Climate change impacts and vulnerability in Europe 2016

Multi-sectoral vulnerability and risks
Box 6.2
National case study: climate change and labour productivity in Austria
Economic activity is exposed to climate change in several ways. The reduction of workers' productivity as a result of
higher outdoor temperatures and/or higher relative humidity and, therefore, a higher heat exposure is one of the core
direct impacts. The impacts of climate change on labour productivity in Austrian manufacturing and trade, as well as their
macro‐economic implications, have been projected in monetary terms up to the middle of the 21st century, drawing on
a range of socio-economic and climate scenarios, disaggregated by region, sector, occupation, outdoor/indoor work and
work intensity. The productivity losses of workers are estimated on the basis of a quantitative model using a relationship
between the Wet Bulb Globe Temperature index and the productivity of workers. The human capital approach (evaluation
by wage rates) and a GDP per employee approach were used for monetising the direct productivity losses.
Changing working conditions can have serious effects on the productivity of workers and thus on companies in specific
sectors. Depending on the future development of the climate and the degree of existing temperature control and future
adaptation, the damage caused can vary significantly. The direct climate impacts observed in the 'manufacturing' and 'trade'
sectors — under assumptions of no current or future adaptation — are found to be magnified three- to four-fold by the
associated macro-economic feedback effects, as the manufacturing and trade sectors supply intermediate inputs to a wide
variety of other sectors. For the mid-range climate scenario and a reference socio-economic development scenario (see
Table 6.5, results in bold), a decline in economic welfare of EUR 6 million per year is projected for the period 2016–2045 (and
EUR 54 million for 2036–2065). The high-range and low-range climate scenarios add and subtract, respectively, one standard
deviation in local temperature change, with the damage-enhancing and damage-diminishing socio-economic scenarios
acknowledging higher and lower growth, respectively, of the labour force. For the high-end combination scenario (high‐range
climate scenario and damage-enhancing socio-economic scenario), welfare losses amount to EUR 58 million for the period
2016–2045 (and EUR 296 million for 2036–2065). As declining demand also triggers price declines, the subsequent losses in
GDP are greater, namely about 1.5 times the welfare losses. By the middle of the century, losses will thus equal up to 0.6 %
of labour value added (aggregated across all sectors, with lower impacts in sectors such as pharmaceuticals or beverage
production, and significantly higher impacts in the production of food, plastics, metals and machinery). However, in practice,
the small fraction of these potential costs related to indoor temperature is unlikely to increase because of the current and
growing role of temperature regulation (autonomous adaptation) in trade and manufacturing, and this will be needed to
ensure quality and also meet occupational health standards. This fraction of the costs will therefore actually increase as a
result of additional cooling demand. Note, however, that this analysis refers only to the effects of productivity changes within
the manufacturing and trade sectors, and similar productivity changes could affect the remaining sectors of the economy, in
particular in relation to outdoor activities in the agriculture and construction sectors.
Table 6.5
Projected impacts of climate change on welfare and GDP owing to labour productivity
changes in the manufacturing and trade sectors
Changes in
million EUR per
year relative to
baseline
Welfare
(changes in
million EUR)
GDP
(changes in
million EUR)
Change in value
added (as % of
sectoral total)
Socioeconomic
scenarios
Climate
scenarios
Damagediminishing
scenario
2016–2045 2036–2065
Reference Damageenhancindiminishing
Damage-
Reference
scenario scenario
Damageenhancing
scenario
High – 58 – 296
Mid – 6 – 54
Low + 4 – 2
High – 95 – 485
Mid – 9 – 89
Low + 7 – 3
+ 0.01 % – 0.02 % – 0.2 % – 0.004 % – 0.1 % – 0.6 %
Note:
The table shows the average annual effects relative to baseline (i.e. reference socio-economic development scenario without
climate change). The impact as a percentage of the sectoral labour value added (gross including taxes) is the average across
sectors, without current or future autonomous or planned adaptation.
Source: Urban and Steininger, 2015.
286 Climate change, impacts and vulnerability in Europe 2016 | An indicator-based report