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Who Bears Climate-Related Physical Risk?

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Abstract

This paper combines data on current and future property-level physical risk from major climate-related perils (storms, floods, hurricanes, and wildfires) that owner-occupied single-family residences face with data on local economic characteristics to study the geographic and demographic distribution of such risks in the contiguous United States. Current expected damage from climate-related perils is approximately $19 billion per year. Severe convective storms and inland floods account for almost half of the expected damage. The central and southern parts of the U.S. are most exposed to climate-related physical risk, with hurricane-exposed areas on the Gulf and South Atlantic coasts being the riskiest areas. Relative to currently low-risk areas, currently high-risk areas have lower household incomes, lower labor market participation rates, and lower education attainment, suggesting that the distribution of climate-related physical risk is correlated with economic inequality. By 2050, under business-as-usual emissions, average expected damage is projected to increase monotonically with current average expected damage, which implies that long-term policies that aim to mitigate climate-related physical risk are likely to be progressive.

Suggested Citation

  • Natee Amornsiripanitch & David Wylie, 2023. "Who Bears Climate-Related Physical Risk?," Working Papers 23-29, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:97399
    DOI: 10.21799/frbp.wp.2023.29
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    More about this item

    Keywords

    Climate Risk; Physical Risk; Inequality; Housing;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G5 - Financial Economics - - Household Finance
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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