The impacts of climate change on energy: An aggregate expenditure model for the US

This paper develops a theoretical model to measure the climate change impacts to the energy sector. Welfare effects are approximately equal to the resulting change in expenditures on energy and buildings. Using micro data on individuals and firms across the United States, energy expenditures are regressed on climate and other control variables to estimate both short-run and long-run climate response functions. The analysis suggests that energy expenditures have a quadratic U-shaped relationship with respect to temperature. Future warming of 2 C is predicted to cause annual damages of about $6 billion but increases of 5 C would increase damages to almost $30 billion