Climate: economic consequences of the heat will get worse – 07/19/2023 – Market

The economic impact of the relentless heat wave that is hitting southern Europe, the United States and much of the northern hemisphere may be short-lived in most places, with the temporary closure of tourist attractions, the withdrawal of outdoor tables from cafes and restaurants and the increase in electricity consumption linked to the use of air conditioning.

In the longer term, however, the economic consequences of climate change are likely to be profound.

Devastating fires, floods and droughts tend to dominate the headlines. Other insidious effects may draw less attention but incur costs nonetheless. Researchers have found that extreme temperatures reduce labor productivity, damage crops, increase death rates, create problems for global trade and weaken investment.

An analysis by researchers linked to the think tank Center for Economic Policy Research found that in Europe, France, Italy, Spain, Romania and Germany were the countries most affected by climate-related disasters in the last 20 years. But countries in central and eastern Europe have been increasingly affected by climate problems.

These problems increase pressure on public spending as governments must replace damaged infrastructure and provide subsidies and emergency assistance. The analysis highlights that tax revenues can also shrink when climate change disrupts economic activity.

Economic losses linked to climate change are expected to increase sharply in the future, according to estimates by the European Union, although it has noted that in most member states there is no mechanism to group and assess economic costs.

Analysts at Barclays have estimated that the cost of each climate-related disaster has risen by nearly 77% over the past 50 years.

The losses will grow globally. A study published last year that sought to measure the impact of man-made heat waves on global economic growth concluded that the cumulative damage between 1992 and 2013 amounted to between $5 trillion and $29.3 trillion globally.

“We think of extreme heat as a kind of localized phenomenon,” commented Justin Mankin, a climatologist at Dartmouth College and co-author of the study. “What’s really amazing about the heat waves we’re experiencing right now is not just their magnitude, but the number of people they’re affecting simultaneously.”

Mankin said that in the United States alone there are 32 million people who work outdoors. He pointed out that the proportion of people working outdoors is much higher in developing countries. Extreme heat also puts more strain on power plants, causing scheduled blackouts in succession and sometimes even causing asphalt roads to warp.

“We built an economy and a set of practices for a past climate, not for the climate that is shaping up,” he said.

Translated by Clara Allain