Readout of the National Academies Workshop on Incorporating Climate into Macroeconomic Modeling

Last week, Council of Economic Advisers (CEA) Member Heather Boushey, Office of Science and Technology Policy (OSTP) Deputy Director for Industrial Innovation Justina Gallegos, OSTP Chief Environmental Economist Solomon Hsiang, and other officials from across the Biden-Harris Administration participated in a workshop on Incorporating Climate into Macroeconomic Modeling convened by the National Academies of Sciences, Engineering, and Medicine. At the workshop, representatives from CEA and the Office of Management and Budget (OMB) presented recent analysis and our current analytical approach to accounting for the economic impacts of climate change in the Administration's macroeconomic forecasts.

The workshop was the first of four in a series initiated by the Roundtable on Macroeconomics and Climate-related Risks and Opportunities, a group that the White House helped establish. The workshop featured sessions on how current macroeconomic models may or may not be accounting for climate change, strategies used in the research community to project the physical and transition risks of climate change, and synthesis discussion around identifying avenues for connecting these modeling communities. In attendance were dozens of scholars, policymakers, and civic and business leaders focused on the intersection of climate change, macroeconomic modeling, and public policy.

The President knows that to address the serious challenges climate change presents, we must take swift and bold action, which is why he has set an ambitious goal of transitioning to a net-zero economy by 2050. To support this effort, the President's Executive Order on Climate-Related Financial Risk called on CEA and OMB to "identify the primary sources of Federal climate-related financial risk exposure and develop methodologies to quantify climate risk within the economic assumptions and the long-term budget projections of the President's Budget." New analytic tools to accurately model the macro-economic effects of climate change and the energy transition will enable policymakers to better anticipate, plan for, and manage these emerging risks.

In response to this Executive Order, CEA, OMB, and an Interagency Technical Working Group are working together to improve the representation of climate risks in the Federal Budget. This includes an updated accounting of climate risks in the Long-Term Budget Outlook. The modeling behind this accounting and a framework for improving this model are described in a recent CEA and OMB white paper, which builds on conversations at the Inaugural Meeting of the Roundtable in October 2022 and the Executive Meeting of the Roundtable in January 2023. Future workshops will provide further guidance on longer-term work to develop new tools and models to improve the Administration's accounting and management of the complex risks of climate change and the energy transition.

These workshops represent one of a series of steps the White House has taken to foster a global community of practice around these modeling efforts. Other such initiatives include recent convenings of private sector macroeconomic forecasters and of representatives of partner governments' finance ministries and multilateral institutions, including the International Monetary Fund (IMF), World Bank, and Organisation for Economic Co-operation and Development (OECD). Together, these events will build our global collective knowledge base and further an economic toolkit that can help us move prudently and reliably toward a net-zero economy.

Biden Administration ex-officio members of the panel include:

Heather Boushey, Council of Economic Advisers
Carla Frisch, U.S. Department of Energy
Justina W. Gallegos, Office of Science and Technology Policy
Sarah B. Kapnick, National Oceanic and Atmospheric Administration
Zachary Liscow, Office of Management and Budget
Kelly Maguire, U.S. Department of Agriculture
Alex Marten, Environmental Protection Agency
Tara M. Sinclair, U.S. Department of the Treasury
Maria Uhle, National Science Foundation