Disaster Recovery Costs Billions to Trillions Annually And Are Growing

I have been reading two different reports today about the costs to society from climate change. The Bloomberg report, “The Climate Economy: 2025 Outlook,” focuses on disaster recovery costs from climate-related events. It reports that in the previous 12 months ending May 1, 2025, Americans had spent nearly $1 trillion or 3% of GDP, dealing with damages to infrastructure. The number included key events like Hurricane Helene, Hurricane Milton, and the Los Angeles wildfires.

The Bloomberg report notes that global spending for disaster recovery amounted to $18.5 trillion since 2000. The data also included the $1.1 trillion the U.S. expended, equal to 46.7% of the $6.7 trillion in total spent by 50 countries for fire, flood and storm costs. Interestingly, that $1.1 trillion is equal to the amount the Trump administration wants to claw back in federal funding relief to local programs and projects aimed at climate change and disaster recovery.

The second report that I have been reading comes from Canada’s Royal Bank of Canada (RBC). RBC’s “Double or Trouble” report states that Canadians need to double down to hit the country’s climate goals. The numbers cited in the report are different from those cited by Bloomberg.

RBC states that extreme weather and natural disasters in 2024 cost $368 billion, or 14% above global average annual expenditures since 2000.  It states that the number is expected to climb as more global warming kicks in and notes a growing number of conversations in boardrooms and during earnings calls that are talking about extreme weather impacts and physical climate change risk.

Bloomberg provides a Climate Damages Tracker that shows the total cost for insured ($1.51 trillion) and uninsured ($1.39 trillion) losses from climate disasters in the U.S. to be $2.9 trillion (43%) of the $6.7 trillion total globally. The balance of the remaining losses comes from Asia, $2.13 trillion, then Europe, the Middle East and Africa.

Bloomberg reports that total global government climate-related spending, including disaster planning and prevention, environmental protection, agricultural insurance and recovery assistance, has reached $4.9 trillion in this century, with China spending $2.1 trillion, followed by the U.S. at $1.38 trillion and India at $480 billion.

Both reports cite one of the biggest drivers of escalating climate disaster recovery costs coming from the rise in insurance premiums, 22% in 2023 for fire, flood and storm policies. With rising payouts, insurers are issuing more catastrophe bonds to offset risk, as well as issuing sustainability-linked coverage to companies that demonstrate climate resilience. RBC states that the market for catastrophe bonds has been growing 7% annually since 2015 and will exceed $50 billion in 2025.

Corporate Carbon Dioxide Target Reductions Are Failing

The Bloomberg report includes information from 494 companies responsible for 55% of global operational greenhouse gas emissions. Only a third of these companies are currently on track to meet the lower CO2 emission targets that would keep warming to 1.5 Celsius (2.7 Fahrenheit).  Instead, global emissions keep rising.

The 1.5 Celsius (2.7 Fahrenheit) established lower threshold set in Paris is pretty much being breached now. Meanwhile, the forecast is to see temperatures rise between 2.7 and 3.1 Celsius (4.8 and 5.6 Fahrenheit) by 2100 unless governments and businesses change course.

With only 163 of the 494 companies Bloomberg tracks on target to meet CO2 reductions of 33% by 2030, an International Energy Agency (IEA) recommendation, one can expect climate-related disaster recovery costs to keep rising.

The Answer To Rising Disaster Costs Is Staring Us In The Face

Derisking climate change policies and programs is beginning to sound like a broken record. What’s needed is not necessarily what governments and businesses are prepared to do short of receiving marching orders.

What should these orders be?

• The implementation of carbon reduction policies at all government levels and in business.
• The sharing of technologies and successes for mitigation and adaptation without reservation, and the pooling of financial resources and expertise for rapid build-outs.
• Stopping future investments in prospecting, drilling, refining and transportation of fossil fuels using a rapid phase-out timetable.
• Stop approving coal-fired power plants globally unless they include carbon capture and storage (CCS) in operations from day one.
• Increasing renewable investments annually by a factor of four to five by 2030 for the building of solar, wind and geothermal projects.
• Scaling up as many existing emission reduction technologies as possible with a quintupling of public and private sector investments annually into research and development for battery storage, hydrogen electrolyzers, direct air capture (DAC) and yet-to-be-named technologies.
• Making investments to make commercial fusion reactors a reality while adding capacity to fission reactor projects that use thorium or recycled fuels.
• Electrifying all transportation, industry, buildings, and homes to replace the burning of fossil fuels.
• Reducing carbon emissions through sustainable agricultural practices that include reforestation and soil carbon sinks.