This is the third in a series of the opportunities and threats to productivity. This week, I address the issue of climate change (also see AI Productivity and the Promised Land and Will America get old before it becomes Great Again?).
The World Health Organization recently issued a joint report with the World Meteorological Organization that quantified the effects of extreme heat on productivity. It warned that “Extreme heat is fast becoming one of the biggest threats to workers’ health and livelihoods…worker productivity drops by 2 to 3 per cent for every degree above 20°C (68°F). The health consequences are wide-ranging, including heatstroke, dehydration, kidney dysfunction and neurological disorders. Overall, nearly half of the world’s population is now experiencing negative effects from high temperatures.”
The Network for Greening the Financial System (NGFS) issued a report that modeled different scenarios of climate change and mitigation policies on global GDP growth. I would make two points about these projections. Investors should approach GDP and productivity forecasts with some humility. Models of temperature change and GDP growth vary wildly, but the general direction of change is down. The higher the temperature, the more growth slows, which equates to a hit to productivity. As well, even though the NGFS report is used by many central banks for scenario planning, the Net Zero in 2050 scenario is totally unrealistic from a practical perspective in light of the voracious power consumption appetite of AI data centres.
The full post can be found here.
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