Heatwaves are directly linked to lower productivity and GDP loss. A call to action for businesses.
Updated: Mar 26, 2022
We are delighted to welcome our newest writer for the SustainNow Blog - Luca Ferrari. He is a research assistant at at Politecnico di Milano, Italy and obtained his MSc in Environmental Engineering from the same institution.
Climate impacts on productivity
A long-known issue
"There are countries where the excess of heat enervates the body, and renders men so slothful and dispirited that nothing but the fear of chastisement can oblige them to perform any laborious duty". That is what Montesquieu was arguing already in 1748, in his most important work, The Spirit of Law. The mind of scholars hosted the idea that high temperatures can influence labour and productivity for a surprisingly long time. Even in more recent times, this question has been extensively examined.
So, what do we know about temperature and labour? Which kind of climate change impacts can we expect on productivity and business sectors? These aspects of climate impacts may be less known but still very relevant for businesses. In this article, I will summarize the key findings on this topic.
Heat is directly linked to lower productivity and lower GDP.
Try to picture yourself working in your office with a comfortable temperature of 20 °C. Now try to imagine a similar situation, but with a room temperature increasing to 25 °C or even 30 °C. Our body, which naturally produces heat, would face increasing difficulties to get rid of the produced heat. We would end up sweating if the room is so hot, and we are not even considering humidity.
We only need to use our imagination to say that being in these contexts would become increasingly uncomfortable, let alone working and performing demanding tasks. Temperature can indeed have a significant effect on your productivity in the workplace. A relevant body of scientific research has also confirmed what may seem common sense.
The authors Melissa Dell, Benjamin Jones, and Benjamin Olken, from Harvard University, reported a detailed review of the scientific literature in their study on the economic impact of weather. Indeed, the consensus states that there is a correlation between an increase in temperature and a decrease in labour. Several studies came to slightly different conclusions on the subject. For example, the study led by Olli Seppänen of the Helsinki University of Technology found that a temperature increase from 23 to 30 °C leads to a reduction of productivity by around 9%.
Despite some differences in the studies, there is consistency between studies about labour productivity loss and industrial losses. High temperatures translate into substantial losses in several sectors, from the retail and hospitality industry to agriculture and mining. These impacts translate into staggering economic losses, as high as 280 – 311 billion US$ between 1995 and 2010 on a global scale.
In the last century, we witnessed the fast temperature increase caused by human emissions of greenhouse gasses, as shown in the graph below.
Source: Climate Lab Book
As we can imagine, as long as the global temperature keeps rising, such impacts on labour, amongst other aspects, will continue to exacerbate. As a result, economic losses could increase even more.
Adaptations to the new heat
Some adaptation measures are available, the most immediate being shifting work schedules to avoid the hottest hours of the day. However, this measure suffers from limitations as global warming reduces the chance to adapt by time-shifting. The use of air conditioning can also help reduce these impacts on labour. However, it is not possible to use it in every sector. Even when this is a viable solution, it requires a lot of energy and generates a lot of emissions.
Only in 2016, air conditioning accounted for 10% of the global energy use, emitting more than 1.1 billion tonnes of CO2, and the International Energy Agency (IEA) projects considerable increases in the future. The risk is to end up in the loop of an adaptation measure that exacerbates the original problem. We should also keep in mind that the climate impacts are more severe for the poorest portion of the global population.
Shift of policies and the economic benefit of the 1.5 degree goal
Knowledge of this aspect of climate change, however, is critical. Thanks to the several research on temperature and labour productivity, our understanding of temperature impacts on economic production advanced significantly. We produced new estimates of the relationship between climate impacts and economic growth.
Amongst the most remarkable, we find the study led by Prof. Dell, the one led by Prof Burke and, more recently, a report of the International Monetary Fund by Prof Kahn. These estimates are a vital aspect in the performance of a detailed cost-benefit analysis of possible climate policies. Recently, one of these updated analyses showed that the goals of the Paris Agreement are optimal from a cost-benefit point of view.
In addition to the many climate policies that needs be adopted, the need to achieve this climate target can inspire a flourishing number of companies and projects. Businesses can reach out to Science Based Target Initiative and the Project Drawdown to find support in reducing their emissions.
Several scientific research confirm that high temperatures harm labour productivity. This trend could worsen in the future, as human activities keep changing the climate leading to significant economic damages, up to a 23% reduction of the GDP per capita in 2100. However, adaptation gives us opportunities, even if limited, to reduce these negative impacts.
Furthermore, we now know that bold mitigation actions are necessary to stop the temperature increase. But they are also a cost-effective strategy to develop our future economy, with potential global benefits of more than 20 trillion dollars mid-century.
About the author:
"My name is Luca Ferrari, and I am a research assistant at Politecnico di Milano, Italy. I recently obtained my MSc in Environmental Engineering from the same institution. I currently work on air quality models, climate policy, and decision making under uncertainty.
I have always been deeply interested in climate change. I focused my thesis and my research work on different aspects of this challenge. However, while the research work is vital, it is not enough to address the climate crisis. It is as much a political problem as it is a scientific one. That is why spreading awareness is so important. It is necessary to achieve serious climate goals through policies and individual actions. For this reason, I decided to try and do my part in informing about climate change."