Burning Economies: the Costs of Extreme Heat
Updated: Aug 6
You know climate change is more than a fringe or so-called soft issue when the Financial Times starts reporting on its economic impacts. The Times article How an Era of Extreme Heat is Reshaping Economies is definitely worth a read this week. According to the Times, the Cerberus heatwave currently roasting southern Europe highlights how the economic costs of record-breaking heat go far beyond tourism impacts in the Mediterranean. Globally, industries from construction to manufacturing, agriculture, transport, and insurance are suffering significantly and bracing for more.
More frequent and intense heat waves caused by global warming are already affecting business productivity and leading to significant economic losses. A study from the Ivy League's Dartmouth University estimates heatwaves caused by human-induced climate change have cost the global economy an astounding $16 trillion over 21 years. Extreme heat makes it harder for people to work, decreases productivity and pulls down economic growth. The International Labour Organisation forecasts that by 2030, over 2% of total working hours worldwide will be lost annually due to heat. Outdoor workers, particularly in agriculture and construction, are at much higher risk of death, injuries, sickness, and reduced productivity. And in developing countries like Bangladesh and Sri Lanka, indoor workers in the textile industry already face hugely uncomfortable working conditions without air conditioning.
Climate change affects more than the workers. Intense heat affects materials such as steel and concrete and increases construction costs and delays. Water scarcity during high temperatures disrupts industrial operations, affecting cooling and transportation. France's nuclear power stations are currently forced to cut output due to high river temperatures. Heat also damages infrastructure. This week the runway at London's Luton Airport melted.
Extreme heat affects agriculture big time, leading to decreasing crop yields and rising food prices. This makes climate change a huge risk for global food security. Heat-related catastrophe losses have already cost insurers billions of dollars, prompting big insurers to cancel insurance in high-risk areas. Farmers Insurance pulled out of Florida this month leaving 100,000 people with no protection.
With delay and diversion still the main responses of governments and the fossil fuel industry, CO2 emissions and global temperatures will continue to rise. Some countries are adapting through bans on outdoor work during extreme heat periods. And companies are adopting cooling measures for employees and using AI to factor weather forecasts into project planning. Passive cooling strategies, like cool roofs and more tree cover also offer some relief. But Earth's climate system is powerful. We will bear more and more costs.
When an economically-liberal media outlet like the Financial Times reports actively on economic impacts of climate change, I feel some hope. Perhaps governments might listen to 'economically rational' analysis rather than the calls of climate activists who are so often branded 'irrational'. Perhaps governments will decide that not taking strong and immediate action will cost much more - now and into the future. But the Australian government, keeps approving new coal and gas projects.
Change will only come with mandates and force. If we don't act now, in the words of the UN's former chief climate negotiator, Christiana Figueres, "the fossil fuel industry will have powered human development in the 20th Century and then destroyed it in the 21st."