CBO’sRoleinAssessingClimateChangeandClimateChangePolicy November1,2022 Forinformationabouttheworkshop,seehttps://usea.org/event/macroeconomic-effects-low-carbon-transition-workshop-modeling-challenges-and-approaches. PresentationtotheDepartmentofEnergyandtheUnitedStatesEnergyAssociation,WorkshoponMacroeconomicEffectsofaLow-CarbonTransition NicholasChase MicroeconomicStudiesDivision 1 CBO’sRole CBOwasestablishedtogivetheCongressastrongerroleinbudgetmatters. Theagencyprovidesanalysisofbudgetaryandeconomicissuesthatisobjectiveandimpartial.Itisstrictlynonpartisananddoesnotmakepolicyrecommendations. CBOfollowsprocessesthatarespecifiedinstatuteorthatithasdevelopedinconcertwiththebudgetcommitteesandCongressionalleadership.CBO’schiefresponsibilityundertheBudgetActistohelpthebudgetcommitteeswiththemattersundertheirjurisdiction. TheEffectsofClimateChangeandClimateChangePolicyontheFederalBudget 2 BudgetaryEffectsofClimateChangeandEffortstoAddressIt Climatechangeresultsinphysicaleffectsthatreduceeconomicoutput. Potentialconsequencesexistforrevenues,mandatoryspending,anddiscretionaryspending. Adaptationandmitigationcouldreducephysicalandbudgetaryeffects. SeeCongressionalBudgetOffice,BudgetaryEffectsofClimateChangeandofPotentialLegislativeResponsestoIt(April2021),www.cbo.gov/publication/57019.3 EffectsofClimateChange 4 SeeCongressionalBudgetOffice,PotentialIncreasesinHurricaneDamageintheUnitedStates:ImplicationsfortheFederalBudget(June2016),www.cbo.gov/publication/51518. 5 EstimatesofHurricaneDamage Thecostofhurricanedamageisexpectedtoincreasemorethantheeconomywillgrow. Expectedannualdamagein2016was 0.16percentofGDP. Expectedannualdamagein2075is 0.22percentofGDP. HowClimateChangeIsExpectedtoChangetheLevelofRealGrossDomesticProductin2050 ClimatechangewillreducethegrowthrateofrealGDPfrom2020to2050byanaverageof0.03percentagepoints. Thatdifferenceinannualgrowthaccumulatestoa 1.0percentreductionintheprojectedlevelofrealGDPin2050. Climatechangewillhaveeffectsonpeople’swell-beingthatarenotmeasuredinGDP. SeeCongressionalBudgetOffice,The2021Long-TermBudgetOutlook(March2021),www.cbo.gov/publication/56977;andEvanHerrnstadtandTerryDinan,CBO’sProjectionof theEffectofClimateChangeonU.S.EconomicOutput,WorkingPaper2020-06(CongressionalBudgetOffice,September2020),www.cbo.gov/publication/56505.6 SeeCongressionalBudgetOffice,Wildfires(June2022),www.cbo.gov/publication/57970. 7 HowWildfiresAffecttheFederalBudget Wildfiresaffectthefederalbudgetthroughspendingonfiresuppression,forestmanagement,disasterassistance,andotheractivities. The5-yearmovingaverageforfederalspendingonwildfiresuppressionhastripledinrecentyears. Climatechangehascreatedhotteranddrierconditionsthatareconducivetolongerandmoreseverewildfireseasons. EffectsofPoliciesThatWouldAddressClimateChange 8