The costs of currently predicted climate changes in California over the next century could be as low as $7.3 billion per year, or as high as $46.6 billion per year, according to a new report by two University of California-Berkeley agricultural and resource economics professors. The 127-page report was funded by the nonprofit Next 10 foundation that studies California's future and the intersection of the economy and the environment.
From the most general perspective, our review of the evidence on climate risk and response supports four overarching findings:
- Our estimates indicate that climate risk — damages if no action is taken — would include tens of billions per year in direct costs, even higher indirect costs, and expose trillions of dollars of assets to collateral risk.
- Climate response — mitigation to prevent the worst impacts and adaptation to climate change that is unavoidable — on the other hand, can be executed for a fraction of these net costs by strategic deployment of existing resources for infrastructure renewal/replacement and significant private investments that would enhance both employment and productivity.
- At the sector level, there will be some very significant adjustment challenges, requiring as much foresight and policy discipline as the state can mobilize. In this context, the political challenges may be much greater than the economic ones. The state’s adaptation capacity depends upon flexibility, but divergence between public and private interests may limit this flexibility. As in the current financial dilemma, resolving this will require determined leadership.
- Despite the extent and high quality of existing climate research reviewed in this document, the degree of uncertainty regarding many important adjustment challenges remains very high. This uncertainly is costly, increasing the risk of both public and private mistakes and the deferral of necessary adaptation decisions. The process of improving research and understanding of climate effects may itself be costly and difficult, but policymakers must have better visibility regarding climate risk and response options.