If your homeowners’ insurance premium has spiked, your electricity bill jumped, or wildfire smoke has enveloped your neighborhood, you’ve already felt the cost of climate change. A recent report from the National Bureau of Economic Research estimates that American families pay a climate bill of $400 to $900 per household annually.
Living in a warmer world will be expensive. The study, “Who Bears the Burden of Climate Inaction?“, examines how extreme weather events increase costs across many household budget categories. Drawing on insurance data, federal disaster cost records, energy consumption surveys, and mortality statistics, the researchers built a county-by-county picture of the climate’s financial toll, and it points to rising costs in the decades ahead.
Researchers found that the total cost to the nation ranges from $50 billion to $110 billion per year. Yet, in the 10 percent of U.S. counties where climate disasters have happened, costs already exceed $1,300 per household. These findings arrive as the nation debates the costs of climate action versus inaction. But they suggest that inaction has a price tag that’s already hitting household budgets.
Insurance costs represent the largest share of that burden, with climate-related premium increases ranging from $75 to $360 per household. Flood insurance, which is often an additional cost on top of homeowners’ policies, adds an average of $142 per household but can cost an extra $2,500 a year in many places. Meanwhile, since the 2010s, wildfire smoke has caused an estimated 35,000 deaths annually in the United States, up dramatically from previous decades.
According to recent Federal Reserve surveys, 21 percent of American households reported financial impacts from natural disasters in 2024, and eight percent experienced moderate or substantial impacts.
Where Your Money Goes: Breaking Down Climate Costs
Insurance remains the leading source of household climate costs. Building on this, another NBER study found that homeowners’ insurance premiums rose by an average of 33% between 2020 and 2023.
These rising costs are especially steep in disaster-prone areas. The gap between what homeowners pay in risky areas versus safer ones has widened significantly, from about $300 in 2018 to $500 by 2023. Furthermore, insurance companies are paying more to protect themselves against major disasters and passing those costs on to customers in high-risk areas to the tune of $375 or more per year.
Energy costs add more costs. Warmer temperatures mean higher cooling bills, leading households to spend roughly $25 more annually on electricity.
But the bigger energy impact comes from utility rate increases to cover storm and wildfire damage, which are also passed along to customers. For example, the California Public Utilities Commission reports that wildfire-related costs now account for 15 percent to 21 percent of the expenses for California’s three major utilities. Florida Power and Light added a $12.02 monthly surcharge in late 2024 to cover hurricane restoration costs from Hurricanes Debby, Helene, and Milton.
Taxpayer-funded government disaster response now averages $142 per household annually to cover FEMA assistance, Community Development Block Grant disaster recovery funds, and subsidies for the National Flood Insurance Program. However, those costs don’t include emergency congressional appropriations for disasters.
In December 2024, Congress approved more than $100 billion in disaster aid for victims of Hurricanes Helene and Milton. Following the January 2025 Los Angeles wildfires, California is seeking an additional $40 billion to support its recovery.
In other words, even if your home hasn’t flooded and your insurance premium hasn’t spiked, you’re paying for climate change through your taxes and the prices you pay for everything else.
The Hidden Cost: Health Impacts and Mortality
Beyond the direct expenses, climate change exacts a toll on human health, which the researchers estimate costs between $64 and $103 per household annually. Wildfire smoke is taking a toll, even hundreds or thousands of miles from the fires.
Using data from peer-reviewed research on wildfire particulate matter exposure, the NBER study estimates that wildfire smoke now causes approximately 35,000 deaths annually, a mortality rate that has increased dramatically as fires have grown more frequent and intense in the West, Pacific Northwest, and across the U.S. due to Canadian wildfires.
Heat-related deaths in the U.S. have remained relatively stable so far, because reduced cold-weather deaths during winter have largely offset deaths from increased heat. However, the study warns that this balance is unlikely to hold. The Fifth National Climate Assessment noted that U.S. temperatures have risen 2.5°F since 1970—faster than the global average of 1.7°F—with the sharpest summer increases focused in coastal regions and the Mountain West.
