 Yes. Good morning. Welcome to this sort of round table. As I already said, well, I'm a volunteer member of Round Gable, and I'll be monitoring this for you through the panel. My career was nearly four decades with NOAA working on R2O problems. The challenge is benefiting operations, production, and that's what is certified the NOAA research laboratory in the work being done in a broad enterprise. So I know the challenge is transferring knowledge and information to the requirements across the boundaries. So it's exciting for me to be here this morning working on this and on the panel as a volunteer member. After NOAA, I worked briefly at Microsoft and went into private industry at Microsoft. And then in my last seven or eight years, we're working with the Climate Corporation recently with Bear Cross Science to work in on cold weather. Put in one final stainless plug. As president of the AMS, I get to plan a meeting. And my next, the next meeting will be, the annual meeting will be in January 27th, 2024 in Baltimore. And the theme of that will be living in a changing environment. And I'm bringing this to the forefront of the AMS as I recognize this is really an all-hands challenge that we need to face. So without further ado on that, the morning panel is going to be on user capabilities and needs. In this panel discussion, we'll hear from representatives of a few key federal agencies who have been asked to provide a brief overview of their relevant work and challenges in the climate matter economics space. Our goal of this panel is to focus around table's own fence of the work, which is critical as we move forward with this charge. This material and discussion from Dave will inform our efforts around table effort tomorrow to develop our program. The logistics of the panel are, for example, each speaker, five speakers will have 10 minutes to provide the remarks. I'll each introduce each panelist at the time they speak. The nine minute mark, I'll give them one minute heads up, and then everyone will be finishing in 10 minutes. After those, 50 minutes, we'll move on to a general Q&A for the group. So unless there are any questions, let's move on to our panel presentations. And the first presenter will be Heather Buchet. She is a member of the President of Biden's Council of Economic Advice. Heather. Wonderful. Thank you. Thank you so much. And I wanted to give a shout out to thank Wendy and Bob and Bridget and the whole team at the National Families for all you've done to put this work together. We at the Council of Economic Advice are very excited about today's conversation. We're excited about it because this conversation is core to the President's economic plans. He often says that he wants to build an economy from the bottom up and middle out. And that means making sure that our economic policy prioritizes growing and supporting America's middle class. To do that, we need tools that allow us to understand what's happening in the economy in real time so that today's policymakers know where, when, and how to take action. Climate scientists have built up the evidence that climate change is real and you can see the physical damages rising. I'm sure Sarah will discuss those analysis showing that 2022 was the third costless year on record with climate damages totaling $165 billion. And the reality of the economic challenges we will face as we rapidly transition to clean energy are becoming occurring. The problem we face is that our toolbox for assessing efforts and integrating them into our economic policy making is limited and what tools we have aren't purpose built. Without the ability to assess the economic risks of the physical and transition risk climate change, we may be blind as to how best to reach the President's goals of achieving net zero carbon by 2050 while growing and supporting America's middle class. How do we take action while also delivering stable macroeconomic conditions that support our goals of full employment and price stability? That's why we're here today. And why we are not the only ones having this conversation. A wide range of financial institutions including the IMF, the World Bank, Central Bank, Central Bank, the Congressional Budget Office and Moody's are working to integrate explicit consideration of climate change risks into macroeconomic projections. That's why it's so exciting to be here today with all of you to better understand how climate change and the policy responses to it will shape growth pathways of a near, medium and long term. Let me walk you through the President's goals for this work, why we believe this work is important, and what we see as the analytic challenges. In May of 2021, the President signed an executive order on climate-related financial risks. Climate change and the massive energy system transition it requires present a range of economic, financial, fiscal and macroeconomic risks to the United States. The executive order directs action across a number of executive office components and agencies to quantify, assess and address climate change-related financial risks. It pushes the U.S. government to develop new tools or modify one we already have to meet the analytic challenge of the economic risks we now face. This includes the financial system, life savings and pensions, federal lending, procurement, as well as the federal budget. Specifically, Section 6A directs OMB and CA to develop methodologies to quantify climate risk within the economic assumptions and long-term projections of the President's budget. CA, OMB and Treasury, the so-called Troika, jointly forecasts GDP curve over the tenure budget window and OMB extends that about 25 years as part of the President's presidential budgeting process. Now, Zach and I are here today representing two-thirds of that Troika to learn from all of you about how we can best incorporate the physical and transition risk of climate change into the U.S. government's processes. Last year, we released a white paper jointly authored by CA and OMB based on the work of an interagency technical working group we stood up to do this work across government. And here I'd like to give a big shout out to all of the folks across government who worked on that report and who spent so many hours working across agencies and the executive office of the President towards rethinking our economic assumptions. We, to this work, we have identified a number of macroeconomic risks from the physical damage to climate change that is increasing. These include increased intensity and frequency of weather extremes that destroy capital stocks and disrupt economic production, extreme weather conditions that lower the productivity of labor and weather exposed capital stocks, greater uncertainty as climate change increases financing costs for certain investment and affects the availability of insurance, the diversion of resources towards disaster response and recovery away from other productive investments, including investments to mitigate future climate risk, and the increasing risk of multiple simultaneously, simultaneous extreme, extremes, raising the probability of systemic failures. We see that the macroeconomic risks of the transition are just as important. Energy is a primary input supporting production across the economy. As such, energy prices are important for macroeconomic outcomes. Indeed, we've seen over these past couple of years how energy and supply chain shocks can drive up economy-wide inflation. Our energy system depends on complex, interacting systems of long-range infrastructure, which we must now completely transform on an extremely short timeframe. This is both costly and introduces substantial uncertainty into energy markets and diverse resources towards this transition away from other purposes. While economies are always experiencing technological shocks, at no point in modern history have economies had to transform a key input over such a short timeframe. The global energy transition will have significant implications for energy prices and volatility to affect global trade patterns and by extension affect the macroeconomy. It will affect the kinds of jobs and where those are located across the United States and across the world. People have not only economic implications but political economy implications as well. The scale and speed of the clean energy transition necessitates that policymakers have a firm grasp of the interim economic challenges. And then there's the effects of the interaction between these two sets of risks. High emission climate policies lower physical risk, but at the same time they raise the transition risks. Because we've seen decades of delay in the implementing climate policy, the rate of energy system transformation required to meet global temperature targets is very rapid. There are concerns that the transition may be chaotic. Transitioners can be lowered through credible long-term policies that set investor expectations for long-range and coordinate activity across countries and economic sectors, with many called inferiorly transitive. At the same time, the adverse macroeconomic effects of climate change induce extremes and the need to respond to disasters and to alter the ability or willingness of governments to provide global public goods to greenhouse gas negation. Thus incorporating both physical and transition climate risk into government planning and broadcasting is essential. And here is why is here is where we get to why we're so fine to have all of you the participants of this workshop. In our work over this on these issues over the past two years, we've identified several analytic challenges. So let me go through those before I close. First, there is difficulty in representing the macroeconomic effects of the tech driven subsidy led climate policies of the administration. The idea behind the Inflation Reduction Act is that highly targeted subsidies and technologically specific policies accelerate technological development and it in adoption, driving down energy costs to enable the energy transition. Representing these effects requires energy models with a rich array of policies, technological change and deployment dynamics that are also coupled to the macroeconomy. We cannot simply plug a carbon tax into a model and assume an orderly transition. Yet this is common. This is a common assumption in much existing work in this space. But this has never been a realistic representation of how the transition would occur on it. Second, we see a limited quantification or understanding of the macroeconomic effects of physical climate change. And third, most existing modeling tools provide limited information regarding the transition dynamics and uncertainty in the energy transition. Most macroeconomic models simulating climate policy are deterministic general equilibrium models. As such, these models do not capture the first order policy questions that revolve around uncertainty and transition dynamics. Which gets to the fourth issue. How do we think about a baseline within the context of climate aspirations that may not yet be law, but are our goals? The United States is committed to a 50 to 52% reduction in greenhouse gas emissions by 2030 and to net zero by 2050. Yet the full set of policies the United States will implement to achieve these medium and long-term goals are not yet clear. Whether additional policies to achieve US emission targets continue this subsidy approach alone or pursue a combination of policies that also include carbon pricing and regulation will have implications for the total costs and macroeconomic effects of the energy transition. So let me end with a brief caveat that the goal of integrating climate risk into the macroeconomic projections underscores the limitations of how we tabulate GDP. By design GDP excludes many of the serious damages of climate change that affect human welfare because they do they have neither large nor direct implications for economic output. And of course at the same time we know many of the actions that we will take to address the physical damages of climate change will also increase GDP. So given the rising importance of incorporating the negative externalities of climate change into our economic thinking I'm especially excited to see the administration's focus on natural capital accounting announced last week. But there's certainly more to consider here as we try to integrate these negative externalities into our more