The Economic and Budgetary Challenges of Climate Change

Blog Post
Wednesday, April 20, 2022

This week on Facing the Future, we explored the connection between environmental and fiscal sustainability with Brian Keane,  president of SmartPower, a Washington, DC based non-profit renewable energy and energy efficiency outreach organization.  Keane also has years of experience working on Capitol Hill and was a key staffer to the Paul Tsongas presidential campaign in 1992. He later became one of the first Concord Coalition field directors.  Also in the program, I spoke with Concord Coalition chief economist Steve Robinson and policy director Tori Gorman about what the latest high inflation numbers portend for our economy and what steps the Fed and Congress may take in response.

For Brian Keane, there is a tremendous amount of overlap between fiscal and environmental sustainability. Both require people to think and act not only about today, but plan for the impact of our present decisions on our shared future.

“It goes back to that same angst that we had when we started The Concord Coalition, which was: how do we actually get people to personally do something about the federal budget deficit when it’s such a huge challenge?” said Keane. “That’s the same thing with climate change.  How do you get individuals to actually personally do something, take a vested interest in the environment, in climate change, when it’s such a huge issue. First and foremost, it’s an understanding that climate change is real. We understand that today, the biggest challenge facing the planet is actually the change in climate, the change in temperatures. And what can we as a government or we as individuals do to mitigate that.”  

According to various federal reports, we are already seeing the budgetary impact of climate change on the local, state, and federal levels with higher sea levels, more flooding, more severe hurricanes and winter storms, prolonged periods of drought, and hotter summer temperatures and the wildfires they bring.  One report from the Office of Management and Budget estimates that the annual cost of extreme climate-related weather events has been about $120 billion over the past five years. The Congressional Budget Office estimates that climate change could lower projected GDP in 2051 by 1.0 percent. Keane says this is a widespread motivator for individuals and governments to take action to support renewable energy projects and cut down on carbon emissions. 

“Climate change does directly impact our federal budget, and impacts our ability to collect taxes. It impacts our ability as a society to actually do things.  We’re already seeing it,” said Keane. “Every time a flight is canceled, that has an economic impact on our government. Every time a community is flooded - huge impact.  Those financial impacts are very real. Then just in your own community you can see it. Hey, we got two one-hundred year floods just in the last 10 years. That’s kind of crazy. Then we have the ability of communities themselves to actually start using clean, renewable energy. But what that requires is investments from these communities in actually changing their energy sources.  There are huge economic impacts from all of this, and it comes down to priorities.”  

Keane says the key to convincing local decision makers across the country to switch to renewable, clean energy such as solar power is individual people seeing their neighbors and friends take action, the same grassroots grounding philosophy employed by The Concord Coalition since 1992. 

Looking at the economy of today, recent numbers show inflation over the last 12 months has risen 8.5% - the highest year-to-year growth in prices since 1981. Concord Coalition chief economist Steve Robinson says it is unclear whether the Fed can engineer an economic ‘soft landing’ by raising interest rates high enough to cool inflation without sending the economy into a recession. He adds that in this case, the public and market expectations of inflation may be nearly as important a factor in whether or not we are headed for a recession. 

“For a year, we were hearing from the Fed that inflation is transitory and it’s going to go away. At the beginning of this year, they said it’s no longer transitory. Just in the last month, they have coined a new term,” said Robinson. “They are now saying inflation has peaked, it’s as high as it’s going to go, and from here on out it will decline. If you do an internet search, you will find the phrase ‘peak inflation’ has really come into wide use in the last month or so. The real interesting question is whether or not it has actually peaked.  The optimistic spin is interesting, but the bottom line is: even if it has peaked, we’re still a long way from the Fed’s target of 2% inflation. The notion that we’re going to get there in the next year or two - I have my doubts. I think higher than target inflation is going to be around for at least a couple of years.”  

Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.