Climate Change Has Already Cut US Income by 12 Percent According to New Economic Research

For a long time, discussions about the economic cost of climate change have focused on what might happen decades from now. New research suggests that approach may be missing a much bigger and more immediate reality. According to a recent study led by economist Derek Lemoine from the University of Arizona, climate change has already reduced income in the United States by an estimated 12 percent. That figure represents a substantial economic loss that is happening right now, not in some distant future.

The research was published in the journal Proceedings of the National Academy of Sciences (PNAS) and presents a fresh way of measuring how climate change affects the economy. Instead of looking only at short-term weather fluctuations or future projections, the study treats climate change as a persistent, ongoing economic force that has been shaping incomes for decades.

A Shift From Future Projections to Present-Day Costs

Traditionally, economists studying climate change have tried to estimate how rising temperatures might impact economic output many years down the line. While those projections are important, Lemoine’s work argues that focusing only on the future overlooks a critical question: what is climate change already costing us today?

Using a new modeling approach, the study finds that when climate change is viewed as a long-term and nationwide phenomenon rather than a collection of isolated local weather events, the economic impact becomes far more significant. Earlier studies that focused on short-term, local temperature changes suggested income losses of less than 1 percent. Lemoine’s research shows that once long-term trends and economic connections between regions are included, the estimated loss rises dramatically to around 12 percent.

While the exact percentage comes with some uncertainty, the study makes one thing clear: the real economic cost of climate change is far larger than previously understood.

How the Study Measured Climate Change’s Economic Impact

The methodology behind the research is one of its most important contributions. Lemoine worked with climate scientists to simulate what weather patterns would have looked like without human-caused greenhouse gas emissions. These climate models created a counterfactual world where climate change had not occurred.

He then compared those simulations with real-world data, combining:

County-level daily temperature records
County-level personal income per capita data from the US Bureau of Economic Analysis
A time span covering 1969 to 2019, providing five decades of economic and climate information

By analyzing how income responded to changes in temperature over time, both locally and across the country, the study was able to isolate the effect of climate change itself. This approach allowed the research to capture how temperature changes in one region can influence income in another through trade, supply chains, pricing, and economic interdependence.

Why Nationwide Effects Matter More Than Local Weather

One of the study’s key findings is that climate change does not operate in isolation at the local level. Modern economies are deeply interconnected. A temperature shift in California or Iowa can affect production costs, prices, and trade flows that ripple outward to other states.

When climate change affects multiple regions simultaneously, the economic consequences compound. This nationwide synchronization of temperature changes is one of the main reasons the income impact appears so large in the study. The research shows that it is not just the number of hot days in a single county that matters, but how temperature changes across the entire country interact with economic networks.

This broader view explains why focusing only on local weather patterns significantly understates the true economic cost of climate change.

What the Study Does and Does Not Measure

It is important to note what this research includes and excludes. The study does not measure the economic damage from extreme weather events such as hurricanes, wildfires, floods, or severe storms. Those events are often the focus of climate-related economic discussions, but they represent only part of the picture.

Instead, the research looks at routine temperature shifts, such as an increase in hot days and a decrease in cold days. These gradual changes affect productivity, energy demand, prices, and trade year after year. Because temperature is consistently measured across all regions and over long periods, it serves as a reliable indicator for linking climate change to economic outcomes.

The fact that the study finds such a large income impact without even including extreme weather events suggests that the total economic cost of climate change may be even higher when those factors are taken into account.

Implications for Policy and Business Decisions

Viewing climate change as a current economic burden rather than a future risk has major implications for policymakers and businesses. Year after year, shifting temperature patterns influence labor productivity, energy costs, agricultural output, and regional trade relationships. These changes directly affect business expenses and household income.

Understanding where and how income losses are already occurring can help guide decisions about:

Adaptation investments
Infrastructure planning
Insurance and risk management
Business location and supply chain strategies

The study suggests that governments could benefit from tracking the economic cost of climate change in a way similar to other key indicators like inflation or employment. Regularly publishing estimates of climate-related income losses could provide valuable real-time insight into where economic stress is building.

Why This Research Matters Beyond the United States

Although this study focuses on the US economy, the framework could be expanded globally. Many countries have access to long-term temperature data and economic records that could be analyzed in similar ways. As more data becomes available, the estimates could become more precise and more useful for international comparisons.

The research also aligns with the broader goals of resilience-focused initiatives, such as those supported by the Arizona Institute for Resilience, which provided early-stage funding for the project. These efforts aim to design economic and social systems that can better anticipate and adapt to ongoing environmental change.

A Broader Look at Climate Change and the Economy

This study adds to a growing body of evidence showing that climate change affects more than just the environment. It influences income, productivity, trade, and long-term economic growth. While future projections remain important, understanding the costs that are already embedded in today’s economy can lead to more informed and timely decisions.

Perhaps one of the most striking takeaways is that climate change is not a distant problem waiting to unfold. It is already shaping economic outcomes in measurable ways. By recognizing climate change as a continuous force rather than a future shock, researchers, policymakers, and businesses may be better equipped to respond to the challenges ahead.

Research paper: https://www.pnas.org/doi/10.1073/pnas.2504376122