yields under various climate change scenarios and the price increases that would be expected to result as the market adjusts to the new supply levels.

Despite those and other uncertainties, ICF is confident that it has underestimated, not overestimated, the cost of climate change. The reason is that many likely economic effects of climate change have not been quantified in the scientific literature, so the analysis necessarily left them out. 

For instance, the report’s estimates of future personal tax increases did not include the effects of increased government spending due to larger Department of Defense outlays, federal mortgage lending risks, damage to federal buildings and facilities, and more—even though peer-reviewed academic journal articles and the federal Office of Management and Budget have identified all those categories as likely contributors to the growth of future federal budgets.

Tracey Holloway, a professor of atmospheric and oceanic sciences at the University of Wisconsin-Madison and head of a NASA effort to use the agency’s data for public health and air quality management, agrees that the ICF report may underestimate the long-term cost of climate change. On the other hand, she accurately says the study did not attempt to calculate the potential effects of technological advances and adaptations that could mitigate the economic effects of climate change. 

“This is an innovative way to approach the issue, and the authors are up front about the limitations of their analysis, because it is so new,” says Holloway, who was not involved in the report but read a draft. “The optimist in me knows there are a lot of moving parts, and it could end up being easier to be sustainable, easier to be resilient, than we thought, and maybe in some ways that will offset the costs that they project.”

The report also emphasizes that its loss projections are U.S. national averages and that the economic effects of climate change on individuals will vary dramatically depending on geographical location, occupation, socioeconomic status, marital status, race, and gender identity, among other factors.

To demonstrate the effect of these factors, the study created a series of fictional personas. Ann, a construction worker in Tampa, Fla., for example, is likely to face greater-than-average housing costs because of damage from increasingly frequent severe tropical storms and hurricanes. But though her income will take a hit because of outdoor work days lost to those climate-driven weather conditions, that’s likely to be outweighed by the additional work generated by those storms. 

Bianca, an IT professional in Reno, Nev., is likely to face elevated healthcare costs because increasing drought conditions in her region will translate into more wildfires and degraded air quality, and thus a higher incidence of respiratory and cardiovascular problems in the region. Similarly, Chris, a farm equipment operator in Iowa, is likely to miss work days and face increased healthcare costs because of heat-related illness, as well as lost income as declining crop yields and increasing fuel costs cut into his hourly wages.

Meanwhile, Derek, a nurse in Boston, will face higher housing costs as insurance premiums on coastal properties increase dramatically to account for flood and storm damage from rising sea levels and extreme weather events.

One interesting finding of ICF’s report is that climate change can be much less economically painful if we change the current trajectory of greenhouse gas emissions and temperatures. 

Under the low-emission scenario, expected losses are significantly lower than $500,000 to $1 million. ICF projects, for example, that taxes would increase by only $5,200 over a lifetime, compared to a cumulative hit of $200,000 if we maintain the current climate change trajectory.

And in some categories, ICF projects that the average American would actually benefit economically from the low-emissions scenario, even compared to a hypothetical baseline scenario in which average temperatures remain at current levels. 

For example, whereas the study projects about $400,000 in lost investment income due to climate change under the high-emissions scenario, it says the typical American born in 2024 would earn about $25,000 extra in investment income under the low-emissions scenario than he or she would if global temperatures remained where they are today. That’s because they would be able to generate modest marginal gains—a “low-carbon transition premium”—by investing in companies developing mitigation and adaptation technologies.

The bottom line? Under the low-emissions scenario, ICF expects kids born in 2024 to hold on to about $300,000 that they’d otherwise lose if we do not act swiftly to mitigate climate change.

That element of the study may be both comforting and galvanizing to the parents of small children.

“I think this study will change the way some people think about climate change because it makes the future so much more immediate and personal,” says Holloway, the climate scientist who is also a member of the advocacy group Science Moms and the mother of two sons, Peter, 14, and Henry, 3. “The effects of climate change are not so far ahead. This report is about the life of this little person I take care of every day, and the choices I make every day are going to affect his well-being.”