Climate change adaptation: A study of fuel choice and consumption in the US energy sector

Using cross-sectional data, this paper estimates a national energy model of fuel choice by both households and firms. Consumers in warmer locations rely relatively more heavily on electricity rather than natural gas, oil, and other fuels. They also use more energy. Climate change will likely increase electricity consumption on cooling but reduce the use of other fuels for heating. On net, American energy expenditures will likely increase, resulting in welfare damages that increase as temperatures rise. For example, if the US warms by 5 °C by 2100, we predict annual welfare losses of $57 billion.