traditional macroeconomic frameworks. In closing I want to thank you all in advance for all of your help. Policy makers need new tools now. As we are making policy decisions in real time we cannot let analytic perfection be the enemy of the good. We need a theory of the case for how we're going to tackle these issues as quickly as possible and we desperately need your help. I look forward to a rich discussion and learning from all of you. Thank you. Thank you Heather. Our next speaker on the panel will be Joe Kyle. He is the Director of Microeconomic Analysis at the Congressional Budget Office. Joe. Thanks Brad. Oh good the slides are up. So thank you Brad and Wendy and Bob and National Academies. I really appreciate the opportunity to be here. Climate change poses a generational challenge for policy makers. It is imposing and will impose increasing costs on the United States and on the rest of the world and many of those costs will be borne by private entities or other governments and some of those costs will be reflected in the federal budget. Likewise preventing a climate catastrophe would reduce those costs to the United States the world broadly and reduce pressure on the federal budget. And our role at CBO is to provide Congress with information about the effects of climate change and the effects of climate change policy as they relate to the economy and the federal budget. There's two important caveats I want to provide about CBO and the work we do just for context and one is that CBO is a non-partisan agency. We don't make recommendations and don't have a preference over what choices policymakers make and related to that we aim very much to be in the middle of distribution of possible outcomes when we do our work. Next slide please. Or do I control that? Thanks. Thanks to whomever. So I want to share a brief schematic that we sometimes use just to provide a roadmap for how we think about how climate change and the federal budget interact and it's a fairly straightforward schematic. On the left hand side of the chart you'll basically see that climate change occurs that affects output and affects damage to the economy. Big challenges in measuring how that is but from a schematic perspective three important elements are relevant to CBO's work and then is trying to understand how climate change affects revenue collected by the by the government and that's usually tied to a GDP one way or another increases in mandatory spending for programs like disaster relief relief and crop insurance and also increases in discretionary spending through programs like disaster relief after after disasters occur. It's important to note that the first two of those channels happen more or less automatically that is they don't require additional congressional action. The third channel requires requires choices by the Congress through annual annual appropriations bills or appropriations after after disasters. And the right hand side of the chart is simply reversing that that lawmakers can make choices about how to spend money either through outlays or through the tax code and that's going to affect both the federal budget and feedback to to the climate. Just super quick on the next slide. I want to talk about four different projects. Two of them relates to how climate how climate change affects the budget and two of them are about climate change policies. So next slide please. Several years ago and this actually goes back to 2016 which you know and maybe in climate science time is actually a very long time. But we did an analysis of the effects of hurricane damage on the economy and the federal budget and how that is expected to grow between the time of the work in 2075 the time of the work and 2075. And one of the key takeaways or one of the key lessons of this is that I think it won't surprise people to understand that we expect climate damage to increase substantially over the period expected damage and expected effect on the federal budget to rise between a third and 40%. And the the slide on the right shows the same effects on coastal populations where we expect a number of people at risk to to increase from but 1.2 million to about 10 million. So a factor of about 8. A second slide that I didn't take from this report which is really interesting is these are expected value results and it's probably unsurprising that the estimate in 2025 was a fairly narrow band. The estimate over 2075 was much longer. There's a significant skew to the right on that. A second takeaway from the slide which you really can't see on the slide is that we had an opportunity to redo the analysis just the first piece of that analysis on projected damages in 20 in 2025 3 years after we did this analysis and the level of costs had doubled by then. So I think it's an important lesson about the importance of sort of continually taking on board improvements in climate science and linking those to to budgetary effects. Next slide please. A second project that we did or a second example of projects that we did is that in 2 years ago in 2021 CBO began to explicitly include the effects of climate change in its estimate of GDP. And this was something that we hadn't that implicitly might have been incorporated through through variables that measure that become part of CBO's forecast. But we wanted to explicitly take it on board and we estimated I won't go into the details but using top down methods of changes in temperature and precipitation on output at the county level and aggregating that to the United States. We found that we estimated we include in our estimate a reduction of GDP on the order of 1% after after 30 years. And I think it's there's 2 things to note about that. One is this is an effect on GDP. It's not an estimate of climate damage. There's a lot of ways that climate can affect the climate damage would affect the economy that aren't necessarily recorded in GDP. The second and this goes to what I mentioned at the outset that we try to aim to be in the middle of a distribution. So we average RCP 4.5 and 8.5 in this work. I think this also highlights an area where additional work by this panel and in the research community more broadly about the ways that climate change is going to affect economic variables that are standard inputs to growth models are really important. So I'm thinking of things like productivity, labor supply, capital services and so forth. Next slide please. So let me turn to 2 projects briefly that we have done for the Congress trying to understand the effects of policies that would address climate change. So climate change policies can cover a broad range of potential outcomes. They basically fall into 3 categories and one is Paguvian taxes which are popular for economists to study but rarely taken on board by policymakers. Subsidies for alternatives or for green approaches as was included in significant legislation in the last Congress and various imposition of regulatory standards by different regulatory agencies. So I want to just illustrate some of the work we've done for the Congress focusing on 2 of those. Next slide please. So at the beginning of every Congress, and I apologize this is a little small to see, but CBO does a document that we call budget options and it's basically a long list of policies that Congress could enact that would help address the nation's fiscal situation. One of those that we've included in the budget options volume for at least a decade would be to impose a tax on greenhouse gas emissions. We did several alternatives on that tax. Let me just focus on the top one, the top line. I think the takeaways from this are that a gas tax, even our modest one, would raise significant revenue. So in the first example, a $25 per ton tax that would increase at 5% real each year would raise about 900 billion or reduce the deficit by about $900 billion over the 10-year budget window. And not shown on this, but discussed in the in the write-up of this option is the effect on greenhouse gas emissions. We found that at the end of the 10-year window, this tax would reduce emissions of greenhouse gases by about 11%. Next slide please. The second example of recent work that we've done for the Congress focuses on one particular provision of the so-called inflation reduction act, the reconciliation that was adopted at the end of the last Congress. One minute. Thank you. Perfect. In that there were subsidies for clean electricity, for solar, for renewables, for nuclear and other forms of electricity that don't estimate carbon or eliminate, I'm sorry, emit carbon amid CO2. We estimated at the end of the last Congress drawing on work from Rodeum and RFF as well as our own analysis using NREL's READS model that this would reduce emissions of CO2 emissions from the electric power sector by about 62% over the course of the next decade. And that's the gray line in both figures. And I show those relative to, as a point of reference, I show them relative to EIAs and NREL's projections of emissions in that sector from before the reconciliation act. And so you can see it's pretty large reduction relative to those benchmarks. I mentioned these all, both the first set of policies, the first set of effects and these two policies because they typify the kinds of things that we get asked to do by the Congress. It's far from exhaustive. And I think it shows ways that hopefully this community and the broader research community can continue to draw on, continue to produce research that we can draw on. I appreciate the time and look forward to the conversation. Thank you very much. Thank you, Joe. Our next speaker will be Adele Morris. She is a Senior Advisor in the Division of Financial Stability at the Board of Governors of the U.S. Federal Reserve. Adele. Well, thank you. And I want to thank our co-chairs and the National Academy's organizers of this roundtable in this event. And thank you so much for including me. What you're getting here today is my personal opinions, like every Fed staffer ever, I have to say. You're getting my views and not to be confused with the official views of the Federal Reserve or our governors. I want to talk about three of the mandates that financial regulators need to fulfill and that can, you know, in which macroeconomic modeling and climate-related factors can come into. And so there's at least three of these mandates that come up. One is supervision, another is financial stability, and the third is economic analysis and, in some cases, forecasting related to that. So these three mandates kind of involve different sorts of macroeconomic modeling and different implications for how climate-related factors might be embedded in there. So what are these things? Supervision refers to the safety and soundness of individual financial institutions. So different financial regulators have different entities that they regulate and oversee and supervise. And so the question is, if you're supervising an institution, are they resilient to various kinds of shocks and economic downturns, whether it's a, you know, a housing downturn or recession or what have you? Are they in a position to remain solvent in a future that includes such a shock? That's supervision. Financial stability goes beyond the safety and soundness of individual financial institution that looks at how can financial risks be transmitted or amplified across the financial sector and to the real economy. And this is certainly something that we've experienced in the United States when there's a downturn of a sort in the housing sector. And next thing you know, that has been transmitted and amplified in damaging ways through the economy and the financial. So we've got a program at the Fed and other financial regulators as well, you know, monitoring, assessing, quantitatively surveilling various factors so that we can, you know, ensure that we have a look to the future. And so climate-related factors can come into that. And so one of the things we're doing is trying to figure out, okay, what should we be monitoring and assessing from a financial stability perspective? The third mandate is economic analysis and in some cases forecasting. And that can be in service to a whole range of objectives. It can be we've heard policy analysis, you know, how should we design certain policies, what might be fiscal implications going forward, et cetera. For some of it's in support of monetary policymaking. So each of these mandates may argue for