The “Outlook could not create the work file. Check the temp environment variable.” error is more common after an upgrade of the operating system. It's the result of a corrupted temporary internet cache variable, possibly caused by the upgrading the OS or using Easy Transfer to move settings to a new computer.

Fixing it is easy - you can either edit the registry to change the location of the Temporary Internet Files or make the change within Internet Options (Control panel).

If you don't want to edit the registry, you can use the Mr. Fix it in You receive an "Error 1606" error message when you try to install or remove a Microsoft program. Mr FixIt will reset all User Shell Folders values, including Cache.

Edit the Registry method:

At Start menu, Run (or Windows key + R) type

regedit

Browse to HKEY_CURRENT_USER\Software\Microsoft\Windows\Current Version\Explorer\User Shell Folders

The Cache variable (in the right pane of the register editor window) should be as follows:

Windows 10:

%USERPROFILE%\AppData\Local\Microsoft\Windows\INetCache

Windows 7 or Vista:

%USERPROFILE%\AppData\Local\Microsoft\Windows\Temporary Internet Files

Double click on the Cache name to open it then edit it, entering the correct path (as listed above).
 

Internet Options method

Open Control Panel, Internet Options or go to Internet Explorer's Tools menu, Internet Options.

1. In the Internet Options dialog, click the General tab. In the Browsing history section click Settings to open the Temporary Internet Files and History Settings dialog.
   
2. In the Temporary Internet Files and History Settings dialog, click Move Folder to open the Browse for Folder dialog.
3. In the Browse for Folder dialog, select the correct location for your Temp folder.

In Windows 10, the folder is at C:\Users\user name\AppData\Local\Microsoft\Windows\INetCache

In Windows 7 or Vista, and Windows 2008 Server, look for the folder here: C:\Users\user name\AppData\Local\Microsoft\Windows

For Windows XP and prior versions of Windows: C:\Documents and Settings\user name\Local Settings

4. Click OK to close the Browse for Folder dialog. Click OK to close the Temporary Internet Files and History Settings dialog. Click OK to close the Internet Options dialog.
5. Wait for content to migrate to the new location.
6. Reboot the computer when prompted.