The EU has warned of the growing risk of systemic financial shocks resulting from continental warming

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The EU is at “increasingly high” risk of systemic financial shocks from climate change, the head of the European Environment Agency has warned, as research showed the continent should prepare for temperatures at least 3°C ​​warmer warmer than pre-industrial times by 2050.

“This is a wake-up call for the financial and insurance sectors,” European Environment Agency executive director Leena Ylä-Mononen told the Financial Times.

“It’s not like we’re going to face a major financial shock tomorrow, but it’s accumulating,” he said. “If we start talking about big investments in general in our infrastructure or if we make bad choices in investing in the way we are building our society. . . the risks are becoming increasingly higher.”

Europe is the fastest warming continent in the world, with temperatures rising at around double the global rate. An increase in long-term global average temperature of 1.5°C compared to the pre-industrial era would correlate with 3°C across Europe.

The impact of this could be disastrous, according to an EEA report published on Monday, which warns that without “decisive action”, “hundreds of thousands of people would die from heatwaves and economic losses from floods alone costs could exceed 1 trillion euros per year”. ”.

Temperatures could rise by more than 7°C by 2100, the report says.

Extreme weather risks causing “a reduction in tax revenues, an increase in government spending, a lowering of credit ratings and an increase in the cost of borrowing,” he added.

In a draft response to the EEA report, seen by the Financial Times, the European Commission said it wanted to establish “minimum climate resilience requirements” for all spending under the next EU budget from 2027.

A committee would also be established to plan strategies for financing adaptation measures.

The Commission’s draft report, subject to change ahead of its publication on Tuesday, also warns of a “risk of conflict” between member states over water resources, a drop in productivity due to extreme heat and a rise in disease such as West Nile virus and dengue fever. , so far prevalent mainly in tropical regions.

“Strategic stocks” of treatments for these diseases will be assessed, the draft says.

Europe has already suffered extensive damage from extreme floods and forest fires in recent years.

The report estimates that heat waves in 2022 caused 70,000 deaths in Europe. Economically, the toll has also been high, as Slovenia recorded economic losses equivalent to 16% of its gross domestic product following floods in August last year, while fires followed by floods in Greece swept away 15% of the country’s annual agricultural yield.

The Northern Hemisphere has recorded its warmest winter, the EU’s Copernicus Earth observation agency said last week.

The global average temperature in February was 1.77°C above the pre-industrial average and marked the ninth consecutive month of record heat, the Copernicus Climate Change Service said.

The unusual winter warmth was particularly marked in central and eastern Europe, the agency noted. Thermometers in some parts of Eastern Europe reached more than 10°C at night and 20°C during the day. In southern Romania and northern Bulgaria, some temperatures last month deviated from normal by more than 14°C, the World Meteorological Organization said.

Ylä-Mononen said that if governments did not act they ran the risk of “huge lawsuits” brought by citizens, with southern European nations most at risk of devastation from extreme weather and bad harvests.

Six Portuguese teenagers are challenging 31 European countries at the European Court of Human Rights for failing to reduce emissions, arguing that the effects of climate change have damaged their quality of life.

Ronan Palmer, head of clean economy at the E3G think tank, said there was a “big message” for EU finance ministers who need to “think about a plan to keep the economy stable while tackling climate change.” But the EEA report “underestimated” impacts such as mass migration in Europe, he said.

“There are whole parts of the EU that are no longer as liveable for people as they were in the past and they will want to move further north and away from the coasts,” Palmer said. “We will have to be ready for people who want to move in.”

Ylä-Mononen said “there is still time to act. . . we are certainly not asking you to give up.”