Future heat stress to reduce people’s purchasing power

Abstract

With increasing carbon emissions rising temperatures are likely to impact our economies and societies profoundly. In particular, it has been shown that heat stress can strongly reduce labor productivity. The resulting economic perturbations can propagate along the global supply network. Here we show, using numerical simulations, that output losses due to heat stress alone are expected to increase by about 24% within the next 20 years, if no additional adaptation measures are taken. The subsequent market response with rising prices and supply shortages strongly reduces the consumers’ purchasing power in almost all countries including the US and Europe with particularly strong effects in India, Brazil, and Indonesia. As a consequence, the producing sectors in many regions temporarily benefit from higher selling prices while decreasing their production in quantity, whereas other countries suffer losses within their entire national economy. Our results stress that, even though climate shocks may stimulate economic activity in some regions and some sectors, their unpredictability exerts increasing pressure on people’s livelihood.