Triodos Bank’s report Hot Summer Economics highlights the substantial human and ecological costs, including heat-related deaths, pressure on healthcare systems and severe wildfire damage of this year’s exceptional heat and drought in Europe. Triodos Bank economists Hans Stegeman, Joeri de Wilde and Ernst Hobma quantify the economic impact of extreme heat in four areas: food and agriculture, energy production, transport and logistics, and labour productivity. Their conclusions:
- Extreme heat could reduce EU GDP by around 1% in 2026, equal to approximately EUR 180 billion in economic damage.
- Lower labour productivity is likely to have the largest economic impact, alongside disruptions to agriculture, energy and transport.
- France is expected to be hit hardest; economic growth in the Netherlands could be almost entirely erased.
- While adaptation can limit some damage, stronger climate mitigation remains essential to prevent even greater damage going forward.
A loss of labour productivity is the largest and most firmly established economic effect of this summer’s extreme heat. The economists estimate an average labour-productivity loss of around 0.6% of EU GDP. Agricultural losses (with EU agricultural output expected to fall by 3–7%) and higher food prices, constrained power generation and higher electricity prices, and disruption to roads, rail and inland waterways add to the damage.
France to be hit the hardest
The impact differs significantly by country. France could see GDP growth reduced by 1.4 percentage points, potentially resulting in a 0.6% contraction. Italy, Spain and to a lesser extent Belgium also face substantial losses. In the Netherlands, an estimated 0.8 percentage-point reduction in GDP-growth would leave the economy broadly stagnant, while Poland is less affected because it is estimated to experience fewer exceptionally hot days.
Adaptation is not enough
While adaptation measures such as better-insulated buildings, climate-resilient infrastructure, adjusted working hours and fairer access to cooling are clearly necessary, they can only limit part of the damage. Only strong mitigation can prevent further harm and reduce the costs of climate change. We therefore urge policymakers to combine rapid decarbonisation with demand-side policies that curb overall energy and material use, so we avoid a vicious circle in which climate damage slows growth and climate policy is then weakened in response.
“This summer shows that climate change is not a distant economic risk,” says Chief Economist Hans Stegeman. “The extreme heat we are experiencing today shows in very real terms how climate change affects people’s lives, workers and prosperity across Europe. This year, a loss of 1% of GDP would mean stagnation. That is a serious cost, though not a catastrophe. But this year’s extreme heat is only a foretaste of what lies ahead if we do not act quickly and decisively on climate change. The most effective way to reduce these costs is to limit climate change itself. That means changing how we live and reshaping our economies so that we use less energy and fewer resources.”
Read the full analysis by economicst Hans Stegeman, Joeri de Wilde and Ernst Hobma.