Excessive heat negatively impacts worker productivity and economic output. This study quantifies the economic impact of heatwaves in Europe, using spatially resolved socioeconomic data and models. The frequency of days exceeding the 90th percentile temperature threshold (1970–2000 baseline) has doubled since 1960, largely due to human-induced climate change. Climate projections indicate more frequent and longer heatwaves in the 21st century. Previous research has examined economic implications of heat-related productivity losses, but often focused on average temperatures, not extreme heat events. This research uses a bottom-up interdisciplinary approach, integrating sector-specific heat-induced productivity losses into a regionalized general equilibrium economic model. The model uses hourly climate reanalysis data (ERA5-Land) and the Wet Bulb Globe Temperature (WBGT) index to assess heat stress. The study focuses on a high-emission scenario (RCP8.5) for the period 2035–2064, balancing foresight and uncertainty in climate projections.

Existing studies have explored the economic implications of heat-related labor productivity losses at various scales. However, these studies primarily focused on average temperatures rather than extreme heat events. Some research analyzed the effects of past heatwaves in Europe but didn't fully characterize the extent and duration of extreme heat episodes. Others studied projected climate change effects on labor productivity in specific regions (like Germany) or globally, considering average temperature conditions at workplaces. This study distinguishes itself by comprehensively analyzing present and future economic damages from reduced labor productivity due to extreme heat in Europe with unprecedented spatial, temporal, and sectoral detail.

The study used hourly climate reanalysis data (ERA5-Land) and the Wet Bulb Globe Temperature (WBGT) index to identify and quantify heatwaves in 274 European regions (primarily NUTS 2 regions). The TX90p criterion was used to define heatwaves, identifying events where the 90th percentile of maximum temperatures (1981–2010 baseline) was exceeded for at least three consecutive days. Researchers analyzed heatwave frequency, duration, spatial extent, and severity (using a Wet Bulb Degree-Day index). Sector-specific estimates of heat-induced productivity losses were integrated into a regionalized general equilibrium economic model, which quantified economy-wide effects, direct and indirect impacts, and mechanisms of impact propagation. For future projections, researchers used two climate model simulations (MPICSC-REMO2 and KNMI-RACMO) under the RCP8.5 scenario for 2035–2064. The sensitivity of findings was tested using different heat exposure functions (ISO, NIOSH, and Hothaps). Population data from UN WPP were used to weight productivity losses and account for seasonal economic activity. The CGE model used was calibrated on the GTAP 8 database, supplemented with regional economic data. The Armington assumption was used to model trade, with adjustments to account for the border effect. Historical GDP losses for 1981–2010 were calculated for comparison.

Heatwaves in 2003, 2010, 2015, and 2018 caused economic losses totaling 0.3–0.5% of European GDP, significantly more than average years (0.2%). Regional impacts varied greatly, with losses exceeding 1% in many regions, some over 2%. Southern European regions were consistently most affected due to higher heat exposure and a higher proportion of outdoor production. Direct heat impacts primarily affected outdoor sectors, but losses propagated through the economy due to intermediate goods and service sector interdependencies, while trade acted as a mitigating factor. Future projections under RCP8.5 show a steady increase in heatwave-induced GDP losses. Annual losses are projected to increase from 0.21% (1981–2010) to 0.77% (2035–2045), 0.96% (2045–2055), and over 1.14% (2055–2064), representing a fivefold increase. Southern European countries will be most impacted, with annual losses possibly reaching 3% by 2060. Indoor workers are projected to become more directly affected by heat, particularly in southern and central Europe. These findings are robust across climate models and emissions scenarios considered.

The findings highlight the significant and growing economic costs of heatwaves in Europe. Southern regions are especially vulnerable, demanding tailored adaptation strategies. The model's incorporation of intermediate goods and trade flows provides a more realistic representation of economic impacts than previous studies that focused solely on direct impacts in outdoor sectors. The projected increase in heatwave-induced losses underscores the urgency for mitigation and adaptation measures. The study's high spatial and temporal resolution allowed for a more nuanced understanding of regional vulnerabilities. The greater impact on outdoor workers highlights the need for sector-specific adaptation measures.

This study demonstrates substantial current and projected economic damage from heatwaves in Europe, with significant regional disparities. Southern Europe is particularly vulnerable. Projections suggest a drastic increase in economic losses by 2060 if mitigation and adaptation efforts are insufficient. Future research should incorporate heat-induced injuries, the urban heat island effect, improved adaptation measures, and more sophisticated sector-specific productivity functions. The methodology presented offers a valuable tool for assessing future occupational health and informing local-level adaptation policies.

The cost estimates represent a lower bound, excluding costs from heat-related injuries and public health expenses. The heat exposure functions relied on limited empirical studies. The model doesn't fully capture the diversity of workloads within subsectors or adaptation measures like widespread air conditioning. Future research needs improved regional-level data on occupational injuries, consideration of urban heat island effects, and more sophisticated heat exposure functions reflecting sub-sectoral variations and adaptation measures.