CBO’s Projection of the Effect of Climate Change on U.S. Economic Output: Working Paper 2020-06

By Evan Herrnstadt and Terry Dinan (both of CBO).

As part of its long-term economic forecast, the Congressional Budget Office projects the effect of climate change on the growth of U.S. real gross domestic product (GDP). CBO projects that climate change will, on net, reduce average annual real GDP growth by 0.03 percentage points from 2020 to 2050, relative to growth that would occur under the climatic conditions that prevailed at the end of the 20th century.

That annual growth differential accumulates to a 1.0 percent reduction in the projected level of real GDP in 2050. Of that 1.0 percent reduction, one-third reflects a continuation of the effect of climate change on real GDP growth in recent years, and two-thirds reflects expected increases in that effect in the future.

This paper describes how CBO constructed its projection, how the projected effect should be interpreted, limitations of the analysis, and the central climate-change scenario that CBO used. It also places CBO’s projection in context by comparing it with two widely discussed estimates of the net damage to the United States from climate change. Finally, it notes the many sources of uncertainty underlying the projection.