including climate-related factors in your macroeconomic modeling, but how you do that and what simulations you do and what data characteristics you need for those projections could be quite different. So from a supervision and financial stability standpoint, you might want to focus on stressful scenarios. Maybe they're unlikely, but if they could happen and they could be a shock and it's something you want financial institutions to be resilient to, you want to understand, okay, what those projections look like and then how do you do an analysis associated with those scenarios. For some applications, you might want to look for a more likely scenario where, you know, you're really trying to forecast what you think really is going to happen or a range of things you think are most plausible. In that case, you might want a simulation that's quite different than you might want for analysis of a stressful scenario. So in each of these mandates and each of these contexts, there are a lot of technical questions about, well, what variables do need? Which financial variables, which macroeconomic variables and other things like what's the right time horizon? What's the right time step for a model? You know, that might be an influencing factor. You might not want five-year time steps if you're trying to really understand shorter run dynamics. You might need some sectoral and regional desegregation. For example, you know, the folks who regulate Fannie and Freddie might be very interested in the housing sector outcomes and real estate outcomes, and so you're going to want a modeling platform and approach that incorporates some granularity that gets you into the sectors you're most interested in. So one example of the kind of scenario analysis that the Fed is doing, we just released the instructions for participants of a pilot climate scenario analysis exercise, and that came out last week. Now, this is to be distinct from a stress test because there are not capital adequacy determinations being part of that. That means we're not going to be passing judgment in a supervisory kind of way on the analyses. It's an exploratory exercise, very different kind of implications. So we're using our terms carefully there. And we're asking firms to analyze, large firms to analyze their certain portfolios in light of scenarios of physical climatic damages and transition paths as well. Now, in terms of our capabilities, I would say we're still kind of in the R&D phase of thinking through what modeling tools do we need? What data characteristics for projections do we need? What kinds of analyses are we going to do internally and perhaps externally with financial institutions involved? And I would say financial regulators in general are kind of assessing the tools they have available, trying to understand what capabilities they need. So this is a really timely conversation for us because we're kind of all in the same situation of trying to understand how to do this. And I think it's fair to say many of our standard macro models don't have necessarily all the right features in there to simulate climate transition greenhouse gas policies or detailed energy technologies, that kind of thing. And then of course, there's the whole issue how you model the macroeconomic implications of climatic disruption. Now, the good news is we have the Financial Stability Oversight Council, which is the interagency process and dialogue that's chaired by the Treasury Department. And in this group are the major U.S. financial regulators. And they've created a climate committee, so it's the AFSOC Climate Committee, in which we can talk with each other. It's a forum for exchanging views and technical approaches and research. And that dialogue is ongoing. I would say this again is a very timely conversation for us. And so I just want to thank everybody in advance for what I know is going to be a rich discussion. Thanks. Thank you, Adele. Okay, our next speaker will be Sarah Kaepnick. She is Chief Scientist for the National Oceanic and Atmospheric Administration, Advancing Policy and Program Direction for NOAA Science and Technology Priorities. Sarah. Thank you. Something a little different now. We'll shift to where we get our climate information. So NOAA is the agency that enriches our life through science. We are science reaches from the surface of the sun all the way to the bottom of the seafloor to help citizens be informed of the changing environment around them. Our mission has three main components. Number one, science, to understand and predict changes in climate, weather, oceans and coasts. Number two, service, to share that knowledge and information with others, engage with groups like this. And number three, stewardship, to conserve and manage coastal and marine ecosystems and resources. Next slide, please. So NOAA data information, products or services span hours and days all the way out to years to decades, even actually centuries. And this work is at the very local scale where you live in your community, all the way to regional parts of the country to the entire United States, but then also globally. And so with us, we have physical, chemical, biological information. Our climate day and forecast are all taken to inform all of these different pieces. NOAA has a wide range of capabilities and is an authoritative source of global environmental data that can inform and support risk management. On our observation side, we have environmental observations of the ocean, the atmosphere, biology, where the fish are located. We have forecasting and prediction products. These go from weather to climate timescales. They also explain extreme events. With extreme events, we also provide pre-disaster support through early warning systems. Then when disasters are happening, we help guide and give information about what is unfolding. And then during disaster and post-disaster, we provide support through rapid responses, damage assessments and restoration post-events. With all the data that we are collecting, we also produce data assimilation and management using our high performance computing. To be able to recombine the information to be able to gather more insights, we also produce products and services that we deliver. We provide your weather forecasts. We also provide fishery forecasts, reports, climate extreme analyses, and various tools of information that are useful. And on this, there's all the examples from space, weather, out in space, to information and drought and agriculture, as well as construction. And then at the longest timescale, as well as the global timescale, we were involved in various reports, such as the IPCC and national climate assessments of the state of climate. Next slide, please. As Heather mentioned, we recently just put out our billion-dollar disaster report. Unfortunately, I had to turn my slides right before it came out. But I can say that with the numbers, it was $165 billion in costs for $18 billion disasters last year. It was the third largest year these numbers have been growing. We've been tracking it and producing this information since 1980. So we have the data back to 1980. So we don't just produce the information on the weather and climate, but we're also starting to produce these derivative products that also are monitoring those disasters and their impacts. The bars here are the number of different events, and then the lines are those costs over time. We're also recombining this information with other information with FEMA's National Risk Index, with census information to understand multi-hazard risk mapping vulnerabilities at the local scale. This provides us with additional information of socioeconomic vulnerability where communities may be most impacted by these types of events to be able to visualize it and understand it better. Next slide, please. Creating this data of climate information, the data, the forecast, the predictions, they aren't enough alone. We need to ensure that this data is used and that we are supporting its use and integration by decision-makers. With this, we have integrated aintore team. We also have a chief economist who is my alternate joining this roundtable. From this, we find that it's especially important to integrate social science and the hard sciences to get people out of harm's way in our experience. We have offices in every state and territory. We do cost benefit analysis of our work. We understand how people are also undertaking that information to be able to use it. The chief economist team, Dr. Monica Grasso, has a small team of economists and they provide all this decision support. They're also a leading partner on understanding how the science needs to be used and the quantification of its impacts. For example, we were a leading partner in this recent White House-led natural capital accounting initiative looking to include natural resources and ecosystem services and national economic accounts. Going forward, we also support various agencies and program evaluations supporting how our information is used and how our restoration and conservation efforts are going through. With this, we're finding increasingly it's important to understand and quantify how adaptation can be measured. All the different impacts that it has, not just on the ecosystems, but on all the other impacts to be able to understand the effectiveness of our work. Additionally, through our National Weather Services social, behavioral, and economic sciences program, we've had extensive experience understanding how people are using the information to be able to reduce risk. For example, that group is currently developing an economic study using an agent-based modeling approach to understand how society responds to floods and other hydrologic phenomena. We can't always think that we are perfectly rational in how we're going to use the information, uptake it, and then respond to it. This analysis has been really critical for us to understand how we need to produce our information, but then also how we need to work with communities as they take it out. Next slide, please. In addition to providing all the data, we also transform environmental information into useful products and services to be able to make sure that people can use it. This is where the social science has taught us how we need to package that information and how people are now interacting with it. So on the bottom left is something called the sea level rise viewer. Potential erosion or loss of tax bases as property insurance stops becoming affordable, populations move elsewhere has an impact on communities and coastal zones. We have clear cases of investing in sea level rise and trying to figure out how to handle it and cities looking for mitigation effects in Houston, Miami, New York City, Boston. There's new proposals in Charleston. The vast majority of mid to smaller coastal towns and communities remain extremely vulnerable to sea level rise and coastal storms, but you not necessarily have the financial resources for implementation to deal with this. We're seeing this as a growing risk and we have this as a viewer where anyone can go into it and start looking at what sea level rise will affect over time in local communities. On the top left, I've also put a picture of heat.gov. After sea level rise, heat is a physical manifestation of climate change that is extremely damaging. It is damaging to agriculture. It is one of the largest killers in the United States when you have extreme heat. It leads to losses of productivity of workers, loss of learning in schools, in urban areas, magnifying effects of concrete and lack of vegetation also amplify heat. Across the federal government, we are now compiling information on heat, how to deal with it, and also case studies of how local communities are trying to adapt to it, but also information of how it affects local scales. I welcome also viewing that to understand the different manifestations of these climate impacts, how it actually then deals with society and all those case studies to be able to understand and visualize and think through what does extreme heat mean and how does it affect people. Similarly, we have drought.gov that looks at drought and provides drought information from short term to long term. On the right-hand side, I've put two pictures. One is the U.S. Climate Resilience Toolkit. The other one is the new climate mapping for resilience and adaptation. These are efforts that