The ECB warns of the economic consequences of climate change. Tourism and agriculture in southern European and Mediterranean countries will see their productivity affected in the medium term. In an article in the ECB’s next economic bulletin, published this Wednesday, the monetary entity’s economist Miles Parker considers that doing nothing against climate change is worse for productivity and more expensive than the economic impact of the transition to a ion of net zero carbon emissions.
“The transition itself can reduce potential production especially in the short term. Well-conceived, well-communicated and well-coordinated policies can help alleviate these negative impacts,” Parker says in the article.
However, some countries backtrack on their environmental goals or commitments. The German Minister of the Economy, the Green Robert Habeck, is renouncing for the moment to support energy efficiency standards for newly built housing.
Previously, the German coalition government between Social Democrats, Greens and Liberals agreed on the EH40 energy savings standard, which was to come into force in 2025 and indicated that an efficient house requires only 40% of primary energy compared to a reference building.
British Prime Minister Rishi Sunak recently announced that he will reduce or delay some of his targets to reduce CO2 emissions in the coming years.
A survey of 5,733 European companies, 91% SMEs with less than 250 employees, carried out by the ECB, also published in the next bulletin, shows that 60% are more concerned about transition risks due to higher climate standards. stricter, to the regulation and price of carbon emissions than to physical risks, especially large companies.
Many companies consider environmental costs too high now because they do not internalize the benefits they will have if they tackle climate change, according to ECB economists.
Tourism and agriculture
Parker describes that “long-term changes in average temperatures and rainfall are likely to negatively affect certain sectors and regions in Europe.” He gives tourism as an example because warmer winters will reduce snow and the possibility of skiing.
“Many Mediterranean regions are now ideal for summer tourism, but higher average temperatures and reduced availability of fresh water during the high season would significantly reduce their sustainability,” according to the ECB economist.
The overall impact on tourism in southern Europe will depend on whether tourists shift their holiday dates to the spring and autumn months. Coastal regions in the Mediterranean are also at high risk of flooding from rising sea levels, which can reduce the value of tourism-related capital, such as hotels, and reduce investments in affected regions.
Climate change will also affect agriculture in southern Europe because crops will give lower yields, although in northern Europe yields may increase. The German insurer Allianz recommended in a report in July that southern Europe invest in sustainable tourism to preserve natural environments and cultural heritage.
For example, by improving transport and accommodation networks, promoting off-season tourism and diversifying the offer beyond beach holidays to attract tourists all year round. Tourism accounts for the majority of gross value added in Croatia (11.3%), Portugal (8.1%), Greece (7.7%), Spain (6.9%) and Italy (6.2%) , according to Allianz figures.
High temperatures and heat.
Additionally, higher temperatures reduce productivity and hours worked by workers. The temperature at which workers are most productive is between 19 and 22ºC and efficiency falls below or above this range, according to the ECB’s Parker.
Construction workers reduce their time worked on hot days. Heat not only affects physical work, it also harms mathematical ability.
Low-income countries or regions tend to have hotter climates and specialize in climate-exposed sectors such as agriculture and tourism, so “increasing global temperatures will exacerbate inequalities between countries and regions,” adds Parker.