Melting point: The abnormal heatwave is taking the world by storm. Five industries that will be most affected
The rise in average temperatures on the planet has a clear economic effect – with a negative indicator for many areas
July of this year has become the hottest on record in the world's meteorological observations. But this record is unlikely to last long – over the past seven years, temperature highs have been consistently breaking, and this trend will continue. According to the report of the World Meteorological Organisation, from 2023 to 2027, there will be a surge in heat release from El Niño, making the next four years the hottest in the history of climate research.
Traditionally, such forecasts spark discussions about the social impact of heatwaves and their effects on public health. However, temperature records also cause stress for businesses. Entire industries are already feeling the impact of global warming, and this has direct financial implications. From installing additional air conditioners in enterprises – as one of the owners of such a facility recently complained that "the equipment manufacturer voids the warranty" – to the need for restructuring entire business processes and logistic routes.
Mind looked into which industries could not call themselves heat-resistant, and how significant the global economic effect of El Niño will be.
If record temperatures are regularly being recorded, is there any point in worrying excessively now? Indeed, another temperature record has long ceased to be a sensation.
According to the World Meteorological Organisation, the last eight years have been the hottest in recorded history. According to Copernicus, the most striking years in this regard were 2016, 2017, 2019, and 2020. In terms of average temperatures, 2022 ranked as the fifth warmest year since records began in the 19th century.
However, the difference now is that the steadily rising temperatures have reached critical values bordering on economic tolerance, and ignoring them has become impossible.
The current heatwave lasts longer than usual. Moreover, it is more intense, and the temperature remains high even at night, providing no relief.
As stated by the World Meteorological Organisation, such extreme weather "unfortunately becomes the new norm." June 2023 was the hottest month in the entire 174-year history of temperature monitoring. Then July earned the same 'title'.
For example, on 7 July, the average global temperature was 17.24 °C, which is 0.3 °C higher than the previous record of 16.94 °C set on 16 August, 2016. Overall, there were more than 20 days in the past month when the average global temperature exceeded 17 °C. Such days had never been recorded before in the entire history of observations.
Long story short: thus, this year is more climatically challenging than the previous ones, and the temperature values have come uncomfortably close to levels that are incompatible with the full economic activity of many sectors.
Can the temperature trend change? Theoretically – yes. Even the most ardent advocates of climate panic admit that global warming is not currently an irreversible phenomenon. However, the only tool humanity has to stop it is to abandon its own industry on the scale of entire states.
Is the impact of El Niño decisive for temperature records? Yes, and it's the least controllable. El Niño and La Niña are the main driving forces of Earth's climate system.
El Niño occurs on average once every two to seven years, and its episodes typically last from 9 to 12 months.
This is a climatic regime of natural origin associated with an increase in sea surface temperature in the central and eastern parts of the tropical Pacific Ocean. When combined with anthropogenic climate changes, it leads to maximum consequences. In particular, the combination of El Niño and anthropogenic factors caused the temperature record in 2016. Now, it is recurring on an even larger scale.
The El Niño conditions have been established in the Pacific Ocean for the first time in seven years. They create conditions for a rapid increase in global temperatures and destructive weather and climatic conditions.
"The onset of El Niño will greatly increase the likelihood of breaking temperature records and triggering more extreme heat in many parts of the world and in the ocean," said Prof. Petteri Taalas, the Secretary-General of the World Meteorological Organisation.
The impact on global temperatures typically manifests within a year after its development, so it is expected to be most significant in 2024. In which sectors will this impact be most noticeable?
Agricultural sector
Agriculture – expectedly the main sector, is the one most affected by fluctuations in temperatures – in any direction. Approximately 40% of all damage caused by global warming is estimated to be accumulated in the agricultural sector. Many see this as a manifestation of 'karmic justice' due to the boomerang principle, as agriculture, especially animal husbandry, is the leading source of methane emissions, which contribute to climate change.