provide information across the entire federal government in one place of the future of climate. Information can be downloaded for projections of information of climate into the future, but also looking into the past. These have been produced so far to be able to gather that information in single places to understand climate change at local scales across the United States by combining the information across different organizations led by NOAA to be able to pull it together. Next slide. With all that data, with the census information that we're bringing in, understanding it local regions, we can begin to understand exposure and vulnerability of populations. From this, it's been really critical for us to work with census and others to be able to understand vulnerabilities. Next slide. No data. Where are we going? Traditionally, for looking at the future of climate, we've had the IPCC. It produces scenarios of the future globally. However, that may not be sufficient going forward to be able to quantify macroeconomic risks. I've had experience working at two different banks and trying to be able to calculate macroeconomic risks and different risks due to climate. We may need new types of scenarios, new types of data, and new types of information forecasted to be able to understand long-term risk. We may also need seasonal predictions. Picture is on the right. We have been doing seasonal predictions for the last few years. We know that hedge funds are starting to use them. They're showing up in commodities markets trying to understand agriculture for early warning decisions of agriculture, but also heat and air conditioning use. It also affects energy markets. We may need new sets of information at different timescales to be able to forecast risk and then also understand it on a longer-term basis. Also, I want to note that we need to really integrate the science with the economic economists here because when I've looked at a lot of the macroeconomic modeling, there's these expectations of very smooth glide paths. There's also an expectation that if you overshoot a certain temperature and come back, everything can return to normal, but actually in the physical climate system, there are things that are lost that we don't get back. Glacier is a nice sheet. Sea level rise, biodiversity of fisheries, and there's new emerging science around climate surprises. One recent one that came out is on ocean circulation. Ocean circulation may fundamentally change due to the climate change that we've imposed upon it. This one thing is related to the Atlantic that may lead to Europe being fundamentally drier and hotter in the future than it has been in the past, even if we overshoot and come back. Last slide. With this, I appeal to all of you in this group of please help us identify the opportunities of the new types of science and data that are required to be able to underpin this type of work, and we're really excited to be here to be able to support that from this group. Thank you. Thank you, Sarah. The final panelist this morning will be Zach Lisko. Zach is a chief economist at the Office of Management and Budget and a professor at Yale Law School. Zach. Great. Thanks so much for having me speak today and for all of you all convening to work on this extremely important question. So what I want to do today is give a little intro to the federal budget to help explain I think one important way that the work of this panel could impact the real world. Excellent. So this is the President's budget. We release that each winter or spring or at some point until we release each year's put out. It includes an economic forecast used to project budgetary impacts proposed spending for each agency of government revenues and of new policies. And unlike the National Budget Office, we very much our perspective. In fact, we prescribe like an entire vision. Thank you. We prescribe an entire vision for what the government should look like over the coming year and over the coming decade. This budget then gives guidance to agencies and helps set the agenda for for Congress. The climate impacts on the macro economy could matter in a variety of ways. One is that it's going to impact analysis of proposed policies which are based on economic assumptions and climate, of course, can impact your economic assumptions. And then, of course, we care a lot about the trajectory of GDP and, of course, climate harms are going to lower GDP. Next slide. So each year we have a table of economic assumptions. It includes things like inflation, like interest rates, but right there up at the top is GDP. And this is one of the foundations, maybe the foundational assumption that goes into the budget. And here are the assumptions that we had had last year. And essentially what we're asking for help with here is your help in helping us produce a better path or a better guess of what GDP will look like over the next decade and beyond given climate transition risk and physical risk. Next slide. So one thing that we produced that ends up being kind of salient in our eyes with what we produce with this data, GDP, as well as revenues and expenditures, is what we think the long-term budget outlook is going to look like. So what this basically amounts to is on the y-axis here, we have debt as a percentage of GDP. And on the y-axis, sorry, on the x-axis, we project that out over time. So as you can see, there's a big jump up there in 2020 because of the pandemic. We have the high expenditures, somewhat lower revenues. And what the budget does each year is that, as you see there with the dotted lines, it says here's what debt to GDP is going to look like if we continue existing policies. And then with the lower line here, here's what debt to GDP will look like with the president's policies. So it is lower here because the president has a variety of tax proposals to raise revenue on those, earning about $400,000 and in big corporations. So I want you to focus on that dark black line here, which is important for our internal planning and then also in public discourse. Next slide. So what we've done at this point in terms of incorporating climate is add one scenario that incorporates climate impacts. So that's the new dotted line here, which is well above the black solid line. What this is, is a climate risk alternative in the long-term budget outlook that incorporates one single emission scenario, which is a 95th percent worst outcome scenario from one particular paper. At a high level, it finds pretty striking things. It finds physical climate risks are very significant. You find that increases mid-century debt to GDP levels by 18 percentage points, which is a lot. And then it decreases late-century revenues by 7 percent of GDP or $2 trillion a year, which is also a lot. But at this point, all we've done is this one particular scenario. And again, what we want to help with here is help us do better. Next slide. So here's how these things matter for budget in our planning. We of course want higher GDP and lower debt to GDP. Incorporating climate impacts into the forecast is going to just overall help us make more appropriate economic planning. And I assure you, as we engage in these discussions across the White House and across the federal government, we are very, very much focusing on revenue impacts, on GDP impacts. So this quantification matters quite a lot. And in particular, that's going to help us make accurate trade-offs when considering economic policy. So of course, the IRA, the climate provisions cost quite a lot of money, but they're also going to reduce climate harms and thus increase GDP and tax revenue and also reduce spending, alongside the off-budget benefits, which are of course very important, but allowing but incorporating climate into the budget will allow us to have more accurate representations of the true budget impacts of things like the Inflation Reduction Act and things like that. So in short, this work here, Climate Macro, can be useful in shaping proposed policy as we consider what policies propose and in determining the economic and budgetary impacts of those policies. Next slide. So here's what we've done so far. We've convened an interagency technical working group, which had to be referred to, to develop a framework for incorporating climate risks into macroeconomic forecasting. This includes folks from throughout their federal government. And they've done four things at this point. First, they've been formed an initial risk analysis in the long-term budget outlook. So that's the figure that I showed you before, the dotted line that shows much, much higher that GDP ratio going forward. Second, we've written, we have written a white paper about a year ago highlighting the resources that the U.S. government has. Third, we've produced an initial assessment of resources required for this effort. And fourth, we've begun to evaluate candidate resources for this effort. So I've already showed you, number one, I'm going to go through two through four now. Next slide. So here's our white paper. OMB and the county become advisors worked on this together and put it out in April of last year. We have three high-level conclusions. First, the physical and transition effects are highly macro significant. Seconds, to our sense at least a year ago, and this is, of course, rapidly evolving in terms of the current literature, there's actually fairly limited to our minds, fairly limited policy relevance. And third, the U.S. government has strong, perhaps unparalleled capabilities in energy, land system and economic modeling, which is, of course, an important point of optimism. Next slide. And steps three and four are working toward a framework. So this working group, which is, it was convened and continued through the spring of last year and developed an outline of required resources to develop a U.S. government's climate macro forecasting capability. Part of this outline was a direct set of requests for funding in man hours, which we've been working on attaining. It also mapped out a rough timeline for meeting certain targets. This outline has been refined throughout the fall and continuing now as certain resources were evaluated for use within the current economic assumptions framework, which I explained at the outset. We recognize that this is a multi-year iterator framework as we continue to improve. Our hope and belief is that there's going to be incremental progress that's made each year until a complete framework can be integrated into the president's budget economic assumptions. And of course, we can continue improving after that as well. As progress is made, we can have a more complete risk analysis presented in the long-term budget outlook each year. And that's what I showed you in those figures at the outset. Next slide. And I want to close here, kind of reiterating some things that that and reflect and adding it to some things that Heather said. First is some key data and analytic needs that we think would be really helpful as we develop a climate macro framework to incorporate directly into the president's budget. The first is to develop the ability to analyze a large range of scenarios and policy tools. Like Heather said, there's a lot of focus on carbon taxes. The president has not proposed a carbon tax. He's proposed other policies. Be helpful to have kind of help in analyzing those, including things like regulations. Second, it's helpful to know more about realistic technology pathways. It's just a really complicated area. There are various learning curves, performance improvements, help to have a comprehensive set of lower carbon alternatives. This is a complicated modeling. Third, there are lots of challenges associated with modeling a dynamic system, as other speakers have mentioned, issues of induced innovation, changing preferences, climate tipping points. For example, the issues with the Atlantic Ocean and Europe that were just discussed, nonlinear damage functions. These are all very hard and we would love for your help in incorporating their impacts in the macro forecast better. Fourth, there are hard macro questions for integrating into the budget framework. In particular, as you saw, we tend to focus on one central tendency. We have one line there. That's a summary set on average, but we're not typically thinking about things with very, very long or right tails. Be helpful to agree to have your help in thinking through that. And