Written by Elisa Sotero
Edited by Annika Lilja
This past summer, many countries across the globe experienced what is called dangerous heat (when temperatures reach 103 degrees Fahrenheit or above), with heat waves in Europe and Asia causing thousands of heat-related deaths. Temperatures in the United Kingdom reached 104 degrees Fahrenheit, the country’s hottest temperature in history. “Dangerous heat” has detrimental effects on not just the health and well-being of many individuals but also monumental impacts on the global economy.
The effects of heat waves on the global economy are not just a current issue, it’s been a prolonged one since the 1990s. A Dartmouth study published October 28 in the journal Science Advances has found that more severe heat waves resulting from global warming have already cost the world economy trillions of dollars since the early 1990s.
How have soaring heat levels affected economic productivity across the globe?
Decrease in productivity:
According to Forbes, indoor workers in multiple industries such as retail and other service businesses are less productive when there is an increase in temperature. Similarly, children are affected in learning environments with extreme heat, as they struggle with focus, resulting in decreased learning and impeding future productivity. According to Frances Moore, an environmental economist and climate scientist, “If you affect kids in this early stage of their life when they’re building this knowledge base, that’s going to have very long run implications on human capital.” The International Labour Organization predicts that by 2030, heat waves could reduce the number of hours worked globally by more than 2%.
Extreme heat conditions extend beyond human productivity, as it has broken down transportation infrastructure. In the United Kingdom, severe heat broke down overhead electric cables that power trains, which lead to cancellations and delays across the country. According to NPR, in July the temperatures of some railroad tracks hit 144 degrees Fahrenheit. But, the steel of the tracks is only stress tested to the average British summer temperature of 80 degrees. Extreme heat can cause what is called a ‘track buckle,’ where the train can derail and jump the tracks.
Electricity production/Power generation:
Unprecedented higher temperatures affect hydroelectric production, increase demand for certain electricity systems, and reduce electricity supply. According to the Energy Information Administration, in California, drought-like conditions caused by excessive heat, lower its reservoirs’ water levels, which could reduce hydroelectric generation by 48% compared with normal water conditions. Lake Mead, which feeds into the Hoover Dam at the Arizona-Nevada border is only 27% full. Reduced water pressure on the Hoover Dam has brought its electricity production down by 36%. Heat waves also cause a reduction in the electricity supply of thermal power plants. Operators of cooling plants must either reduce their output or shut down as an increase in global temperature causes a reduction in the availability of water for cooling plants.
Higher temperatures increase demand on electricity systems as some refrigerated appliances must work harder to maintain cool temperatures. A decrease in energy efficiency raises households’ utility bills and destabilizes electricity prices. When outside temperatures rise into the 90s and 100s, it causes internal temperatures to also increase, thus increasing the chances of air conditioning systems and refrigerators to stop working altogether.
Intensifying heat waves have led to severe drought conditions and massive wildfires, ravaging crops across the globe. Drought in places can dry up its most important crops. According to the farmer associations, corn and soybean production could fall by 50% if droughts continue. According to the U.S. drought monitor, in the Midwest, about 29% of corn production and 26% of soybean production are in areas experiencing drought. Extreme heat in the United States is compounding drought-like conditions in Kansas, Oklahoma, and Texas, which have experienced roasted pastures. This has led to an increase in the prices of hay, an important resource farmers need to feed their cattle. As a result, some farmers are selling cattle months in advance as it’s costing ranchers much more to hold herds. Selling cattle months in advance leads to low inventories and higher meat prices for consumers.
Which regions suffer the most economically from heat waves?
Heat extremes due to global warming will stress low-income regions the most, even though they are the lesser contributors to climate change. According to the study, “Globally Unequal Effect of Extreme Heat on Economic Growth,” while economic losses due to extreme heat averaged 1.5% of GDP for the world’s wealthiest regions, low-income regions suffered a loss of 6.7%of GDP per capita. Additionally, extreme heat negatively affects economic growth the most in warm regions and increases economic growth in cold regions.
How do record-breaking heat waves affect a global economy that is already growing under pressure?
Europe is at high risk of a recession as energy prices are rising due to Russia’s invasion of Ukraine. The United States is dealing with an unstable economy due to inflation, a plummeting stock market, and an unprecedented spike in interest rates. China is still struggling with the aftermath of coronavirus lockdowns and its current real estate crisis. The increase in heat waves will further add to an already weakened global economy.
Ultimately, humans are the main culprit of the intensifying heat waves, or climate change. Because the increase in global temperature could have detrimental effects on both our wellbeing and the economy, it is important to adapt our electricity systems to reduce the effects of global warming, by increasing the amount of solar and wind power. There is an immediate need for policies and technologies that protect people during the hottest days of the year, particularly in the tropics and the global South where the world’s warmest and most economically vulnerable nations are located.
Extreme heat was a factor in the recent world cup conditions in Qatar, which you can read more about in an upcoming article to be posted on ATP, so stay tuned and subscribe!
Furthermore, the recent winter storms that hit the US demonstrate climate changes, just as heat waves do. For more reading on this you should read this New York Times post.
Foerster, Jim. “The Economic Realities of Heat Waves.” Forbes, Forbes Magazine, 1 Aug. 2022, https://www.forbes.com/sites/jimfoerster/2022/07/29/the-economic-realities-of-heat-waves/?sh=3f47c4e13e63.
Horowitz, Julia. “Extreme Heat Is Slamming the World's Three Biggest Economies All at Once | CNN Business.” CNN, Cable News Network, 18 Aug. 2022, https://www.cnn.com/2022/08/18/business/heatwave-global-economy/index.html.
“How Extreme Heat Is Disrupting the Global Economy.” The Wall Street Journal, Dow Jones & Company, 27 July 2022, https://www.wsj.com/story/how-extreme-heat-is-disrupting-the-global-economy-2a1af974.