Climate inflation is a big problem; it is ongoing, growing and permanent because our weather is on track to get far more violent and costly.
With less than four months to go until the presidential election, the economy is delivering some good news. At this point two years ago, inflation was above 9 percent. Last month, it dipped to 3 percent, while wages continued to grow.
The bad news is that a new villain has arrived on the scene. Call it "climate inflation."
Over a generation, we've seen global climate change progress from science to a heated political debate and now to a hotter world. It's become a kitchen table issue that threatens the financial as well as physical security of America's families.
Anyone worried about rising costs of living and higher taxes should be concerned. Yet, climate change is getting too little attention in presidential campaigns, especially since President Biden and Donald Trump have diametrically opposed views. Trump and his newly named running mate JD Vance, don't believe global warming is a real issue, while Biden deserves credit for doing more to confront climate change than any president in American history
The physical risks of climate change are indisputable. Last year alone, 28 big weather disasters (each causing more than $1 billion in damages) cost a total of $93 billion, the highest on record. Over the last decade, big weather disasters caused more than $1.2 trillion in reported damages. The actual damages were significantly higher because the government doesn't count disasters where damages are less than $1 billion.
However, these numbers don't tell us how climate change affects families, including its impacts on household budgets.
Take cooling, for example. It isn't optional anymore. Last week, historic heat waves threatened the lives of more than 100 million Americans. According to the Center for Energy Poverty and Climate, the average price to cool a home will be $719 this summer, up 9 percent over last year.
Extreme weather raises food prices too. It's one reason that orange juice cost 42 percent more in April than the year before. Because the U.S. imports about 15 percent of its foods, extreme weather elsewhere in the world affects food prices here. One study predicts that rising temperatures could increase food inflation by more than 3 percent annually in the next decade.
One of the biggest kitchen-table issues is the rising cost of home insurance as weather disasters increase. The First Street Foundation, a climate-risk research organization, says nearly 36 million homes face rising insurance costs or reduced coverage, and homes in parts of the United States are becoming uninsurable. The BBC reported earlier this year that hazard insurance premiums are "a crisis unfolding across America — along both coasts, and through the Midwest."
The National Bureau of Economic Research says the average premium in the United States jumped 33 percent from 2020 to 2023. The National Association of Realtors says the average home insurance policy, now $2,377, will rise another 6 percent this year. But premiums will be much more expensive where climate impacts are worse. The Association says home insurance for Florida residents will average $11,759 by the end of this year.
Large insurers such as State Farm, Allstate and Farmers have already pulled out of California and Florida, and more than a dozen home insurance companies have declared insolvency since 2019. Families that can't obtain or afford insurance may be unable to buy homes since most mortgage companies require it.
The overall economy feels the heat, too. Analysts say America's economy has been one of the strongest among advanced nations since the pandemic, mainly due to increases in labor productivity. However, the Atlantic Council has predicted that the United States could lose an average of $100 billion annually from lost labor productivity due to extreme heat. Productivity losses already affect all regions and sectors of the national economy. The council says productivity losses could double by 2030 and rise to $500 billion nationwide by mid-century.
However, the biggest threat to the economy is the so-called climate bubble. Realtor.com says nearly 45 percent of homes in the United States, worth about $22 trillion, are at risk of severe or extreme damage from floods, high winds, wildfires or heat.
A study published last year in the journal Nature Climate Change showed that climate change lowers the value of at-risk properties, but the risks often are not reflected in home prices. Once climate risks are recognized and priced, home values could collapse with an impact comparable to the subprime mortgage bubble that burst in 2008 and helped create the Great Recession.
"Despite enormous risks, climate change-related weather risks have not seemed to impact consumer behavior in the real estate market just yet. Americans are still moving into floodplains, drought-stricken cities, and the paths of hurricanes – and at a historic rate," according to Bradley, a national law firm. "As risks of extreme weather events from flooding to wildfires rise dramatically in coming years, lenders, insurance companies and others will revise valuations of millions of homes, popping a real estate bubble and resulting in crashing prices for homeowners."
Climate inflation is a big problem; it is ongoing, growing and permanent because our weather is on track to get far more violent and costly. We have allowed global warming to become a forever crisis.
Yet, Trump and Vance deny that climate change is a problem. Trump's record and the Project 25 plan show that he will not only fail to do anything about global warming, he will also undo the progress Biden has made. For example, he and Republicans in Congress want to repeal the critical clean energy provisions of the Inflation Reduction Act.
The U.S. Treasury Department has done a more detailed analysis of climate inflation. More violent weather, higher household costs, unaffordable insurance, falling home values, the inability to qualify for mortgages, and lost productivity — voters should ask themselves if that's the future their families want.
William S. Becker is executive director of the Presidential Climate Action Project and a former regional director at the U.S. Department of Energy. He is author of several books on climate change and national disaster policies, including the “100-Day Action Plan to Save the Planet.” and “The Creeks Will Rise: People Co-Existing with Floods.”