third, sorry, fifth, there are questions of how physical and transition risks interact with each other and other macro outcomes can be very complicated and we'd love your help on it. Thank you so much to all of you for working on these really important questions. We're really grateful as we move toward developing better economic forecasts to help develop better policies for the President's budget. Thanks. Thank you, Zach. And thank you to all the panelists for excellent presentations. So at this point, we'll be moving on to a larger group Q&A. Quick reminder that for Roundtable members, both in the room and virtually, if you could raise your hand within Zoom, I'll be monitoring raised hands. And then for those public participants, if you could please submit your questions via Zoom Q&A. So at that point, I see the hands lining up. Excellent. So Paulina, you have a question. Thanks. And I guess this is a question to everyone, but maybe especially the economists in the Congressional Budget Office and the White House or the Office of Management and Budget. So everything was very focused on domestic impacts. And so last year, we saw big challenges with extreme heat waves in India and Pakistan, rainfall. And so how can these models account for macro economic impacts outside of the U.S., which I'm not an economist, but will absolutely affect the U.S. economy, right? Yeah, I'm happy to start. So global impacts are super important. Let me, I want to emphasize when considering the U.S. federal budget, that is just one in the scope of the whole world, one small piece of climate impacts. We are concerned with federal revenue, U.S. federal revenues, U.S. federal government spending. So that's our focus. But of course, there are many other important questions. But even within that, there are lots of ways in which global impacts matter. For example, if the European economy was heavily damaged through way higher heat and very different temperatures, that would have very, very large impacts on the U.S. economy and thus the U.S. budget because they're very large trading partners. So that's one way. But again, I don't want to diminish global impacts just because what the U.S. federal government's Office of Management budget is focused on is ultimately the U.S. economy. Yeah, please, Heather. Yeah, this is such a great question. And I think, I can't remember if it was a Dell or Sarah, I think it was a Dell actually that talked about, you know, there are all of these different ways that we need to think about our economic assumptions. So productivity, trade, I mean, all of these patterns are being affected by the physical and the transition risk. So to some extent, I mean, Zach's point, we are looking at what this means for we in our role are looking at what this means for the U.S. economy and for U.S. budget outcomes. But as we're thinking about the modeling, you have to take these things into account. I mean, just as a live news issue that's happening right now, of course, is because we did, we passed the Inflation Reduction Act, this is affecting how our trade partners are viewing us. Well, that has, I mean, all of these things, especially when you start adding them up, they have consequences. So the fact that we've chosen a path of not doing carbon taxes but doing subsidies is implicit in that, is a trade policy agenda as well, which I think gets to just that there are tons of interconnections that we need to think about. Let me chime in on that. It's a really good question. And I think like my colleagues on the panel, CBO's role is to try to understand the effect of climate change and climate change policy on the U.S. budget and the U.S. economy. And so that tends to be the majority of our focus. Obviously, effects of flooding and climate damage are expected to be worse in other parts of the world than in the United States. And the fact that our job is to focus on a piece of that is not to ignore the rest of it. I think there's other elements of risks to the rest of the government that aren't well understood that we need to think about and others and researchers need to think about. So one could imagine situations where there would be significant international migration. And that's just something that we have not yet captured into our modeling or directly into our thinking. Similarly, if climate change impacts in other parts of the world lead to economic instability in those parts of the world, those will have significant implications for the United States. And that isn't yet part of our thinking, but it clearly is there. Excellent. Real quick. So we'll have about 35 minutes left of Q&A. And I am going to favor round table members initially. So I appreciate all the questions from the public. We will get to you, but just be patient. So the next question will be to Lars Hansen. Yeah, I want to thank the panelists for the very informative discussions and presentations of your challenges. A couple of questions come to mind that we're not explicitly addressed, that I want to kind of bring up. And one is if we want to think about the uncertainties faced by the private sector, by financial markets and the like, one big source is policy uncertainty. And so that creates challenges for the private sector. And anyone in the business of trying to quantify uncertainty has to address that. And I think that's very important. And it shows up both in the short run, but also in the long run. There's lots of, there was discussions here about the interconnections between physical risk and transition risk and the like. Well, policy responses are part of the transition risk, I suppose. And then if you find yourself, if you have uncertainty about the economic damage piece of it, and we find ourselves in the future, having very severe damages, we expect there to be different policy responses than if those damages are somewhat less severe. So if you want to do long term uncertainty quantification, those type of dependencies have to show up as well. So it seems to me at least external people, external researchers in the private sector have to confront this policy uncertainty issue and be very curious about your views about that. I'm very much supportive of this notion of trying to bring in uncertainty into policy. And I think that's very, very important. Many of you talked about it. One question that comes to mind there is, do we really need to give you exact probabilities? Because once you start talking about so-called nightian uncertainty, or we talk about deep uncertainties, the best we're going to do is do things like probability bounds. And is that something that policy makers are willing to deal with? Probably bloody bounds. Because otherwise, we're going to have to make it, we'll just be making up stuff. And I don't think that's very useful. Now, let me push that one step further. And this showed up in some of Adele's comments, I think, implicitly. But let me try to make it much more explicit. Once we start putting these uncertainties on the table, a very important question for policymaking is how adverse should society be to these uncertainties? So we as scientists can't announce what societal aversion should be. But that aversion is going to matter, and it's going to matter in the design of what prudent policies are. And this is a tradeoff between what are possible bad outcomes versus what we expect might be most likely. Those type of tradeoffs become very important in designing prudent policy. And so then, how do we want to think about that? The most that external researchers can do is give you tradeoffs between different type of aversions and what the consequences are. But as a society, we have to face that. And so maybe we need to bring that into our language in terms of policymaking and uncertainty. Thank you. All of those are just such important questions. I think this question of probability bounds, I mean, if you are, so one of the fundamental challenges of government is that, you know, as Zach talked about, we have to do a budget, we have to make decisions about how we're going to spend money, how we're going to develop resources. And for that, you can't, you know, how do you think about all of this uncertainty as you're trying to also act in the real world? And how do you represent that to other policymakers to build support for a particular agenda seems really challenging. We have, you know, if you were to put yet at the same time, and I think that actually Joseph Fordy mentioned this, we're already seeing that policymakers are dealing with that in the real world, that the costs of damages are increasing. And they have to plan for a greater uncertainty or a higher level than they have had in the past. And so on the one hand, policymakers are implicitly, we've actually spoken a lot to state level policymakers, especially in California, who've been really like, wow, we're spending so much money, they know that, but they aren't writing it down in the same way that they might have thought about those issues in the past. So that opens a little bit of a door. But the other thing in terms of policy is that, while we have global commitments, and the president has given this clear goal that we want to get to net zero by 2050, there isn't a political consensus around that or a mandate in say the same way that there is around the Fed, right? The Fed has this dual mandate of employment and price stability, where we can then plan because we know that if those things get out of line, the Fed's going to act, but we don't have that on in this set of issues yet. And it feels like that, that is one of the things that how do we, how, so we set up this goal, but do we believe it? And, but we believe it with the Fed, but we don't believe it when it comes to the fiscal. So there's, there's some, there's some thinking there and work to be done that might help us deal with some of that, which will help us do with that uncertainty that we're going to reach this goal, but not how we're going to reach it, which I think is the other big question, but I'll pause and let my colleagues. So, so I want to thank you for that question, Lars. I think you're exactly right that policy uncertainty is an important part of this discussion. And, you know, especially in the United States where we don't have that legal authority established in law that sets that long-term trajectory to incentivize lower carbon and greenhouse gas transition. Other countries have more in their law. And so they, their projections are, are less uncertain, at least with respect to existing law. I don't know what probability distribution to put around what Congress is going to do, you know, two years from now, five years from now, or whenever. And so when we talk about transition risk in the United States, what, what a lot of what we're talking about is policy uncertainty. It's not the case that we know what that probability distribution is. And so when we do the macroeconomic projections, often the way we address that uncertainty is through positing a resolution to the policy uncertainty. Okay, we're going to simulate a carbon tax or a cap and trade bill or something like that. And we run the model. And then we do sensitivity analyses to say, okay, what if we're wrong about the cost of nuclear technology or the availability of carbon capture in storage or something like that, that we know is important to the economic outcomes. So we do those sensitivity analyses, but there might be better ways to capture this kind of uncertainty that are more structural and kind of less ad hoc. So that's something to think about. And then, and then I would say that the uncertainties and risks on the physical side are of a whole different nature. And those were going to need the input from scientists to, you know, think through what are the right ways to represent those kinds of uncertainties. And you're absolutely right in the endogeneity of policy to the physical damage outcomes. I think that is true. How adverse we should be is not a new question to environmental policy, right? There's a whole literature on the precautionary principle and how we should undertake, you know, measures that might have costs but reduce risks and so on. So I think there's work that could be brought to bear that brings some of that environmental economics literature to this macroeconomic question around climate and and see if there are things we already in the literature we could build on and what else we need