Putting a price tag on climate change for cities and towns in Massachusetts Putting a price tag on climate change for cities and towns in Massachusetts

NEPPC report shows how much the state’s municipal spending may increase as temperatures rise NEPPC report shows how much the state’s municipal spending may increase as temperatures rise

January 10, 2023

Climate change is likely to be costly for Massachusetts cities and towns – and ultimately taxpayers – in the coming decades. This is according to a new report by Bo Zhao, a senior economist with the New England Public Policy Center in the Federal Reserve Bank of Boston Research Department.

Zhao finds that rising temperatures related to climate change could increase the state’s average per capita municipal expenditures by as much as 30% for 2090–2099 relative to average per capita expenditures for 1990–2019. “These large increases could have a significant impact on the fiscal health of local governments and may be difficult or impossible to accommodate without significant increases in taxes and fees,” he writes.

The report is called “The Effects of Weather on Massachusetts Municipal Expenditures: Implications of Climate Change for Local Governments in New England.” It uses research and analysis from a Boston Fed working paper by Zhao titled “The Impact of Weather on Local Government Spending.”

Zhao notes that the report’s findings are applicable to the other five New England states because the climate is generally the same across the region, and each state is projected to see similarly higher temperatures and more extreme storms in future decades. Also, each state has either no county governments or extremely limited county governments, so municipal governments provide nearly all local public services

A 1-degree rise in average temperature results in a 3.2% increase in per capita municipal spending

Using regression analysis of data on Massachusetts weather and municipal expenditures from 1990–2019, Zhao finds that a 1-degree Fahrenheit increase in average temperature resulted in a 3.2% increase in per capita municipal general-fund expenditures in Massachusetts on average. A city’s or town’s general fund supports daily government functions, which include public works, general government administration, the operation of schools, and other public services. Zhao writes that among other effects, hotter or stormier weather can increase the costs of snow removal, road maintenance, and the heating and cooling of schools and other public buildings.

Zhao uses the relationship between weather and local spending in Massachusetts from the last three decades, along with average-temperature projections from the National Oceanic and Atmospheric Administration, as a basis for estimating the state’s municipal expenditures for future decades.

According to NOAA, if global emissions continue to grow at their current rate, the average temperature in Massachusetts is expected to rise from about 50 degrees Fahrenheit in 2020 to nearly 54 degrees Fahrenheit for 2050–2059 and to almost 58 degrees Fahrenheit for 2090–2099.

Based on those temperature increases and assuming the relationship between average temperatures and municipal expenditures remains the same as it was from 1990 through 2019, per capita local spending in Massachusetts could grow as much as 15% for 2050–2059 and as much as 30% for 2090–2099 relative to the level of the past three decades. In terms of dollar amounts, the per capita increases could be as great as $456 and $924 (in 2019 dollars), respectively.

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Even with lower emissions, expenditures could rise 15% by the century’s end

In a scenario where emissions are lower in the future, NOAA projects that the average temperature in Massachusetts will reach about 54 degrees Fahrenheit for 2090–2099. Zhao finds that even in this scenario, municipal expenditures could increase by as much as 15% by the end of this century.

“This report recommends that municipalities account for climate change in their long-term municipal financial planning, since early policy actions are often more cost effective than later ones,” Zhao writes. “Investing in improvements to the climate resilience of public infrastructure is important, and it is particularly urgent for New England, given how dated the region’s infrastructure systems are.”

Zhao does present a caveat to his findings. He notes that the regression analysis is based on historical data, and that using that information to make projections assumes that the relationship between weather and local spending will remain the same over time. However, his research for the report’s accompanying working paper finds evidence that Massachusetts municipal spending has become less sensitive to temperature changes over the past 30 years. This could be because states and cities and towns in New England have been adapting to climate change by, for example, improving the heating and cooling systems of public buildings. “Thus,” he writes, “the fiscal projections based on the regression results should be treated as directional guidance rather than as precise forecasts.”

Read the report.

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