It's so hot in Phoenix that American Airlines Group Inc has had to cancel scores of flights. With temperatures touching 119 degrees Fahrenheit (48 degrees Celsius) in the Arizona city, some jets couldn't generate enough lift.
As a metaphor for the brake that climate change could put on global economic output and asset prices, grounded planes are hard to beat. The sweltering conditions, which have engulfed much of western Europe too, are probably just a taste of what’s to come as greenhouse gas emissions create more drought and heatwaves.
Cities have most cause to sweat. Because of the so-called urban heat island effect, their temperatures tend to be several degrees higher than surrounding rural areas, particularly at night as buildings and roads trap heat. 1 About 80 percent of global GDP is generated in cities and more than half the world’s population live in one, which is expected to reach two-thirds by 2050.
We’re about to find out what happens when you cram billions of people into urban areas and crank up the heat.
Economically, the most immediate problem could be worker productivity. Employees are more irritable and distracted when hot. See this video from Bloomberg's Climate Changed team. Gadfly's Max Nisen also wrote about the problem here.
Perhaps your office is air-conditioned but plenty aren’t in poorer countries. Many people work outside. This study found that productivity per workday drops 1.7 percent for each 1 degree Celsius in daily average temperatures above 15°C (59 degrees F).
Plus, heat can kill, particularly if it’s humid. Many died because of heatwaves in Chicago (1995) Paris (2003) and Moscow (2010). By the end of the century up to three-quarters of the world’s population could be exposed to deadly heat if emissions continue rising, a study found this week.
Older people suffer more, which is troubling when we’re living and working longer. There are other health impacts: hotter temperatures worsen air pollution, for example. London issued another emergency air alert this week.
For now, urbanization continues apace. But unless cities can mitigate rising temperatures—maybe through planting trees or using heat-reflective building materials—they could lose their appeal. "Rising temperatures or urban health risks may convince people to leave behind the economic opportunities that cities offer", analysts at HSBC argue.
This might affect asset values. In Florida homes worth hundreds of billions of dollars could be left underwater by the end of the century. But prices will probably start falling well before tides reach the doorsteps.
For now, populations (and property prices) are still swelling in places like Phoenix and Sydney, despite summers that feel like a furnace. But there are limits to human adaptability. Rising temperatures could eventually make parts of the Middle East and North Africa uninhabitable, some researchers fear, perhaps triggering an exodus.
Even in comparatively temperate London, about one-third of summer days are expected to exceed 32°C (90F) by the 2050s (with night-time temperature exceeding 18°C). People take account of air pollution when house-buying so it's plausible that heat could affect buying decisions too, particularly among the elderly.
As ever, there will be corporate winners from all this. Makers of building cooling systems such as Ingersoll-Rand PLC, United Technologies Corp and Johnson Controls International plc stand to profit. Siemens AG and other companies that make electricity grids more resilient during heatwaves should benefit too.
More important, scores of U.S. cities still plan to honor their emission targets, despite President Donald Trump pulling the U.S. out of the Paris climate agreement. That's in their self-interest, of course. Cities that mitigate climate change are less likely to depopulate, notes HSBC.
The heat is on, but there's still time for cities and business to do something about it.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.