Policymakers and economists have long treated climate change as a crisis whose costs would mainly accrue to future generations. Unfortunately, that future is here. As the world frets over the consequences of the Iran war on everything from the cost of goods to the food supply, a separate phenomenon is also choking maritime traffic—and will continue to snarl supply chains long after the Strait of Hormuz reopens.
Water levels in Germany’s Rhine River—one of Europe’s busiest shipping routes—have been at record lows amid weeks of drought, forcing cargo carriers to cut shipments to as little as one-fifth of normal capacity. Those problems didn’t start this summer, either. Rising temperatures caused by climate change have meant less snow in the Alps during the winter, and so less meltwater draining into the Rhine in warmer months. ING, the Dutch banking giant, estimates that the halt of traffic on the Rhine will lower Germany’s GDP by 0.3 percentage points this year, which is especially bad news considering the country was on track to grow by just 0.8 percentage points all year. German insurer Allianz likewise estimates that the brutal two-week heatwave in June will cut all of Europe’s GDP by 0.3 percentage points. In May, Allianz analysts had already projected that the countries most exposed to extreme heat—France, Japan, Italy, Germany, and Spain—will see economic output that’s 5 to 7 percent lower than it would have been otherwise by 2030.
It’s not just Europe. The cost of shipping goods through the busiest lanes in the Panama Canal have jumped to record highs amid falling water levels and increased traffic from vessels redirected from routes disrupted by the Iran war. The Financial Times reports that transit slots on the canal’s most commonly used locks are being auctioned off for 16 times the average price for the same period last year. The ongoing El Niño—on track to be the strongest such event in 76 years—has seen wet season rainfalls slip below previous levels. Climate change has already made rainfall there much less predictable, meaning extreme droughts and floods both threaten to “push canal infrastructure past its operational limits,” The New York Times reported.
Influential environmental economists, including Nobel Prize winner William Nordhaus, have argued that spending heavily to respond to climate change in the present risks dinging economic growth down the line. The theory holds that by taking a more gradual approach—forgoing massive investments in adaptation and decarbonization, and continuing to reap the economic benefits of the fossil fuel economy for a while—continued robust growth will make our future selves rich enough to respond to climate change more easily (read: more cheaply) than we can today.
The problem is that our poorer, present selves are now paying for the ballooning costs of climate change in all sorts of nightmarish ways. Direct hits like hurricanes and wildfires dole out damages all at once, destroying homes, businesses, and infrastructure. Governments pay for emergency response, then to clean up damages and rebuild. Insurance companies pay out to policyholders, and then raise rates in ways that strain household budgets, making federally backed mortgages harder to get and pushing up rents as landlords pass those rising costs onto tenants. If major insurance companies opt not to offer coverage to riskier markets, as in Florida, states step in to create their own insurers of last resort and open the market up to smaller, sometimes sketchier firms that threaten to leave policyholders to foot the bill when disaster strikes again. Heat waves drain labor productivity and droughts push down agricultural yields as farmers harvest crops later. Wars, like Trump’s misadventure in Iran, exacerbate these costs in the Panama Canal and elsewhere; growers are paying more for fertilizers, or losing access to them, because maritime traffic has ground to a halt in the contested Strait of Hormuz.
Record-low water levels in the Danube have forced nuclear plants in Hungary and Romania to cut output and shut down without the river water needed to cool down reactors. Hungary’s MBH Bank reported a 0.1 percentage point hit to GDP for every week the country’s largest nuclear generator is offline. In France, three nuclear reactors were taken offline earlier this month as jellyfish—whose populations have been buoyed by warming waters, overfishing and plastic pollution—swarmed the seawater pumping stations used to cool them.
The models that experts use to assess the costs of climate change also have a tendency to understate risks and leave out things now proving to be extraordinarily costly. A study in Nature last year, Heatmap’s Robinson Meyer noted recently, found that “climate-driven smoke deaths” resulted in economic damages that “exceed existing estimates of climate-driven damages from all other causes combined in the U.S.A.”
It’d be unfair, of course, to blame governments’ failure to prepare for this moment on a handful of overly sanguine economic modelers; although their more prescient colleagues deserve credit for assessing climate risks more accurately, precious few economists have even bothered to consider the effects of rising temperatures. Climate change is a genuinely thorny problem to tackle given that our world still runs on the substances driving it, on fossil fuels in particular. In America, that fact has been ably exploited by Big Energy companies and the Republican politicians they fund, who’ve gone to great lengths to deny the problem and stop governments at every level from doing anything about it. Among the many hellish results of those efforts is that policymakers are essentially flying blind into a world that’s becoming increasingly expensive, and quite literally unnavigable.
