The United States has faced a staggering financial burden from climate-related disasters in the past year. From May 2022 to May 2023, nearly $1 trillion was spent on recovery and other climate needs, according to a recent analysis by Bloomberg Intelligence. This amount represents about 3% of the country’s GDP, which means it’s money that could have been spent on goods and services that people actually want. Analysts have described this spending as a hidden tax on consumer spending.
In late September 2024, Hurricane Helene struck Florida, becoming the strongest storm to hit the state’s panhandle. Just a week and a half later, Hurricane Milton followed, causing a combined damage of $113 billion, as reported by the National Oceanic and Atmospheric Administration. Additionally, wildfires in Los Angeles in January added another $65 billion to the national disaster recovery costs.
The report titled “The Climate Economy: 2025 Outlook” highlights the growing trend in disaster-related spending, which has reached $18.5 trillion globally since the year 2000. A significant factor driving this increase in costs in the U.S. is the rise in insurance premiums, which have doubled since 2017. Other contributors include expenses for post-disaster repairs and federal aid.
Overall, climate-related costs, such as insurance, power outages, and disaster recovery, have accounted for $7.7 trillion, or 36%, of U.S. GDP growth since 2000. The risks associated with climate change continue to rise, leading to more frequent and severe weather events. Additionally, development practices that do not prioritize resilience are exacerbating these issues.
Andrew John Stevenson, a senior analyst at Bloomberg Intelligence, has put together a list of 100 companies that benefit from this increased spending. These companies span various sectors, including insurance, engineering, materials, and retail, and they have outperformed the S&P index by 7% each year for the past three years.
Insurance costs have become a significant and often overlooked burden in the climate economy. Insurers have raised premiums by as much as 22% in 2023 alone, and further increases are expected this year. These costs are not reflected in the Consumer Price Index, suggesting that housing expenses, which are currently estimated to be about 35.5% of total spending, might actually exceed 40%.
Federal funding used to cover about a third of climate-related expenses for disaster prevention and recovery up until 2016. However, this share has dramatically decreased to around 2% in recent years. Proposed federal budget cuts may further limit this support, leaving communities in need of funding to rely more heavily on general debt, which their economies may struggle to repay after disasters.
Analysts have pointed out that bond markets alone cannot compensate for the gap left by reduced federal assistance. As climate-related disasters continue to escalate, the financial implications for both individuals and communities are becoming increasingly significant.