Extreme weather events, particularly heatwaves, are multiplying globally, directly impacting key economic sectors. According to the Intergovernmental Panel on Climate Change (IPCC), mandated by the United Nations (UN), the frequency and duration of heatwave episodes have significantly increased since 1950, reaching a historical peak in 2024. Additionally, the International Energy Agency (IEA) highlights in its annual report that these phenomena exacerbate energy price volatility, further destabilizing international markets. In 2024, global carbon dioxide (CO₂) emissions reached an unprecedented level of 53 billion tons, reflecting increased use of fossil fuels.
Repercussions on the energy sector
In the energy sector, prolonged heatwaves trigger spikes in electricity consumption due to intensive use of air conditioning systems, causing overloads on national power grids. Concurrently, extended drought periods significantly reduce hydroelectric production, threatening energy stability in countries heavily reliant on this energy source. Nuclear power plants, essential for European electricity supply, also face operational constraints when high temperatures limit reactor cooling capacities. These disruptions can cause substantial financial losses for operators and destabilize local energy markets.
Extended economic consequences
The agricultural sector, particularly sensitive to climatic conditions, suffers direct economic losses due to declining yields and increased costs related to artificial irrigation. The UN estimates global agricultural losses could increase significantly by 2030, impacting food security and leading to rising prices for agricultural commodities on international markets. Meanwhile, the real estate sector faces increasing insurance costs and repair expenditures due to damage caused by frequent wildfires and floods. These additional expenses heavily impact national budgets, forcing governments to redirect significant portions of their investments toward crisis management.
Financial and regulatory approach
In response to these economic challenges, the IEA and several international financial institutions emphasize the need for markets to strengthen their adaptive capacities. This notably includes revising traditional economic models to systematically incorporate climate risks into financial analyses. Several central banks, such as the European Central Bank (ECB), are considering fully integrating climate risks into their financial risk assessment criteria, potentially influencing investment and borrowing strategies in international markets.
Experts concur that direct financial repercussions from extreme climate events will continue to grow, prompting businesses and financial institutions to revisit their risk evaluation approaches and economic models to maintain long-term resilience.
