Economic stress increases cost impacts from extreme weather by third in EU – report

Extreme weather events such as heatwaves and river floods are known to hit the economy - but the damages could be significantly worse if economic output is already low, a report by the Potsdam Institute for Climate Impact Research (PIK) found. In the EU, households’ consumption goes down by an additional 35 percent when an extreme weather event is coupled with an existing economic crisis, compared to a scenario with an unstressed economy, according to the report. In China, consumption losses almost triple, while in the U.S. they double. This is because, under economic stress, production capacity goes down, and this is more pronounced when coupled with lost production from climate extremes. This then leads to higher prices and lower consumption. “It is as easy as it is dangerous to underestimate the economic impacts of increasing weather extremes,” report author Anders Levermann warned. “As they will intensify under global warming they will coincide with non-climate-related economic crises and that is a threat.”

The report authors called for climate mitigation and adaptation to go beyond protecting at-risk regions, ensuring that there’s a holistic approach to them. “Increasing the resilience of trade relations is necessary to cope with shocks originating in other regions,” they concluded. This was “of vital importance to our societies,” Levermann said. Europe is the continent experiencing the fastest rise in temperatures because of climate change, and the impacts are felt everywhere across the region. The EU is considered a global adaptation pioneer and has recently stepped up coordination of member states’ responses, but the challenges are huge and many plans remain non-binding “soft” policies. Preparation is also hampered by the delayed benefits of climate adaptation beyond electoral terms, and a lack of financing.