US Spending on Climate Damage Nears $1 Trillion Per Year

The US has spent nearly $1 trillion dollars on disaster recovery and other climate-related needs over the 12 months ending May 1, according to an analysis released Monday by Bloomberg Intelligence. That’s 3% of GDP that people likely would have spent on goods and services they’d prefer to have, and amounts to “a stealth tariff on consumer spending,” analysts write.

Hurricane Helene struck Florida in late September 2024 as the most powerful storm ever to hit the state’s panhandle. Its rampage was followed a week and a half later by Hurricane Milton. Those two storms caused $113 billion in damage, according to the National Oceanic and Atmospheric Administration. The Los Angeles fires in January added another $65 billion to the national total.

The new report, “The Climate Economy: 2025 Outlook,” draws on data from dozens of public sources to demonstrate the volume of disaster-related spending, which represents $18.5 trillion globally since 2000. The biggest drivers of this trend in the US are insurance premiums — which have doubled since 2017 — post-disaster repair spending and federal aid.

Overall, increased climate costs from insurance premiums, power outages, disaster recovery and uninsured damage are responsible for $7.7 trillion, or 36%, of US GDP growth since 2000. Risks are rising both from climate change, as it increases the severity and frequency of extreme weather, and from development that is insufficiently focused on resilience.

Andrew John Stevenson, a Bloomberg Intelligence senior analyst, assembled a basket of 100 companies that have stood to gain from this spending. The firms, which span sectors from insurance to engineering, materials and retail, together outperformed the S&P index by 7% in each of the last three years.

Insurance is a “hidden burden of the climate economy,” write Stevenson and Eric Kane, director of ESG research for Bloomberg Intelligence. Wind, water and fires led insurers to raise premiums by as much as 22% in 2023 alone. They may rise again more than 6% this year. These costs are not included in the Consumer Price Index, which means that national spending on housing, thought to be about 35.5% of the total, may actually be higher than 40%.

Federal spending covered as much as a third of climate-related costs, for both disaster prevention and recovery, until 2016. The share has fallen in the last couple of years to only around 2%, and federal budget freezes and proposed cuts may diminish the outlook further. That puts stricken communities at greater need to issue general debt — which their post-disaster economies may not always be resilient enough to pay off.

“Bond markets aren’t big enough to fill the gap left by a federal pullback,” the analysts write.

Photo: A restaurant damaged by hurricanes Helene and Milton in St. Pete Beach, Florida, on Oct. 11, 2024. Photographer: Tristan Wheelock/Bloomberg