Could climate change dent productivity?
There are obvious arguments to stem climate change from a moral and sustainable perspective – but is there one from an economic perspective too? The recent heat wave in Phoenix, Arizona has seen temperatures soar to as high as 48 degrees Celsius, so hot that American Airlines has cancelled a large proportion of its flights to and from the city. The company didn’t do this in reaction to passenger comfort – it was a reflection that many of their jets simply couldn’t generate enough lift in these conditions.
If ever a clearer indication was needed that it will be more than our crops that fail due to global warming, it is this: past a certain point in temperature, humanity just struggles to function. America isn’t the only major power to suffer in the heat – Europe has been gripped by an incredible heat wave, passing the TUC’s suggested point (30 degrees Celsius) in many countries at which workers are obliged to turn up. Since we are probably just beginning our journey into a hotter climate, this has serious implications for business in the near future.
Amongst the biggest threat to productivity is the correlation between where we are most productive, and where temperatures are rising fastest. Cities generate about 80% of the world’s GDP and house half of the world’s population. They are also more susceptible to rising temperatures due to the “urban heat island” effect: in brief, the propensity of roads and buildings to soak up heat and retain it overnight.
Worker productivity is an immediate threat in cities. In Australia, mandatory breaks of 20 minutes per hour are required for each worker once the temperature reaches 35 degrees Celsius. Were Europe and America to follow suit, global labour would be dramatically decreased. Beyond these and similar laws, the stark reality is that people are just less productive generally when they overheat – and if they overheat enough, death is a very real risk. Chicago (1995), Paris (2003), and Moscow (2010) have all seen multiple deaths due to heat waves.
As the trend towards urbanization continues apace – by 2050, two thirds of people are predicted to live in cities – and global temperatures continue to rise, it is becoming painfully clear that we will need to find solutions for a great many problems: economic and business-related amongst them.
Dominion holds a number of companies that are engaged in the mission to address climate change in its Global Trends Managed Fund.
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