to develop for for this particular context. Thank you. I was quickly, I think it's a great point. I think that we would benefit from more research, especially research that's accessible to policymakers, especially research that makes kind of a quantitative case that policy that is more certain, maybe longer term, but indicates more certain, it should be like a first order thing that we should pay attention to. But I think it's a great point. And I think my hunch is there's a lot more to be done that we would benefit from. Thank you. Okay, Sarah, and then go ahead. Quickly, I would also say from the literature and from my experience looking at the private sector, there's been a lot more on the transition risk quantification of the macroeconomic part. And there will also be policy uncertainty around adaptation and the physical risk, particularly as we look at the manifestations around water security and drought and what's happening with drought that the policy decisions around water and water use and those things as drought unfolds into the future with increasing changes in risk may also lead to uncertainty. But at least on the physical side, we have directional certainty and understanding of where we're going and much better capability of forecasting that on a short term basis and a long term basis. And so it provides us with directional information as the translation of what's expected into actual behavioral change, which is the difficult part, given that so much cost analysis is based on historical experience, rather than trying to model it out into the future. Okay, let's move on real quick. Charge everyone is that we have a good queue of people wanting questions. Let's be concise both in formulating our questions and our responses so we can try to get to everyone in the queue. I'd appreciate that. So the next question will be Bob Cop. Hi, thanks Brad. And thanks everyone. I want to pick up on the risk question from a slightly different angle. So Adele talked about how when you're thinking about supervision or financial stability, you know, there's this interest in sort of what IPCC would call low likelihood high impact storylines or outcomes. So questions of how, you know, are the institutions in this system resilient to shocks? I'd be curious to hear from some of the other people on the panel, particularly the folks working on the budget, how they think about these sorts of tail risks. And the thing I want to point to as an example, if you think about, for instance, the National Flood Insurance Program, right, if you look at, you know, if you have sufficiently fat tailed distributions, expectations can become ill-defined. And so you end up, you know, having a very different expectation for from the hundred billion dollar or billion dollar damages, what your annual trial hierarchy damages are, if you're looking at 1980 to 2004 versus 1980 to 2005. And I would like to hear from the people focused on the budget, how you think about dealing with some of these issues. So great question, Bob. Let me let me offer a couple of thoughts from my perspective. One is that I agree that understanding risk and uncertainty and conveying that to policymakers is incredibly important. And I would, we, you know, as I mentioned in my talk, we had this made reference to a slide that I didn't show about how the expectation of climate damage from hurricanes was fairly narrow in 2025 and long right tailed by 2075. One thing that's important to understand and can be frustrating in its own right is that from the perspective of cost estimation for the Congress, we need a single baseline against which to estimate the effect of policies. And that has the effect, so flood insurance was mentioned, CBO prepares a baseline estimate of the cost of flood insurance under current law for 10 years. And that's something we publish. We recognize that there's significant uncertainty around that. And it's a reflection of current law, it's not actually a reflection of sort of our projection of what we think is going to necessarily happen. But part of the budget scoring process is to have a basically a concrete measuring stake against which we can measure the costs of proposals. And that's different, I think, than saying, you know, here's a here's a projection of the cost of flood damage and some some cone of uncertainty about that that would go out. And, you know, well honestly, well beyond 10 years. And I think that's things that we can take on in some of our analytical work, but actually not in in our baseline work. So let me stop there and see if Zach or somebody else wants to respond as well. I think it's a great question. For the most part, I throw that back at the group in and helping us learn how to do that better with respect to climate. But I think for the most part, I don't have much to add. I think we have a baseline so that that first dotted, I showed you that first figure with the dark line, which was the president's budget and the dotted line above it, which was the baseline. So that's the baseline for their federal budget. So we're stuck with, I think we're basically stuck analytically with having the one baseline. But we should incorporate uncertainty better into that. I agree. Thank you. Let's move on. James Stock. Hi, yes. Again, that was a terrific presentation. So I just learned a lot and it was really helpful and succinct. I have, I guess, two questions. So one of them has to do with this maybe the contrast between the exercise that Zach presented that OMB did about making this bad case outcome modification, and then a particular slide that Joe showed for the CBO. And I think that the question has to do with one of the arrows in Joe's slide. So the way, if I understand it correctly, what OMB did in this implementation is you took a particular paper, they had some, they had some equations about the effect of climate on GDP. You change the GDP path. The lower GDP path is going to generate less revenues. You're still going to have some spending plans. And so you have a worst case fiscal situation. The point is there's no closing of the loop there. That's just taking this path from the literature. CBO, Joe, you had an arrow going from spending or the macro economy back to climate. And that means that you're conceptualizing maybe where you want to be as with an I am. I think that's a big question. I'm just going to leave it, I have an opinion, but I'm actually just curious about that. It opens a whole world of questions. Second is there's a fair amount of discussion here. So second question, maybe this is a Joe Zach question. Also, there's a fair amount of discussion about what I would think of as micro policy impacts. So in the CBO paper that looks at where you estimate about 600 million metric tons reduction from the IRA, that's going to have certain budgetary impacts and so forth. Those budgetary impacts are going to spill through the model because of the uptake and so you're building that into a dodgeness. To what extent or where do you think about in this exercise that we're talking about today, where do you think about drawing? How do you think about drawing the lines in terms of like these micro policy impacts and building those into the various CBO models? And of course, the power sector one is big, but then you can go down into some of the much smaller ones in the IRA and CBO has responsibility for analyzing those, but maybe the macro. Where do we think about that in terms of the macro modeling part of it? Two really good questions, Joe. Let me see if I can take a quick stab at each one. In our analysis of the macro effects of climate change, we basically developed this estimate of one percent by 2050 and we now incorporate that into our baseline estimate. I think we'd like to update that and I think that's something where we could really benefit from the people that are participating in this program and the research community more generally and to try to understand basically the structural ways that climate change is going to affect productivity, labor supply, capital formation, the things that go into a growth model. In doing our work, and I think this, I'll let Zach talk about what OMB does, but we very much tried to hit the middle of a distribution and so in that we were picking sort of moderate climate scenarios and maybe I'll stop there just in the interest of time, but we very much are trying to understand how that affects GDP and then that has effects on revenue collections and so forth and that's I guess where I'll stop on that part of the question and hope is responsive, Jim. On the second question, we haven't yet connected as well as we would like the different. So our analysis of the effects of the subsidies and the reconciliation act were essentially of what they would do to CO2 emissions and we get questions from the Congress about well how is that going to feed back in terms of damage avoided and therefore reduced spending in the future and those kinds of channels and we aren't yet to a point where we can connect those links as well as we would like to. I think it's something we're working on, it's something that anybody else contributes to, we'll be glad to pick it up. If I could just make a comment on that, I mean I think that brings up a really interesting question which is that we have not thought of emissions as a core economic assumption and it just I mean the way that it plays both into the physical damages, the transition that it feeds back into the model year after year, it does seem like that's a question that I have for the group is as we're thinking about the core aggregates that we're watching, this is what's shifting and it's kind of elevating this into our econ conversation in a new and different way and I think Joe just actually summarized why that feels like a really important question for how you're thinking about the uncertainties in the planning. I'll just add quickly great questions on the first, just descriptively you are right that it is not a closed loop when we did our scenario, we would love for help in closing the loop and doing the macro forecast. Second on the kind of micro policy impacts, I wanted to point to a different part of the president's executive order. So part of what we've emphasized here the GDP impacts but when it comes to the budget you know there's the economic assumptions but there's also estimates of spending across the whole federal government. We are currently engaged in a government-wide effort to have better estimates of spending that incorporate climate impacts, you know the Army Corps of Engineers, FEMA, et cetera, et cetera. So it's not clear to me how much that relates to the work of this group but if it does that is work that we would love to have more guidance on as we complement the top-down GDP with the bottom-up category by category spending. Which is that this work that Zach and I are talking about is just section 6A of an executive order that has one through five and others. I mean he just talked about six B and C but all of those other pieces different parts of government are looking into. Excellent, thank you. The powers that we have said that we can run over a bit because we still have quite a queue. I have 10 or 11 questions remaining so if everyone could kind of cooperate and try to move through as many as we can we'll try to finish up by a quarter after. So Laurie Hunter. My question is actually quite easy. It's not substantive, it's organizational. I was excited to hear about the Interagency Technical Working Group, Zach and Zach and OMB. I just felt like some of the mandates of that group were quite parallel to ours and so I just wanted to ask if there were some overlaps, synergies, joint work, somebody on this group from that group or vice versa. That's my question. Do you want to take that anyone? Yes. Many of us are in the room. Fantastic, I didn't know that because I wasn't sure who was on the Interagency Working Group. That's really great to hear. Thank you. Okay, excellent. Thank you. Solomon. Hi, I just have two quick questions inspired by things that were actually said recently. One was just about the budget baseline. So if the budget baseline is our projection under current policy, has anyone been talking about the notion that the impacts of climate change should be baked into that baseline? And instead of saying the baseline is one baseline and then when we account for climate, it goes down. It seems like under