Climate change is geographically shifting the boundaries of agricultural regions or altering their specialisation in favour of more heat-resistant crops. Ukraine could observe this phenomenon ten years ago on the example of Kherson Oblast, which, with rising average temperatures, became a zone of risky agriculture.
Warmer temperatures reduce the crop yields of many grains, as the ripening process accelerates, leading to a decrease in grain volume. Additionally, sudden warming disrupts plants' ability to receive and utilise moisture.
The benefits of rising average temperatures are experienced primarily by stone fruits and grapes, as the zone for their cultivation has significantly expanded. However, the most common effect is drought and drying of the topsoil, which cannot always be compensated for by soil enrichment.
Another negative consequence of global warming on agriculture is the appearance of new pests and bacterial plant diseases in the region.
According to World Bank experts, with an increase in the global average temperature by 1.5–2 °C and a reduction in rainfall, the areas for cultivating maize, millet, and sorghum in Africa will decrease by 40–80% by 2030–2040.
In Mexico, due to drought, the area of land suitable for growing maize – the country's main agricultural crop – is decreasing.
In Southeast Asia, land degradation and drying threaten the production of the region's main crop – rice. Vietnam, located in the Mekong River Delta, one of the world's rice-growing centres, is at particular risk. A 30 cm increase in sea levels could lead to an 11% reduction in rice production.
According to estimates by the FAO, the main impact of rising temperatures on agriculture will be a decrease in productivity (production volume per hectare), with an average weighted decline of up to 16%. The potential damage is concentrated in developing countries.
In industrially developed economies, the projected losses range from 6% of damages without considering carbon fertilisation to 8% of profits when taking this factor into account. However, regions in developing countries bear losses ranging from 25% without considering carbon fertilisation to 10–15% with its inclusion.
In developing countries, the average losses would be around 15–26%, and the average losses weighted by production volume would be 9–21%. In some of the poorest countries, the losses could reach catastrophic levels (over 50% in Senegal and Sudan).
The losses will be more severe in countries located closer to the equator, where temperatures are already in many cases approaching the critical thresholds for agriculture. The country's elevation above sea level also matters in determining the impact of climate change on agriculture.
For instance, due to higher altitudes above sea level and lower average temperatures, Uganda may experience smaller losses (17% excluding carbon fertilisation) compared to Burkina Faso (24%), even though the latter is located about 10 degrees north of the equator.
While the most significant losses are concentrated at lower latitudes, the benefits, where they occur, tend to be at higher latitudes.
*Carbon fertilisation is the ability of additional CO2 to stimulate the growth of certain plants.
Fishing
In 2023, the average sea surface temperature was unusually high for this time of year, from May to July. The warming of the waters directly affects the distribution of fishing. According to the FAO's estimates, by 2050, the production potential of this sector in the 200-mile exclusive economic zones (EEZs) to which each coastal state has special rights may decrease on average by 12%. This phenomenon will be most evident in tropical countries, primarily in the southern part of the Pacific Ocean.
Under the influence of warming waters, the habitat of fish is changing. This trend is already noticeable in some tuna species in the northeastern and northwestern Atlantic.
The reduction in catch volumes can significantly impact the economies of countries that depend on the fishing industry. This will necessitate a review of the current system of water resource allocation, especially concerning small island states.
The most vulnerable countries in the freshwater aquaculture sector are considered to be Vietnam, Bangladesh, Laos, and China, while in marine aquaculture, Norway and Chile are among the most vulnerable.
In Europe, this trend is already evident in Lake Garda, where eels and trout used to be abundant, but for several years, these fish have become scarce in the water body.
Moreover, due to high temperatures, aquaculture is facing the spread of a large number of parasites and diseases.
It is expected that by 2100, the volume of primary production in the world's oceans, on which the marine food chain depends, will decrease by 6%, and in tropical zones, the decline could be as much as 11%. According to various models, the global catch volume of fish is projected to decrease by 10% by 2050.
Medicine
Climate change is one of the greatest threats to human health. Heatwaves, deaths from extreme weather events, injuries, and the spread of infectious diseases are just a few of the consequences of rising global temperatures.
