How hard heatwaves hit the economy

Extreme heat has victimised every sphere of human activity and global economy – agriculture, health, energy, tourism, infrastructure, etc. The damage may cost trillions of dollars.

Heatwaves have not spared any corner of the earth. Their onslaught has time and again dealt shocking blows to the world economy including agriculture, health, energy, tourism, and infrastructure.

Here is some data from the World Bank and IMF to explain the situation.  

World Bank

· The World Bank estimates that the economic impact of climate change could be as high as $7.9 trillion by 2050, with the most significant impacts being felt in developing countries.

· Heatwaves are projected to become more frequent and intense in many regions, leading to reduced labor productivity, increased healthcare costs, and damage to infrastructure and ecosystems.

· The World Bank also notes that investments in climate adaptation and mitigation measures could generate significant economic benefits, including job creation and improved public health outcomes.

International Monetary Fund (IMF)

· The IMF estimates that climate change could reduce global GDP by 0.7% by 2050 and by up to 4% by 2100, with developing countries being the most affected.

· The IMF estimates that climate change could reduce US GDP by 1.6% by 2050 due to the impact of extreme weather events, including heatwaves, on labor productivity and infrastructure.

· Extreme weather events, including heatwaves, are projected to have a significant impact on labor productivity, agricultural yields, and infrastructure globally, leading to higher costs and reduced economic output.

· The IMF also notes that policies to reduce greenhouse gas emissions could generate economic benefits, such as increased energy efficiency and the development of new technologies and industries.

Domain & country-wise damage

Heatwaves are of mankind’s own making. But it makes sense to closely check the wounds we have inflicted upon ourselves. Though comprehensive data about the global loss is not easily available, here is a bird's eye view of the damage done by heatwaves in different spheres of our lives, country-wise.  

Agriculture

· In the US, the 2012 drought and heatwave caused losses of $ 30 billion in the farm sector.

· In India, the 2015 heatwave led to crop losses of $ 1.5 billion and resulted in a 7% drop in GDP growth.

· In 2019, Nepal experienced a heatwave that lasted for several weeks and caused significant damage to crops, particularly maize and paddy. The government estimated that the heatwave resulted in a loss of NPR 1.73 billion (approximately USD 14.5 million) in the agricultural sector.

· In 2019, China experienced a heatwave that affected millions of people and led to several fatalities. The IMF estimates that climate change could reduce China's GDP by 0.9% by 2050 due to the impact of extreme weather events, including heatwaves, on labor productivity and agriculture.

Health

· A study published in the Lancet found that between 2000 and 2019, heatwaves were responsible for an average of 5.3% of all deaths globally, resulting in an estimated economic cost of $ 2.4 trillion.

· In Europe, the 2003 heatwave led to an estimated 70,000 deaths and economic losses of Euro 13.1 billion.

· In 2019, a heatwave in Nepal led to an increase in hospital admissions, particularly for respiratory and cardiovascular diseases. The heatwave was also linked to an outbreak of scrub typhus, a bacterial infection transmitted by mites, which affected thousands of people.

Energy

· The 2019 heatwave in Europe caused wide-spread droughts, wildfires, and crop failures, resulting in an estimated Euro 2.2 billion in economic losses in the agriculture sector alone. The heatwave also led to increased electricity demand and higher energy prices, affecting consumers and businesses alike. In France, the electricity demand reached a record high of 59.5 GW, leading to power shortages and higher prices.

· In the US, the 2011 heatwave caused power outages affecting 4.4 million people and resulting in economic losses of $ 2.6 billion.

· In 2020, the Western US experienced a severe heatwave that led to rolling black-outs in California and other states.

· In 2020, Nepal experienced a prolonged heatwave that caused power demand to surge, leading to power outages in many parts of the country. The situation was exacerbated by the fact that many people were working from home due to the COVID-19 pandemic, which further increased electricity consumption.

Tourism

· The 2018 heatwave in the UK led to a 5% drop in hotel bookings and a 7% fall in outdoor activities, resulting in an estimated economic loss of £ 2 billion.

· In Italy, the 2019 heatwave caused a 10-15% decrease in tourist bookings and an estimated economic loss of Euro 1.1 billion.

· Nepal is a popular destination for trekking and mountaineering, but heatwaves can make these activities more challenging and even dangerous. In 2019, several trekkers died due to heat exhaustion and other heat-related illnesses. This had a negative impact on the tourism industry, which is an important source of revenue for Nepal.

Infrastructure

· In the US, the 2012 heatwave caused road buckling and bridge expansion, leading to an estimated economic cost of $ 155 million.

· In Australia, the 2019 heatwave caused railway lines to buckle and damaged roads, resulting in an estimated economic loss of AUD 1.1 billion. The 2019-2020 bushfire season in the country, which was exacerbated by a prolonged heatwave, resulted in 33 fatalities and caused an estimated $100 billion in economic losses, including damage to infrastructure, property, and the tourism industry.

· Heatwaves can also affect infrastructure in Nepal, particularly roads and bridges. In 2019, several roads in the Kathmandu Valley buckled due to the heat, causing traffic disruptions and affecting commuters.

· In 2020, India experienced a heatwave that affected more than 60% of the country and led to several fatalities. The World Bank estimated that heatwaves could reduce labor productivity in India by 3.7% by 2030, resulting in a loss of $120 billion in annual economic output.

Given the grievous loss that heatwaves can inflict upon mankind, investing in climate adaptation and mitigation measures could generate economic benefits and help to reduce the overall cost of climate change.