California’s Fifth Climate Change Assessment: Climate Impacts to the Economy

- Climate change is projected to continue imposing large and growing economic costs on California, with the largest monetized damages arising from premature mortality.

The full report is now available!

Project overview

This report is a core component of California’s Fifth Climate Change Assessment, led by researchers at the UC San Diego School of Global Policy and Strategy. It translates cutting-edge climate research into clear economic terms, helping state and local leaders understand the financial stakes of inaction and the critical need for cost-effective adaptation.

This report examines the direct and indirect economic effects of climate change across key sectors of California’s economy, synthesizing evidence from peer-reviewed academic research, government agency reports, and analyses by private and nonprofit organizations. The analysis is organized into three interconnected systems that collectively encompass California’s economic landscape:

  • The Social Systems section focuses on human-centered economic activities, analyzing impacts on public health costs, labor productivity and workforce dynamics, educational infrastructure and outcomes, and government operations and fiscal capacity. 
  • The Built Systems section addresses critical infrastructure that underpins economic activity, encompassing real estate markets and property insurance sectors responding to natural hazard risks, transportation networks, and water and energy systems. 
  • The Natural Systems section examines sectors heavily dependent on natural resources, including agriculture, fisheries, forestry, and tourism, industries that face direct exposure to changing temperature, precipitation, and fire patterns.

Key Findings

Massive Economic Toll

Historical events are already costing billions; for example, wildfires between 2017 and 2021 caused over $117.4 billion in average annual economic losses.1

Uneven Regional Impacts

Workers in the lowest 20% of income face heat-related injury risks five times higher than those in the highest 20%.2

Born into the Bill

An American born in 2024 faces an estimated $500,000 to $1 million in climate-related costs over their lifetime, including higher housing, food, energy, healthcare, transportation, taxes, and lost income.3

Climate Change is Already Imposing Significant Costs

  • Seven major heat events between 2013 and 2022 resulted in $7.7 billion in damages.4 
  • Between 2020 and 2022, droughts caused an estimated $3 billion in agricultural losses.5
  • California faces an expected $1.7 billion in annual flood damages, with more than 1.1 million residential properties statewide at substantial flood risk.6
Heat Damages
$ 0 B
Wildfire Losses
$ 0 B
Drought Impact
$ 0 B
Flood Risk
$ 0 B

Selected Economic Damages

Projected Per‑Capita Economic Losses from Climate Change

The following represent estimated California-specific per-capita impacts of climate change in 2100 under 3°F of warming. Note that these damages do not account for cross-sector interactions, do not quantify uncertainty, and do not include all sectors affected by climate change. Estimates are based on the US Environmental Protection Agency’s Framework for Evaluating Damage and Impacts (FrEDI)7,8.

    • Air Quality: The $190.6 per capita damage estimate for air quality reflects the economic valuation of additional deaths caused by climate change-induced worsening of ozone and fine particulate matter, as both cause respiratory and cardiovascular disease and premature mortality. 

    • Wildfire: The $ 165.1-per-capita damage estimate for wildfires reflects economic losses from both property destruction and smoke-related impacts on earnings.

    • Labor: The $103.3 per-capita labor damages reflect projected losses from heat-driven reductions in time worked and wages among heat-exposed occupations.

    • Agriculture: The $150.1 per-capita agricultural damage reflects projected losses from reduced yields of major staple crops (cotton, maize, soybeans, wheat) under warming. However, because California’s agricultural economy is dominated by higher-value specialty crops, this figure likely understates total climate-related agricultural losses.

    • Energy: While milder winters may reduce natural gas heating costs by $66.1 per capita, increased cooling demand may raise electricity costs by $35.4 per capita.

The damage functions were derived from both FrEDI and the Fifth National Climate Assessment, Chapter 19.

Change in Average Annual Hours Worked per Worker

Relative Scale of Climate Change Impact on GDP Growth across Counties

By 2050, highly exposed sectors in the Central Valley may experience a decline of 5 to 10 hours worked per worker annually by 2050, while those in the southeastern part of the state could see reductions of 15 to 20 hours per worker annually.9

Places with higher baseline temperatures and larger temperature increases risk greater economic impact. Inland counties in the Central Valley, Inland Empire, and southeastern desert regions face disproportionate burdens. 

Implications for Households & Government

    • Property & Insurance: By 2050, sea-level rise could cause nearly $17.9 billion in damages to residential and commercial buildings.10

    • Insurance Transformation: California’s FAIR (Fair Access to Insurance Requirements) Plan coverage grew from $50 billion in 2018 to $750 billion as of March 2026.11 

    • State Budgets: Wildfire protection spending has nearly quadrupled since 2005, reaching $2.9 billion in recent fiscal years.12

    • Food Security:  Climate change is expected to increase national food price inflation by roughly 1.4–1.8 percentage points annually by 2035.13

Learn more about the California’s Climate Change Assessment here!

Authorship

  1. Paci, et al. (2023). The Economic, Fiscal, and Environmental Costs of Wildfires in California. Gordon & Betty Moore Foundation.

  2. Park, R. J., Pankratz, N., & Behrer, A. P. (2021). Temperature, Workplace Safety, and Labor Market Inequality (IZA DP No. 14560). IZA Institute of Labor Economics. https://docs.iza.org/dp14560.pdf.

  3. ICF (2024). Cost of Climate Change to an American Born in 2024. ICF Incorporated, L.L.C. https://advocacy. consumerreports.org/wp-content/uploads/2024/04/ ICF-CR-Cost-of-Climate-Change-Study.pdf

  4. Munich Reinsurance Company (2025). Natural disaster figures for the first half of 2025.

  5. Medellín-Azuara et al. (2022). Economic Impacts of the 2020–22 Drought on California Agriculture. UC Merced.

  6. First Street Foundation (2021). The Cost of Climate: America’s growing flood risk.

  7. EPA, U. S. (2024). Technical Documentation for the
    Framework for Evaluating Damages and Impacts (FrEDI). https://www.regulations.gov/document/EPAHQ-OAR-2023-0434-1050

  8. Hsiang, S., Greenhill, S., Martinich, J., Grasso, M., Schuster, R. M., Barrage, L., Diaz, D. B., Hong, H., Kousky, C., Phan, T., Sarofim, M. C., Schlenker, W., Simon, B., & Sneeringer, S. E. (2023). Fifth National Climate Assessment (Chapter 19: Economy). U.S. Global Change Research Program. https://toolkit. climate.gov/NCA5

  9. Carleton, T., Arguedas, K., Hess, H., Klos, S., Malevich, D. S. B., McCusker, D. K., Sehaumpai, M., Tavarez, H., & Wimberger, D. E. (2022a). Climate Vulnerability Metric: Unequal Climate Impacts in the State of California. California Air Resources Board. https:// ww2.arb.ca.gov/sites/default/files/2022-11/2022-spappendix-k-climate-vulnerability-metric_0.pdf

  10. Grenier, L., & Sencan, G. (2024). Sea Level Rise in California. Public Policy Institute of California. https:// www.ppic.org/publication/sea-level-rise-in-california/

  11. California FAIR Plan Association. (2026) Key statistics & data.

  12. Morales, et al. (2022). Climate Change Impacts Across California: Housing. California’s Legislative Analyst’s Office.

  13. Kotz, et al. (2024). Global warming and heat extremes increase food price inflation. Nature Climate Change.

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