Extremely hot summers and brutally cold winters—widely understood to be effects of climate change—are likely to have a huge impact on the U.S. economy in the coming decades, according to a new analysis from the Federal Reserve Bank of Richmond that overturns previous thinking on the topic.
"[It] has generally been assumed that the economic effects of global warming for the United States would be relatively small," the Fed paper says. "[However,] rising temperatures could reduce overall growth of U.S. economic output by as much as one-third by 2100."
A reduction in the economic growth rate is more damaging in the long run than a drop in economic output, the Richmond Fed writes, because "changes to the growth rate compound over time and, as a result, are more lasting."
Southern states are the most sensitive to changes in summer and fall temperatures, the paper's authors found. Auto plants reduce production when temperatures rise above 90 degree, they noted. Services and the finance, insurance and real estate industries -- the two largest sectors in the U.S. economy -- are also hurt by higher summer temperatures.
"More housing transactions take place in the spring and summer, perhaps because house shopping involves travel and outdoor activity," the paper said. "As temperatures rise, potential homebuyers may tend to stay inside, which could help explain the finding that higher summer temperatures negatively impact the real estate sector.
Warmer-than-normal temperatures result in increased hospitalizations, creating more work and expense for the insurance industries, and also hurt agriculture, forestry, and fishing. But they can benefit other industries such as utilities and mining, which profit from increased energy use.
The Fed's paper came to a similar conclusion as research published earlier this year in Science, which estimated that climate change could erase as much as 6 points off U.S. GDP by the end of the century. Climate change will also redistribute wealth as workers flee from hard-hit areas to more resilient ones.
Temperatures this summer have continued to move higher. According to the National Oceanic and Atmospheric Administration, July was the third-warmest on average in the 48 contiguous states since record keeping began in 1895. Only 1933 and 2016 were warmer.
The Carr Fire and Mendocino Complex fires in California have left a path of death and destruction in their wakes. After it ignited near Redding, Carr has destroyed 1,600 structures, damaged hundreds more and left six dead, causing more than $1 billion in total economic costs. Mendocino, the state's largest fire since 1932, has destroyed 143 structures. Greece and Sweden have also battled deadly wildfires this summer.
Regions typically known for their temperate climates — including Ireland, Scotland and Canada — have also been battered this summer by higher-than-normal temperatures. Record highs have been recorded in Glasgow, Scotland, Denver, and Tbilisi, Georgia.
"No single record, in isolation, can be attributed to global warming," according to the Washington Post. "But collectively, these heat records are consistent with the kind of extremes we expect to see increase in a warming world."