current policy we ought to have the lower baseline that accounts for climate and if we take action it will go up. So that's one question. The other question was that Joe said something about instability around the world having important economic impacts. I totally agree. And I think there's a sense in the literature that that's one of the really big challenges that we want to think about. I just wanted to ask if there was any precedent for incorporating projections of some type of instability in the past? Like with something that's not climate maybe? Just something to help us think about how we could do that in a useful way. So good questions on the first question or first observation. Short answer is yes. If we have a sort of improvement in the climate future, that ought to be reflected in like a projection of GDP. And we would welcome the feedback of this group in how to develop those feedbacks. I don't actually have a good example off the top of my head in response to your second question, though it's a really good one. Defense. On incorporating into the baseline, you said better than I did what the aspiration is. So you described it exactly right. That's what we want to do. I would just say that the Federal Reserve has a program called Comprehensive Capital Analysis and Review, also known as our stress testing program. And in some instances, and I am not an expert on this, our scenarios do include variables that apply to other countries. And that might be one example where we are looking at outcomes in other countries and assessing how that pertains to issues in our own jurisdiction. Good. Thank you. Bilal, you're next. Yeah. Thank you for the insightful presentation. My question is about the fact that we are dealing with a system of systems. And certainly the risk that we are addressing here, therefore, in some form of a hierarchy, there is a lot of complexity. And if I try to maybe come up with a hierarchy, I'll say there is the primary ones, which is direct climate threats, as were presented by Sarah and others, the drought, the temperature and the storms and so on. And then there is a secondary layer of risks that is consequential in nature. And this will be possibly water supply impact, food shortages and so on. And then you could define maybe another level, pressure, which could be migration and so on. And then possibly war could be another layer that could be added. So in defining a policy and doing projections and realizing the fact that was stated repeatedly, would like to stay in the middle of the curve. Would you consider in projections and policies all of those outer layers? I mean, I could see it's somewhat manageable to stay within the primary risk. But the minutes we venture into the other level, the state of the system becomes, it's not the same anymore. It's not the same system that I'm dealing with. It's almost we are transitioning to other systems, other states. And even planning for it, it could be, I'm not sure to what extent it can be realistic to plan for a war that could have been at the second, at a third order of a scenario construction. I think I'm trying to understand the scope of how OMB and economic advisors think in terms of helping us to come up with projects and future pursuits that will help you in providing input in this area. Thank you. I can make one comment on that. I think, and I started my remarks on this, that the president has focused on achieving our climate goals while also making sure that this, as he likes to say, when he thinks of climate, he thinks of jobs. And that is a political economy framework that he has brought to this, which is that if we don't make sure that this is good for communities, if we don't help communities get through this transition, where the Ford plant that produced the fossil fuel-based trucks is now closing, but the ones that are making the EVs or opening how that's chaotic for communities, that is why this macroeconomic work is actually so important. Because there's a lot of climate stuff happening, that's all chaotic. But there's also a lot of labor and industry stuff that is happening that is chaotic for local, state, federal budgeting, and community. So I think if I understand your question correctly, that's one of the purposes of doing this is to figure out how you can create that economic stability so that you can actually deal with the deeper problem of climate. Because if you can't do one, you won't be able, the theory of the case is you won't be able to do the other. Sarah? Yeah, I'll add that part of the reason there's also money being spent in early warning systems is that we know those extremes are getting worse and more likely. But also if we have time in advance and we plan in advance for how to deal with them, those can be mitigated. So that's why us, USDA, USAID, State are all working on these warning systems of temperature and precip that then feed into the food or early warning systems and water availability once. And that's why that's so critical to create the plans around what to do when those extremes actually happen. Okay, thank you. Rachel? Thank you so much for the wonderful presentations today. A couple of quick questions. Just going back to a challenge that Sarah raised, which is that the latest climate science is signaling really transformative, profound, multi-generational risks, including the potential for tipping points. We know what's happening already around us. But when you look out in the future and the fact that many economic models or economic decision making, I shouldn't say models are still structured around a kind of incremental smooth thinking where you can turn a dial down up and down and make decisions. And there's a kind of a mismatch in the time horizons around which decisions are being made. When we think about many of the conventional decision making formats in which current financial markets are structured. So what do we do to incorporate these kind of bring this future to the present? And there are lots of ideas that are bubbled up here. They're adjacent things like the social cost of greenhouse gases that the EPA just recently updated. But how do we bring this to bear so that we're not locking ourselves into futures now by kind of keeping our heads down and looking at the next 10, 20 years, when in fact these are multi-generational impacts? To the point that Adele made, the precautionary principle is really helpful. And in this context, we're talking about multi-generational and global kinds of impacts and precautions that we need to keep in mind. The second piece is the distributional aspects. So a focus on GDP and this kind of macro view really loses the way climate change is fundamentally a very inequitable challenge both in the United States and around the world. It's compounding and intersecting with existing socioeconomic and racial disparities, but it's also exacerbating them and creating more challenges over time. So what are the kinds of metrics we can bring into this conversation? So we don't lose some of those really fundamental justice and equity pieces that are reflected in the problem but also need to be reflected in the solutions if they're going to be fit for purpose. Well, maybe I'll just say real briefly. There is a lot of congressional interest, not just in sort of things like GDP, but in how climate change and climate change policy would be distributed. And I guess we've said this publicly. So one project we have ongoing actually is to look at how flood risk is expected to affect different communities by income and income distribution and various demographic characteristics. And I think that work in that kind of in that space actually would help lawmakers think that that's more across distributional lines than your intergenerational point, which I think is an excellent point. I don't have anything to add particularly on that. But work on the distributional aspects of this is quite welcome. I will add to that. I mean, certainly the president has his EJ 40 commitments and is committed to questions around equity. But Rachel, I think you're actually getting to so much of why this work is so important. We were able to do macroeconomic thinking for decades with a stable climate and all of the negative externalities, which any economist in the room would tell you were very important, they weren't measured and they hadn't bubbled up. So this is an opportunity to rethink some of that. And so I would encourage you to keep asking those questions as we go through these conversations. But fundamentally, we're having to figure out ways to take that into account, but that's not the way our tools were built. So that is, I think, the purpose here today. Excellent. Thank you. Wendy. All right. So I want to just speak in favor of the baseline again. So I think for these macroeconomic models to be most useful for policymakers, policymakers want to know what the economy will look like on lots and lots of different dimensions if they sit on their hands. And that tells them then separately where is their value added if they don't sit on their hands, how much better can they make the world? So what that means is that we want macroeconomic models that can hold policy fixed. Now, whether or not that's only holding federal policy fixed, whether or not that's also holding state and local policy fixed, at least being really transparent about what's being held fixed in all of your climate projections that are then fed into a macro model. So it's a world, let's say, federal policy doesn't change. And I think that's the baseline that CBO is thinking about. And so CBO did indeed incorporate into its projection. I think this is just to answer Sol's question in a different way, Joe answered it, but using different words that one of the challenges of this is that climate has been changing over the last several decades. And so some of this is already in the trends. And if we actually thought that the next few decades were going to, the climate was going to continue to change as it has over the past few decades, then we might actually say it's all in the trends, absolutely still possibly worth parsing out. But could be that we're pretty confident about our macroeconomic projections. And we do this in another context. So like on the positive side, economists spend a lot of time thinking about how increasing education matters for projections. We, you know, education has been increasing for a very long time in the US globally, but that doesn't stop us from then trying to parse it out from our models about how education is going to matter going forward. And then moreover, we say, oh, but it looks like in fact the future of education and, you know, the growth in education and the effectiveness of education is actually going to be different from the past. So we can't just extrapolate trends. And so we have a lot of, we do this in lots of other contexts. And on the flip side, we do this on the military side as well. We think very much about is the world getting less safe? It does, you know, are we, are we having to spend extra money to keep ourselves safe from, you know, risks in the US and in a way that's hurting productivity growth, etc. So we do it on the, that's just to bank a plug for the fact that it is done on the, on, on the global side. But what this means is that the deltas around how different climate outcomes affect the economy are really hard to think about in the context of these models that I, these model outcomes that I think are most useful for policymakers that are really about the baseline. I think we want to know what the economy, including the distribution of the economy, equity issues, all the good stuff under the hood, what it, what it looks like if policy stays unchanged. But of course, that has to include how does the private sector adapt. So, you know, it has to be if federal policymakers, let's say sat on their hands. Okay, let's make our lives easier. And state and local policymakers too. Well, the private sector is not going to sit on its hands. So if you're really going to create a model of a baseline for policymakers to look at, you have to think really hard then about how the private sector adapts. But what that means is what does the composition of the economy look like? You know, I just want to, like this, this thing about creating a baseline and knowing what things look like if policymakers don't, don't take additional action over and above what they've