The cost of heatwaves in Europe

Economic losses in Europe are projected to increase by almost a factor of five by 2060 compared to the historical damages experienced and will affect more the areas where heatwave-induced productivity damages are already pronounced, with a clear north-south gradient in economic losses. A study just published on Nature Communications and realized with the contribution of the CMCC Foundation sheds light on the economic damages triggered by extreme heat.

Extreme heat undermines the working capacity of individuals, resulting in lower productivity, and thus economic output. In a context of rising temperatures, quantifying the economic impact of these externalities is key to combat their effect, acting as the necessary input for the design of adaptation plans and occupational health policies.
A new study realized with the contribution of the CMCC Foundation, recently published on Nature Communications, assessed the present and future economic impacts of extreme heat in Europe while adopting a higher spatio-temporal resolution level and considering all the productive economic sectors.

Future projections of the study highlights that by 2060 impacts might increase in Europe by a factor of almost five compared to the historical period 1981-2010 if no further adaptation actions are taken, suggesting the presence of more pronounced effects in the regions where these damages are already acute.

The study takes into account historical events and future projections (for the period 1981-2065). For the analysis of current impacts, the authors focused on heatwaves occurring in four recent anomalously hot years (2003, 2010, 2015, and 2018) and compared their findings to the historical period 1981-2010. In the selected years, the total estimated damages attributed to heatwaves amounted to 0.3%–0.5% of European gross domestic product (GDP), 1.5 to 2.5 times more than during an average year over the period 1981-2010.

“Our study”, explains Gabriele Standardi, researcher at CMCC Foundation and RFF-CMCC European Institute on Economics and the Environment (EIEE), “aims at identifying the most vulnerable European regions, where vulnerability results from a combination of their average cumulative heat exposure and their economic exposure. We observe a north-south gradient in economic losses, consistent with average warmer temperatures in the southern part of Europe. Even when heat patterns were intensified to the north of the continent, as was the case in 2018, with observed impacts in Northern Europe well above their historical maxima, the economies of southern regions were always shown more affected relative to the size of their economies (regional GDP losses above 1% in some regions of Spain, Portugal, Cyprus, and Greece, even above 2% in Croatia in some cases).”

Heatwave-induced GDP losses in Europe are projected to grow steadily over the next 40 years: average costs will pass from the current average of 0.21% over 1981-2010 to an expected annual average of 0.77% in 2035-2045, to above 1% in 2055-2064. Once again, the study found that southern European countries will clearly be the most economically harmed by excessive heat in the future. Portugal, Cyprus, and Croatia will gradually move from a range of losses of 2% in 2040 to around 3% in 2060.”
The situation in Italy is also quite worrying. Heatwaves in 2003 affected heavily Italy, with some regions such as Sicily, Sardinia, Apulia and Veneto experiencing losses of more than 1% of regional GDP; Italy will also experience considerable increases in their expected damages, with average annual losses of more than 2% of GDP by 2060 attributed to extreme heat: in big regions of the South like Sicily but also North like Lombardy, regional GDP losses could be around 3% by 2060; in Central Italy Tuscany even more than 4%.

“Our results”, Gabriele Standardi concludes, “suggest that direct impacts of heat on labour productivity take place mostly in outdoor sectors. However, these losses propagate to the entire economy; for example, sectors dependent on agricultural products, such as food manufacturing, tourism, and travel-related services, were shown largely affected. Meanwhile, trade between regions might act as a buffer and mitigate this negative effect.”