Extreme temperatures have been affecting Europe since mid-June, leading to significant economic and human impacts. In Germany, autobahns are cracking, while France has seen hundreds hospitalized. Spain is dealing with deadly wildfires, Italy has issued red alerts, Switzerland has shut down a nuclear reactor, and Turkey has evacuated thousands.

Moody's Analytics provides context for the economic implications of these heatwaves. Currently, they cost the global economy about 1% of GDP. This figure aligns with the Climate Analytics methodology used by the Network for Greening the Financial System in their climate risk scenarios.

If no new actions are taken to transition away from fossil fuels, global temperatures could rise to 2°C above pre-industrial levels. This would increase heatwave costs from 1% of GDP today to approximately 3% by 2050.

Economic impacts occur through various channels:

- Changes in tourism patterns: Travelers cancel plans due to heat and wildfires, reducing revenue for hotels and businesses.

- Business disruptions: Economic activity declines due to store closures or reduced hours.

- Human health effects: Rising temperatures increase mortality and disease spread, impacting productivity.

- Labor force productivity: Heat stress lowers working speed and increases injury risks.

The NGFS-consistent estimates of economic cost—1% of GDP escalating to 3% by 2050—might be understated as indirect effects like reduced tourism visitation and lower labor force productivity are challenging to capture fully.

"Heatwaves cost the global economy roughly 1% of GDP at present time," according to Moody's Analytics climate risk analysis. "This impact channel could cost the U.S. economy an additional 0.6% of GDP by 2100 in a do-nothing scenario."

The NGFS methodology uses catastrophe modeling principles and grid-level data across temperature trajectories but primarily captures business disruption costs. Indirect effects might lead economic losses from heatwaves to exceed current estimates.