already taken is incredibly useful and incredibly important to decision making and incredibly hard. I just wanted to react to one piece on the trend and expecting that we can use the trend. We're expecting accelerations in certain parts of the climate, but also some of these new exposures that we've never even had before, like over 700 people dying in the extreme heat wave that happened last summer in the Pacific Northwest that we otherwise have no analog for in the entire record. That's part of the true difficulty of trying to model this out more is that society was built and we've adapted to a climate that is no longer exists, but also fundamentally is disrupting and changing in ways that will really create shocks if we all model out my worst fears plus your worst fears and then put them all together. We'll have to say that we can't expect the past to be able to be useful on that point. I think that's exactly right. In the work we did, we incorporate sort of both the past trends and then we make explicit adjustment for changes in those trends going forward. But I think Wednesday's point is that we want to create models that capture those changes in the future in the baseline and those are changes in the real world, but then to Wendy's, the lawmaker said on their hands point, we want to understand how a changing real world and a static policy can be used to create a baseline against which we can measure the effects of policy changes. Okay, very good. Bob. Two questions. Questions are quick. The answers may not be. So one, I think in response to Saul's question, somebody muttered about defense. I'm wondering if anybody wants to expand on how we think in terms of the baseline, in terms of the potential for exogenous shocks like war breaking out and the benefits of national defense preparedness in the baseline. The second sort of taking my role as a coach, I saw several of the questions on the online relate to the question, the limitations of GDP. And so I wanted to see if anybody wanted to take the opportunity to talk about the national capital accounting strategy. Yeah, the importance of national capital is really being able to quantify the value of our nature capital in the country. And part of that is you have regions where GDP is growing, where you have nature capital degradation, which quantifies the true impact that may not be seen for later. And so you need different accounting methods to be able to pull in all of them. And so with that, there's dramatic push forward now. And how do we assess that? How do we quantify it? And how do we start taking stock of that? Sorry, just a gentleman. Could somebody be a little more specific about what the administration is doing? I glanced at the document that was released, but probably most people haven't. And it would be helpful. Yeah, the document came out last week and it's be able to create how are we going to start creating these accounting methods and how are we going to start moving forward on making those metrics and then putting them out. And so it's a multi step process for being able to quantify our biodiversity, our natural lands, the conservation efforts necessary, and then be able to track that over time. So we have an idea of how that is changing over time going forward like we do with other traditional economic indicators. I guess I just quickly, I along with the rest of OMB is like extremely, extremely excited about natural capital accounting. It's, you know, the right way to do it. It's important to recognize that we're probably a long way away from the statistics being developed, let alone being incorporated into the budget. So although extremely, extremely valuable, it's, it is very, very much worth the effort to focus on improving traditional measures of GDP because, you know, that's the way we do budgeting today and for better or worse probably will be doing for a decent period of time. Okay. I think at this point what I'll do is I'll go ahead and move on to some of the questions from the public. I see we have a couple raised hands, including my own, but to give some opportunity to the public. What I'll do is, so Dr. Kaepnick, how are you estimating how society is responding to flood and other climate shocks? What are your parameters and scale? We're still developing those out, but we have it on a cost basis. So the cost basis of the damages that are caused, lives, loss, inundation of water, and then others are being developed. Okay. Super. And that was from the Spanish genre. Gerald Stokes. Much of the, there are a couple here on GDP. I'll try to combine them. Much of the governmental perspective is GDP based, which is understandable. However, is this really sufficient? And Gerald suggests perhaps a five capitals approach or other approach to societal value would be more useful. Gina went on and says, you know, GDP counts, results from climate catastrophe, cleanups, et cetera, what efforts can be done to redefine GDP and so that it only measures positive steps in addressing climate change. So if people could address sort of those aspects of GDP alternatives or modifying GDP itself to better reflect impacts. So I won't speak to modifying GDP. I mean, that's what part of what the natural capital accounts are trying to do. And that is a challenge. But I think that, you know, this conversation that we've just been having about the baseline and how we're thinking about what goes in there and how we account for climate damages that are rising feels like a really important piece of that conversation. So we're all here because we think that that is an important thing to incorporate into our macroeconomic work, but that is the work to be done. It's starting to be done. Are we doing that? Do we have the best methods of doing that? And I think one of the things that you hear up here from the policy perspective is that all of this is about people moving in herds or groups, right? So, OMB is not going to do something totally wacky different from what CBO is doing, which is not going to be something totally wacky different from what the blue chip forecasters are doing, which is not going to be totally something very different from what the IFIs are doing and the Fed. And so I think a core part of this conversation is we need to be incorporating all this modeling that we have not been. We all need to bring it in, but figuring out together how to come up with that list of must-do, must-haves and nice-to-haves feels like the way to get that conversation about GDP into or some of our critiques about what it doesn't, doesn't measure into here. Because if we're taking into account physical damages and the lost human life in ways that we weren't before, that gets us at least some of the way there, which is separate from the re-measurement of GDP. But I just kind of want to emphasize for those who are listening that this is an opportunity to have that conversation in a slightly different venue and to rethink what that baseline is. But we have to, it has to be together. Yeah, and also based on how those things are quantified and what we want, we have to build the science and technology to actually deliver on that as well. I guess on the GDP thing, one thing that might help people think about this issue is you can think of GDP as a flow of economic activity. This is consumption and other factors that go into that flow of economic activity. Separate from that is the productive capital stock of the economy. So a hurricane comes in and destroys buildings and homes and infrastructure. That is a real loss to the physical capital stock of our country, not to mention outcomes on people's lives and livelihoods. GDP is not the measure to capture the loss of the capital stock in the economy and the ability of the economy to produce more flows of economic activity. So you're going to need different measures to capture the capital loss than a measure that is intrinsically associated with flows. I don't know if that helps, but. Okay, thank you. Moving on with a public question from Bai. How do we know that we are doing enough in terms of climate and natural ecosystems? And how are we doing or performing compared to other organizations and countries? Yeah, to be able to take stock and measure this, we are at the forefront of trying to do those conservation efforts in the measurement and being able to create the science and technology to do so. And across organizations internationally, we work across many different ones, collaboratively with our partners on those efforts to build that science, build that technology and be able to do that monitoring. Okay, maybe I'll ask through my questions real quick. It's double sides here. One is, I think I'll start with Adele. You mentioned and made a really compelling case for considering different scenarios from the high impact sort of scary event. Well, I won't say you didn't use scary, but you said stressful scenarios to more likely scenarios. It makes a lot of sense. My question to you is clarity of message because these conversations don't take place independently. So it's a very complicated landscape already. How would you approach it? And how would you suggest you maintain clarity but address these different scenarios? Thanks for the question. I think it's really important to be super clear about what you're doing with your analysis. What are you trying to inform? If you're trying to inform what emissions mitigation policies should we adopt? And how do we make them as cost effective as possible? And we want to measure the benefits of those policies relative to the cost of those policies. Okay, that's a policy analysis framework. And then you need scenarios that are appropriate for the no policy scenario versus the policy scenario. And then you measure costs and benefits and distributional outcomes and emissions and all the things that go into a proper policy analysis. If you're doing something else like supervision, you're trying to balance the costs and benefits of something very different, which is ensuring the safety and soundness of an individual financial institution against various shocks that could disrupt their solvency. So in that case, you want a scenario that properly captures the risks that you want financial institutions to take into account in their management of risk as a regulator. So I think as long as you're really clear about what it is you're trying to accomplish with your scenarios, the scenarios will follow. And they'll have different data characteristics and different time horizons and different, like I said, desegregation in household income distribution or region or sector or what have you. And you're going to have to structure those scenarios in a way that allows you to serve the mandate that you're focusing on for that particular analysis. Okay, thank you. And then the other side of my question is for Joe and the CBO, where you emphasize that you use the middle of distribution solutions. And I'm wondering if you could say just a few thoughts on how the CBO thinks about and incorporates that uncertainty. No, that's a really good question. We do try to hit the middle of the distribution, and I think that's just a reflection of our nonpartisan stance. And for certain things, like the economic baseline and like cost estimation, we're actually required to provide basically point estimates. And that's the requirements in the law and the way that the budget rules are set up. In doing that, say in the cost estimating world, we try to discuss sources of uncertainty. And I'm somewhat less constrained in the work that I lead talking about basically some of the analytical reports that we write. And in those, we do our best to try to highlight areas of uncertainty and quantify it where we can. And I think that's where more research we can do, but also more research that can be done by this group will really be valuable in trying to understand how the distribution of outcomes can occur. And this actually goes back to Lars' point very early in the Q&A. So great question. Thanks. Okay. I think at that point, we didn't get to everything, but we did very well. Thank you all for working through those questions. And so at this point, I think, first, thanks to the speakers. Really great way to start off today. At this point, we'll break for lunch, and we'll have cut it short to 45 minutes. We'll reconvene at 1 p.m. Eastern time to the top of the hour. Okay, great. Thank you, Bridget. Thanks again, everyone.