Heatwaves are natural disaster with a very high mortality rate. They coincide with a decrease in air quality, which exacerbates the effects.
Each year, air pollution alone causes 7 million deaths worldwide. The economic equivalent of this figure amounts to approximately $5.11 trillion in damages to social welfare systems. In 15 countries with the highest greenhouse gas emissions, health-related costs associated with air pollution are estimated to be over 4% of their GDP. According to WHO data, over 930 million people, or about 12% of the world's population, spend at least 10% of their household budget on healthcare services.
According to preliminary estimates, direct costs associated with the negative impact of climate change on health will amount to $2–4 billion annually by 2030. This includes additional sick leaves, healthcare expenses, and decreased workforce productivity. It is expected that between 2030 and 2050, climate change will lead to an increase of approximately 250,000 deaths per year.
At the same time, the WHO believes that achieving the goals of the Paris Agreement related to air pollution will save about a million lives annually by 2050.
Energy Sector
In the energy sector, approximately three-quarters of global greenhouse gas emissions are generated. This figure serves as a stimulus for the development of green energy. By 2050, the majority of energy needs are planned to be met through renewable sources, with solar energy becoming the largest single source of electricity supply.
Africa holds 60% of the most powerful solar resources, yet it accounts for only 1% of installed photovoltaic capacity.
However, currently, the increased temperature is straining the existing generation. For instance, in January 2022, mass power outages, triggered by a wave of record-breaking heat in Buenos Aires, affected 0.7 million people.
Electricity generation is also closely linked to water resources. Already, one-third of thermal power plants, whose operation depends on the availability of freshwater for cooling, are located in regions with high water deficit. This also applies to 15% of nuclear power plants, whose share is expected to rise to 25% in the next 20 years.
In the hydropower segment, 11% is already considered deficient. Approximately 26% of existing and 23% of planned hydroelectric dams are located in river basins with medium to high water scarcity risks.
Transitioning to renewable energy sources will help mitigate the growing global water resource deficit.
To achieve the long-term global goal of the Paris Agreement regarding temperature by 2030, it is necessary to establish a capacity of 7.1 TW for electricity generation from clean energy sources.
The world economy is already lagging behind this plan. To reach the stated target, investment in the 'green transition' needs to be tripled by 2050.
In practice, the increasing average temperatures mean that at the design stage of power plants, it is necessary to consider the region's climate and its future changes, as well as the trends observed over the last 30 years, and incorporate a scenario for their growth. Additionally, new plants should be constructed with enhanced cooling systems
Energy systems and networks require modernisation, taking into account the fact that electricity consumption will increase during the summer period due to air conditioning, while the resource expenditure for heating will significantly decrease. Currently, energy systems are oriented towards more active usage predominantly during the colder seasons.
Logistics
Transport activity is also responsible for environmental pollution – both as a consumer of petroleum products and natural gas and as a generator of emissions into the atmosphere. The consequences for global logistics are already being felt: freight vehicles are restricted in their movements on the roads during periods of high temperatures. However, the ports bear the brunt of the heat.
Floods and inundations in coastal areas pose a threat to the transport system. Not only the ports are vulnerable but also the airports located near the coast – rising sea levels and more frequent natural disasters cast doubt on their ability to function.
So, options are already being explored at the local and regional levels to create backup transportation capabilities to minimise the economic and social consequences of potential failures in essential facilities. With the introduction of new technologies, infrastructure, and vessels become more complex, which increases risks both in terms of safety and commercial operations.
Among the possibilities to achieve zero emissions from berth equipment, the use of onshore power sources, extensive digitalisation, and operations optimisation are being considered, as well as harnessing wind energy.
Rising sea levels will lead to more frequent occurrences of catastrophic events. Phenomena that currently happen once every 100 years may become annual events. Without additional protective measures, annual losses from flooding in coastal areas could surpass current levels by 100–1,000 times.
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