Productivity losses due to extreme heat
Global models project how heat can impact productivity and GDP, providing insight to the potential economic impacts of climate change.
Published
February 2024
Data Analyst, ICE Sustainable Finance
Much of the world experienced extremely high temperatures in the summer of 2023, and the month of July was the hottest month in recorded history. The global economic and financial consequences of this kind of extreme heat event are significant. The Atlantic Council estimates that the United States could lose as much as $100 billion a year from the effects of extreme heat on economic productivity.1
The economic effects of extreme heat vary significantly between countries. One study estimated that economic losses due to extreme heat events averaged 1.5% of gross domestic product (GDP) per capita per year for the world’s wealthiest regions, while low-income regions saw a loss of 6.7% of GDP per capita per year.2 Extreme heat reduces the number of safe working hours for outdoor workers and workers in under-ventilated or non air-conditioned indoor environments; it also limits individuals’ physical abilities and capacities. According to the International Labour Organization, temperatures above 24-26°C (75-79°F) are linked to reduced productivity for individual workers, and at higher temperatures (above 33-34°C, or 91-93°F), individual productivity can drop by as much as 50% in moderately physical jobs.3 As the intensity and frequency of extreme heat events increases, the effects of these increases on productivity could translate into significant productivity losses for countries around the globe.
ICE Sustainable Finance projections of change in productivity losses due to extreme heat under the SSP 5-8.5 emissions scenario from 2023 to 2100. Source: ICE Sustainable Finance as of 10/1/2023.
To estimate these future losses, ICE Sustainable Finance combines global Wet Bulb Globe Temperature (WBGT) model projections with information about the exposed working population in countries around the world under three different climate change scenarios: the International Panel on Climate Change’s Shared Socioeconomic Pathways 1-2.6 (the “Sustainability” pathway, with global emissions declining to net-zero by 2050), 3-7.0 (the “Regional Rivalry” pathway, with global emissions roughly doubling by 2100), and 5-8.5 (the “Fossil-fueled development” pathway, with global emissions roughly doubling by 2050). ICE Sustainable Finance’s productivity loss estimates incorporate information about the major industries within each country and the percentage of workers likely exposed to heat within each of those industries. For example, in agriculture and construction, close to 100% of the workers might be expected to be outdoors and doing intense physical work—work that would be heavily impacted by heat—whereas in commerce, a lower percentage of workers are directly exposed to heat in the outdoors and the average metabolic rate associated with the work is lower.
ICE Sustainable Finance then converts country-level productivity loss estimates (provided as percentages) into estimates of projected Gross Domestic Product loss (again percentages) by accounting for the relative contributions of each industry to GDP, as well as the adaptative capacities of certain industries.
ICE Sustainable Finance projections of change in GDP losses due to extreme heat under the SSP 5-8.5 emissions scenario from 2023 to 2100. Source: ICE Sustainable Finance as of 10/1/2023.
1 Extreme Heat: The Economic and Social Consequences for the United States. (2021). The Atlantic Council. ISBN-13: 978-1-61977-192-5 Link
2 Callahan, C & J Mankin (2022), Globally unequal effect of extreme heat on economic growth, Science Advances 8(43).
3 International Labour Organization. (2019) Working on a warmer planet: The impact of heat stress on labour productivity and decent work. Link