Geography Matters: Pick Your Place
The climate’s impact on household budgets varies dramatically by location. The Gulf Coast, all of Florida, and wildfire-prone areas of California face the highest burdens. Data from NOAA’s Billion-Dollar Weather and Climate Disasters database show that disaster costs reached approximately $1,500 per capita in 2023 and 2024, and that more than 2,500 deaths from climate-related disasters occurred in the past five years alone.
The southern United States has experienced the largest increases in cooling degree days—a measure of temperatures above 65°F—while the Mountain and Pacific census results show the greatest net increases in energy expenditures. Households in South Florida and the Gulf Coast pay an average of $242 more per year for insurance premiums compared to just $35 in northern states.
Compounding the problem of finding common ground for the climate conversation, urban and rural communities face different climate burdens. Less populated rural counties experience higher per-capita losses from storms, floods, and other disasters, along with slightly greater exposure to wildfire smoke on average.
Farm families also feel the effects of climate change directly through drought and flooding, and rural utilities have less capacity to absorb the costs of storm damage. Residents may also live farther from emergency services and cooling centers—a critical gap, given that research suggests rural populations may face a higher mortality risk from extreme heat when it occurs.
But city dwellers also face growing dangers: the urban heat island effect concentrates extreme temperatures in metropolitan areas, and a Nature Communications study found that in 169 of 175 major U.S. cities, people of color experience higher heat exposure than white residents. Heat now kills roughly 1,500 Americans annually; more than any other severe weather event.
Climate Change Is Regressive
The research confirms what environmental justice advocates have long argued: climate change burdens lower-income Americans more. When insurance premiums or utility rates rise by the same dollar amount, lower-income families feel a much greater percentage impact.
Health impacts are not evenly distributed, falling hardest on the poor. The study reports that Black Americans and lower-income people of all races face higher mortality risks from extreme temperatures and smoke exposure.
They often cannot afford air conditioning, air purifiers, and effective masks. Economically disadvantaged communities are often located in higher-risk areas and have reduced opportunities to adapt to a warmer planet, including access to air conditioning, water stations, and healthcare.
What You Can Do to Reduce Climate Costs
As policymakers continue to debate systemic climate action, households can take steps to reduce their vulnerability to climate-related health and economic damages.
Invest in home energy efficiency. A home energy audit can identify opportunities to reduce cooling costs, which are rising fast. Improved insulation, smart thermostats, and efficient HVAC systems can lower energy bills and carbon footprints. To make it easier on people, utilities offer rebates and financing programs to offset upfront costs, but these moves still require planning.
Review your insurance coverage. Standard homeowners’ policies don’t cover flooding. With FEMA’s Risk Rating 2.0 system now in effect, understanding your actual flood risk and coverage options is essential. Average flood insurance costs have risen from $700 to $800 under the new system, with some Florida ZIP codes seeing rates as high as $7,000 annually.
Consider location in major decisions. For those contemplating moves, the research underscores that geography significantly affects climate costs. Popular retirement destinations like Florida and Arizona face among the highest climate-related costs. The climate risks to retirement planning are increasingly worth factoring into long-term financial decisions.
Protect your health during smoke events. Air quality monitoring has become essential, especially during wildfire season. Check AirNow.gov for real-time conditions. HEPA air purifiers can reduce indoor particulate matter exposure, and staying informed about air quality alerts helps you make protective decisions for your family.
Rising Costs Are Just Beginning
The NBER report emphasizes that its $400-$900 estimate represents only a partial accounting of the rising cost of climate change. They did not account for impacts on agricultural productivity (which raises food costs), migration costs (which raise food and healthcare costs), workplace productivity losses from heat (which harms incomes and stock performance), and many other economic effects. The study also did not project future costs, which climate models suggest will accelerate significantly as warming continues.
“Although the costs we highlight are modest at present,” the authors note, “most climate modeling indicates the importance of threshold effects that can cause costs to rise steeply in the future if climate change is not addressed.”
The most significant finding, the one to talk with your elected officials about, is that extreme weather events, not gradual temperature increases, account for the majority of current U.S. climate costs. While air conditioning helps households adapt to warmer temperatures, the unpredictable and destructive nature of hurricanes, wildfires, and floods is far more difficult to manage. That reality should inform both household planning and policy priorities in the years ahead.
