Record-breaking heatwaves in cities across the UK, US and mainland Europe could punish economies already reeling from inflation | Kiowa County Press

A runner tries to beat the heat by training in the morning. AP Photo/Michael Probst

Derek Lemoine, University of Arizona

Hundreds of millions of people struggled to stay cool amid a sweltering summer heatwave as cities across the United States and mainland Europe experienced record high temperatures. In the UK, thermometers topped 104 degrees Fahrenheit (40 degrees Celsius) on July 19, 2022, the highest on record.

While all of this scorching heat is certainly punishing on a personal level, it also has significant impacts on the wider economy.

As an economist who has studied the effects of weather and climate change, I have reviewed a large body of work that links heat to economic outcomes. Here are four ways extreme heat is hurting the economy.

1. Growth takes a hit

Research has shown that extreme heat can directly harm economic growth.

For example, a 2018 study found that US state economies tend to grow at a slower rate during relatively hot summers. The data shows that annual economic growth drops 0.15 to 0.25 percentage points for every degree Fahrenheit (0.56 C) that a state’s average summer temperature is above normal.

Workers in weather-exposed industries such as construction work fewer hours in warmer weather. But higher summer temperatures are also reducing growth in many industries that tend to involve indoor work, including retail, services and finance. Workers are less productive in warmer weather.

2. Crop yields drop

Agriculture is obviously exposed to bad weather: after all, crops grow outdoors.

While temperatures up to around 85 F to 90 F (29-32 C) can be beneficial for crop growth, yields drop sharply when thermostats are increased further. Some of the crops that can be hit hard by extreme heat include corn, soybeans, and cotton. These yield declines could be costly for US agriculture.

For example, a recent study I conducted found that an additional 2 degrees Celsius (3.6 F) of global warming would wipe out the benefits of an average acre of farmland in the eastern United States.

The collapse of the Russian wheat crop in response to the 2010 heat wave, which pushed up wheat prices around the world, is a stark example.

3. Energy consumption is skyrocketing

Of course, when it’s hot, energy consumption increases as people and businesses run their air conditioners and other cooling equipment at full blast.

A 2011 study found that just one extra day with temperatures above 90 F (32 C) increases annual household energy consumption by 0.4 percent. More recent research shows that energy use increases the most in places that tend to be warmer, likely because more households have air conditioning.

This increase in electricity consumption during hot weather puts strain on power grids when people depend on them the most, as seen in California and Texas during recent heat waves. Power outages can be quite costly to the economy, as stocks of food and other goods can spoil and many businesses have to either run generators or shut down. For example, the 2019 power outages in California cost an estimated US$10 billion.

4. Education and income suffer

A long-term impact of the increasingly hot weather is how it affects children’s ability to learn – and therefore their future earnings.

Research has shown that hot weather during the school year reduces test scores. Math scores decrease more and more as the temperature rises above 70 F (21 C). Reading scores are more resilient to high temperatures, which this research suggests is consistent with how different regions of the brain respond to heat.

One study suggested that students in schools without air conditioning learn 1% less for every 1 degree Fahrenheit (0.56 C) increase in average school year temperature. He also found that minority students are particularly affected by warmer school years, as their schools are more likely to lack air conditioning.

Lost learning leads to lower lifetime earnings and harms future economic growth.

The impact of extreme heat on development, in fact, begins before we are even born. Research has found that adults who were exposed to extreme heat as a fetus earn less over their lifetime. Each additional day with an average temperature above 90 F (32 C) reduces income 30 years later by 0.1%.

Air conditioning can help – to a point

Air conditioning can offset some of these effects.

For example, studies have shown that having a working air conditioner means fewer people die, student learning is not compromised, and extreme heat outdoors during pregnancy does not not harm the fetus.

However, not everyone has air conditioners, especially in states like Oregon and countries like the UK that have more temperate climates but have nonetheless recently experienced unusually extreme temperatures. And many people cannot afford to own or operate them. Survey data from 2017 found that about half of homes in the US Pacific Northwest lacked air conditioning. And about 42% of American classrooms don’t have an air conditioner.

Although heat waves have been shown to prompt more households to install air conditioning, this is not a panacea. By 2100, increased use of air conditioning could increase residential energy consumption by 83% worldwide. If that energy comes from fossil fuels, it could end up amplifying the heat waves that are driving the higher demand.

And in the southern United States, where air conditioning is ubiquitous, hotter-than-usual summers still weigh the most on state economic growth.

In other words, as temperatures rise, economies will continue to suffer.

This is an updated version of an article originally published on August 2, 2021.

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Derek Lemoine, Associate Professor of Economics, University of Arizona

This article is republished from The Conversation under a Creative Commons license. Read the original article.