A new scientific study finds that the climate affects every sector of the U.S. economy. In “U.S. Economic Sensitivity to Weather Variability,” Jeffrey Lazo of the National Center for Atmospheric Research, economists Megan Lawson and Donald Waldman of the University of Colorado, and Peter Larsen of Lawrence Berkeley National Laboratory find that “U.S. economic output varies by up to $485 billion a year of 2008 gross domestic product — about 3.4 percent — owing to weather variability.” They explain:
Weather directly and indirectly affects production and consumption decision making in every economic sector of the United States at all temporal and spatial scales. From very local short-term decisions about whether or not to pour concrete on a construction project to broader decisions of when to plant or harvest a field, to the costs of rerouting an airplane around severe weather, to peak demand electricity generation in response to extreme heat, to early season snow for a bumper ski season in Colorado, drought in the Midwest, or wind-fueled wildfires in California, weather can have positive or negative effects on economic activity.
Their study examined the statistical connection between economic activity at the state level and changes between unusually warm and cold weather (measured by heating degree days and cooling degree days), total precipitation, and extreme precipitation and drought (measured by standard deviation of precipitation) over the seventy-year period of 1931-2000. Unsurprisingly, U.S. agriculture is strongly affected by weather variability, but every sector, including the massive finance, insurance and real estate (FIRE) sector are affected by changes in the climate:
A primary finding of this study is that every sector is statistically significantly sensitive to at least one measure of weather variability, and two sectors — FIRE and wholesale trade — show sensitivity to all four measures of weather variability.
Interestingly, mining appears to be the most sensitive to weather variability at 14.4 percent, which could be a product of the high dependence of demand on factors like heat and cold, though the authors caution the “result should be further investigated to determine whether it is an artifact of the data or statistical estimation.”
The economic correlation with more heating degree days “is consistently positive, suggesting though that across the seven sectors for which the estimate is significant, cooler weather is associated with larger GSP.”
This observed sensitivity of the U.S. economy to past weather variability should raise alarms for policy makers as we enter an era not just of changeable weather, but a changing climate that will worsen the weather itself. The Congressional Budget Office has taken the absurd position that the largest potential impact of extreme climate change on the U.S. economy could not be more than three percent. One hopes they will recognize that the science does not agree.