For decades, economists have focused on how climate change will impact the future. New research from Derek Lemoine, APS Professor of Economics in the Eller College of Management , shows the impact is already here: climate change has reduced U.S. income by an estimated 12%.
Lemoine, co-director of the university's Consortium of Environmentally Resilient Business , said measuring climate change's current economic impact has big-picture implications when it comes to policymaking and business investment.
"If we can't figure out what climate change is already costing us with the data we have, projecting the future becomes almost hopeless," said Lemoine, lead author of the study out today in the journal Proceedings of the National Academy of Sciences.
Lemoine added that previous research largely focused on local, short-term weather changes alone, which, by his model, had a negative impact on U.S. income of less than 1%. When he accounted for climate change's year-after-year persistence and nationwide reach as well as connections between regional economies, the income loss jumped to about 12% – comparable to a major national policy shift. While the exact number is uncertain, Lemoine said the true effect is clearly far larger than 1%.
"A lot of the real cost comes from how temperature changes across the whole country ripple through prices and trade," he added. "It's not just about the weather where we live. When every region is affected at the same time, the economic consequences add up quickly."
A new approach
To measure climate change as an ongoing economic force, Lemoine worked with climate models simulating the world with and without human emissions to figure out how different each county's weather would have been if there was no climate change. He then combined county-level data on daily temperature with county-level personal income per capita from the Bureau of Economic Analysis covering 1969-2019. By doing this, he was able to measure how income historically changed with the number of hotter and colder days both locally and around the country, giving him a more detailed picture of the economic effects of shifting temperature patterns.
Lemoine said it's important to measure climate change's impact nationally, not locally.
"The reason the effects get so much larger is that climate change operates through the whole economy," Lemoine said. "Places are linked through trade, so temperatures in California or Iowa can influence income in Arizona. Those cross-state connections turn local weather changes into nationwide economic impacts."
Importantly, the study does not measure the economic impact of extreme weather events like hurricanes, wildfires or floods. Instead, it assesses how routine temperature shifts – like more hot days and fewer cold days – affect personal income. Lemoine said temperature is a useful measure because it can be tracked everywhere and provides a consistent way to link climate change to economic activity.
Why measuring matters
Approaching climate change as a continuous economic factor, rather than solely focusing on future projections, can reshape how businesses navigate the financial landscape. Year after year, temperature changes impact prices, productivity, regional trade and energy demand, all of which factor into business costs. Recognizing economic losses that have already occurred illustrates the importance of resilience planning for businesses, which Lemoine said can guide decisions ranging from location choices to insurance coverage.
"If you want to decide where to direct adaptation resources, you have to know what's already happening on the ground," Lemoine said. "Measuring the current economic effects of climate change helps businesses and policymakers understand where risks are emerging right now."
Lemoine said the data could also help inform policy design, where debates often center on predicting climate damages 50-100 years into the future. He believes agencies could use a framework like his to regularly publish the economic cost of climate change, similar to how they track other economic indicators such as employment or inflation. With a clearer picture of how climate change is affecting the economy now, Lemoine said policymakers could make more informed decisions about where adaptation funding is needed most and what industries and regions are being hit the hardest.
The research also aligns with the mission of the Arizona Institute for Resilience , which focuses on designing environmental and social systems that anticipate and integrate with global change. The institute helped launch the project with early-stage funding.
Real-time insight
Lemoine hopes his research offers a novel, data-driven way to understand climate damages as they happen using a framework that could be expanded globally. As more data and climate effects are included, he says the calculation would become more precise and more actionable.
"We would love to know how this number is changing over time," Lemoine said. "That's exactly why I think its calculation should be institutionalized, so that we calculate numbers like this every year."
