Economic Impact of Heatwaves in Numbers... Up to 2% GDP Decline in Europe [Economics of Heatwaves①]

[Image source=AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] # This year, an early heatwave has caused the water level of the Rhine River to drop significantly, bringing Germany's maritime logistics system to the brink of paralysis. One of the reference points for measuring the Rhine River's water level, Kaub, typically has a water level of 200 cm. However, due to this year's severe heatwave, on the 17th, the critical 78 cm level?considered the safe navigation threshold for ships?was breached, and later the level even fell below 70 cm. With the 78 cm threshold broken, the risk of ship sinking has increased. As cargo ships have had to suspend operations or reduce cargo weight, the damage to logistics and the overall German economy is growing. The Rhine River accounts for 80% of Germany's maritime transport. It passes through major German cities such as Cologne and D?sseldorf and connects to Rotterdam in the Netherlands and Basel in Switzerland, making it one of the most important maritime transport routes in Europe.

# In Texas, USA, it has not rained for over 50 days. Due to the ongoing heatwave, on the 13th, the Texas power grid operator declared an emergency to prevent a large-scale blackout, prompting companies like Toyota and Samsung Electronics to reduce electricity usage. Toyota decided to halt most production at its San Antonio plant before 2 p.m. until mid-August and reduce night shifts. Samsung Electronics also announced on the 15th that it partially cut electricity usage at its Austin semiconductor plant.

# In China, the heatwave has continued for over a month, raising concerns about a repeat of last year's large-scale blackout. The China Meteorological Administration (CMA) issued severe heatwave warnings for nearly 70 cities on the 25th, forecasting temperatures exceeding 40 degrees Celsius in these cities. The CMA warned that although not all cities will reach 40 degrees, 393 cities are expected to exceed 35 degrees Celsius.

Heatwave Death Toll in Spain and Portugal Exceeds 2,000

This summer, the world is suffering from heatwaves. Especially in Europe, the heatwave arrived earlier than usual, and record-breaking high temperatures have caused large-scale casualties.

The US online media Axios reported that over 2,000 deaths due to heatwaves occurred in Spain and Portugal alone. Spain's Carlos III Health Institute reported 1,047 heatwave-related deaths between the 10th and 19th of this month. Portuguese health authorities also reported 1,063 deaths due to heatwaves between the 7th and 18th.

France plans to officially announce the heatwave death toll at the end of this month. In the western French city of Nantes, temperatures soared to 42 degrees Celsius, surpassing the 1949 record of 40.3 degrees. Across France, there have been numerous instances of temperatures exceeding 40 degrees this year. The southwestern coastal city of Biskahos recorded 42.6 degrees Celsius. The UK also surpassed 40 degrees for the first time, with London Heathrow recording 40.2 degrees on the 19th. On the 18th, Wales recorded a historic high of 37.1 degrees Celsius.

As global warming continues, deaths caused by heatwaves among climate anomalies are increasing. According to the United Nations World Meteorological Organization (WMO), most heatwave deaths have occurred since the 2000s.

Between 1970 and 2019, about 2 million people died due to climate anomalies caused by rapid temperature and precipitation changes, with heatwaves accounting for about 10% of these deaths. However, from 2010 to 2019 alone, about half of the 185,000 deaths caused by climate anomalies were due to heatwaves. In Europe, most casualties from climate anomalies are attributed to heatwaves. The European Environment Agency (EEA) analyzed that 90% of deaths related to climate anomalies between 1980 and 2022 were due to heatwaves.

Europe's Wildfires This Year 2.7 Times the Average... Yosemite Park in the US Burns Area 25 Times Larger than Yeouido

As the heatwave dries out the land, wildfire damage is also increasing.

In the Gironde region of western France, a wildfire broke out on the 12th and firefighting efforts are still ongoing. Although the main fire has been contained, residual fires continue due to the parched land caused by the heatwave. The UK’s BBC quoted experts on the 19th, when the Gironde wildfire was uncontrollable and heatwave deaths were rising, reporting that "the western region of France is now facing a Heat Apocalypse."

According to the European Forest Fire Information System (EFFIS), as of the 16th, 1,756 wildfires have occurred across the European Union (EU), a 273% increase compared to the 2006?2021 average. The burned area reached 517,881 hectares, already surpassing last year's annual damage area of 470,359 hectares. Experts warn that the wildfire season is not even halfway over and that this year's wildfire damage could approach the record level of 1 million hectares burned in 2017.

A firefighter is working to extinguish a wildfire at Yosemite National Park in California, USA, on the 24th (local time).
Photo by AP Yonhap News

In the US, a wildfire broke out near Yosemite National Park, one of California's landmarks, on the 22nd and has yet to be extinguished. Named the 'Oak Fire,' the burned area expanded to 10,887 acres (approximately 73.2 km²) as of the morning of the 26th. This is more than 25 times the size of Yeouido (2.9 km², the area inside Yunjungno embankment).

Fire authorities have deployed about 2,500 firefighters, 12 helicopters, 281 fire trucks, and 46 large water tankers to combat the fire, but the containment rate is only 26% as of now. Authorities warn that the fire is spreading unprecedentedly fast due to the extremely dry land.

Heatwave Damage Could Reduce GDP by Up to 2%

As heatwaves increase, the economic damage is also growing. Deaths caused by heatwaves directly mean a loss of labor force, and even if they do not lead to death or illness, heatwaves have a significant impact on labor productivity loss.

According to the International Labour Organization (ILO), when temperatures remain between 33 and 34 degrees Celsius, workers lose an average of 50% of their labor capacity. The ILO estimates that with ongoing climate change, heatwaves could reduce global working hours by more than 2% by 2030. This equates to a loss of approximately 80 million full-time jobs and a financial loss of $2.4 trillion (about 3,153.6 trillion KRW). The ILO analyzed that this labor loss is nearly ten times higher than in 1985.

The United Nations Intergovernmental Panel on Climate Change (IPCC) also noted in a report that "heat stress related to climate change will reduce outdoor physical work capacity globally," warning that "in some tropical regions, outdoor work may become impossible for 200 to 250 days annually."

A report released in October last year by Nature Communications analyzed the gross domestic product (GDP) of four unusually hot years in Europe (2003, 2010, 2015, and 2018) and confirmed that heatwaves caused a GDP loss of about 0.3 to 0.5% during those years. Particularly in southern Europe, where agriculture is a significant sector, the loss reached about 2%. Nature Communications expects the GDP loss due to heatwaves in Europe to steadily increase over the next 40 years. The estimated losses are 0.77% of GDP between 2035 and 2045, about 0.96% between 2045 and 2055, and exceeding 1.14% in the 2060s.

The EAA estimated that between 1980 and 2000, 32 European countries suffered economic losses ranging from 27 billion to 70 billion euros due to heatwaves.