Situation: Global warming, the new threat to the economy

The Northern Hemisphere continues to suffocate, with droughts and fires in various places around the planet. This widespread heat wave highlights the scale of economic damage caused by climate change.

Italy’s current drought, worst in 70 years, could cut agricultural production by 30% A drop in the level of the river Po, which irrigates the entire northern part of the country, has also hampered the operation of hydraulic power plants. This decrease in power generation, in the midst of an energy crisis, certainly has a negative effect on the price and supply of energy.

In Germany, the decline of the Rhine worries all industries, as the river is one of the axes of transit of raw materials and intermediate goods in the basin’s industries. But, when the water level is very low, the boats cannot move around. A month of low water results in a 1% drop in industrial production. In France, nuclear power plants are running on slow motion and traders in the southwest, devastated by the fire, already know the tourist season is being seriously compromised.

Will the economic damage caused by this extreme heat last?
Generally, farmers offset the loss of a bad season with the profits of the following seasons. But when episodes of drought recur frequently, the economy cannot catch its breath. This is what is happening in Morocco. Water resources have been continuously declining since the 1960s, and as a result, the country today is in a situation of structural water stress.

The World Bank warned last week: Morocco’s growth will shrink by a fraction this year, to just 1.3% against nearly 8% in 2021, the post-Covid recovery year. Partially global warming. Fire also has very long-term effects. It takes twenty to thirty years to rehabilitate a forest, hence the activities associated with it.

In France, a dozen sawmills have already closed in the southwest. In Greece, on the island of Evia, which was devastated by a violent fire last year, the pine honey harvest could not resume for thirty years.

Has climate become a threat to the economy?
This is according to reinsurance company SwissRe. This is a major threat to the future, and is more worrying than the pandemic itself. In Europe, many analysts believe that the heat wave and its dramatic effects, as well as fires and droughts, will accelerate the recession. Heat waves also have negative effects on health and productivity.

When the thermometer is 40 degrees Celsius, it is very difficult to work. The frenzied Western development based on hydrocarbons has accelerated the phenomenon of global warming. She is now one of the first victims. Elements known to experts long before this historic heat wave of 2022. In a report published last year, the European Central Bank concluded that the euro zone could lose almost 4% of economic growth by 2030 due to global warming.

How to escape from this disastrous situation?
By investing in adaptation. For example, in fire prevention activities, European countries around the Mediterranean allocate 80% of their budgets to the fight against flames and 20% to protection. There is also a need to reduce water consumption and make cities, homes, etc. more heat-tolerant.

Note that Italy suffers losses of 30% against the European average of 5 to 8%. Certainly, there is an urgent need to accelerate the energy transition. But the war in Ukraine has relegated what should have been a priority.

Sami Nemili with agencies / Les Inspirations Ego