Climate Change and the European Economy - Economists: This is just the beginning. Costs will rise faster than temperatures
Record heat and droughts this summer - which scientists say have been worsened by global warming - have wreaked havoc on energy production, shipping and public health systems, while this fire season is on track to become the biggest ever in Europe.
Together, the hit to the region's economy could already be measured in hundreds of billions of euros, economists and academics estimate. But they warn that this is just the beginning, as costs will rise faster than temperatures.
The climate is changing faster in Europe than on any other continent, and the damage is already straining public finances, causing huge swings in inflation, redrawing the map of tourism and forcing the bloc to rethink the way energy is produced and goods are transported.
Traffic on the Rhine and Danube rivers, major freight arteries, is severely restricted due to low water levels, more than half a dozen nuclear generators have shut down or reduced output due to cooling difficulties. Agricultural yield estimates have been down, with late-harvested crops such as corn and sunflowers suffering a 6-7% loss since July.
It is estimated that stopping traffic on the Rhine River alone will reduce the GDP of Germany, the world's third-largest economy, by 0.3 percentage points this year, while Hungary's MBH Bank sees a drop of 0.1 percentage point in GDP for every week that the country's largest nuclear generator is out of operation.
Allianz, the German insurer, estimates that the two-week heatwave in June alone will reduce Europe’s GDP by 0.3 percentage points, and climate change will reduce growth by 5-7% by 2030 for the most exposed economies such as Spain, France and Italy. Given that the eurozone is expected to grow by just 1% this year, the hit is significant.
Southern Europe could take the biggest hit, as temperature increases are greatest there, reducing tourism revenues, worsening agricultural production and driving out-migration. The south may attract more tourists year-round, but summer peaks will decline as holidaymakers move north.
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