13.2.4.1. Energy

Increasing temperatures will have a direct impact on energy use, especially in the domestic sector, as Palutikof et al. (1997) note for the unusually warm year of 1995 in the UK. The main effects of climate variability are on markets for space-heating fuels and on the amount of electricity used for air conditioning and refrigeration. Air conditioning has become universal in new office buildings, and there is a strong likelihood that it may spread to new markets such as houses and flats in future years. The relationship between climate change and the “take up” of new air conditioning installations is largely unknown, especially in areas where the practice currently is not widely used.

Requirements for heating and cooling can be estimated from the change in the number of heating and cooling degree days per year. In general, we can expect increased temperatures in Europe to lead to an increase in space cooling and a decrease in space heating requirements (Climate Change Impacts Review Group, 1991, 1996). Very mild winters in the EU, such as those experienced between 1988 and 1990, resulted in a 2% drop of energy demand. Milbank (1989) estimates that for northern Europe, a 4.5°C temperature rise would more than double summer electricity consumption by air conditioning and refrigeration systems.

13.2.4.2. Insurance

The insurance industry in Europe has an annual turnover of 600 billion EUR, with assets of 4,000 billion EUR. The common view is that the sectors that are most germane to climate change impacts and adaptation are property insurance and reinsurance. There will be lesser effects on other branches, such as casualty, life, and pensions, and the industry also could be affected in its investment activities by shifts in the economics of other industries that are impacted by mitigation policies (Dlugolecki and Berz, 2000). Essentially, the insurance industry “recycles” other sectors’ monetary risks, thereby focusing information on such impacts. However, there is a wide variety of insurance systems in place in Europe, so international comparisons or extrapolations are difficult. In addition, many economic risks are not handled through insurance currently—for example, standing crops, flood damage, and “pure” economic losses where no physical damage has occurred. Weather affects insurers through the medium of property damage caused by a variety of extreme events; storm, flood, freeze, drought, and hail are the prime ones (Dlugolecki and Berz, 2000).

In early 1990, a series of storms in northwest Europe resulted in insured damage of 10 billion EUR. Despite the use of reinsurance, much of this risk remains within the European insurance industry. The risk will continue to rise because of pressure from economic growth and economic wealth. The industry’s assets are sufficiently large to cope with purely European climate change impacts. The industry’s main vulnerability is likely to arise outside Europe, from events such as hurricanes, earthquakes, or a global stock-market collapse. Human health impacts will be minimal for insurers as employers or suppliers.

This analysis assumes that there will be no major change in the scope of insurance services to include impacts that currently are not insured, such as standing crops, flood (in many countries), and pure economic losses. Establishment of the common market will help to reduce national differences in insurance services, but only slowly.

13.2.4.3. Industry and Transport

A sophisticated transport system has evolved in Europe to move people and goods. Efficient, rapid, reliable, and dependable transport is an essential part of the continent’s infrastructure, and disruptions and dislocations to transport systems have a rapid impact on most industrial and commercial activities. Air transport probably is the most sensitive sector to weather and climate change and rail transport the most tolerant. In manufacturing and retailing, “just-in-time” distribution systems are quickly disrupted by adverse weather conditions. Changes in consumer demand for many products, which influence indices of retail sales (Agnew and Thornes, 1995), are likely to accompany climate change.

Significant changes in the frequency of short-term climatic extremes such as windstorms impact transportation (Perry and Symons, 1994). The impact of wind and windstorms includes the effect on land-based terminals such as seaports and airports, as well as in-transit delays and damage to the means of transport itself. Instances of wind shear associated with summer thunderstorms, which pose a hazard to aircraft during takeoff and landing, could become more common in Europe. Increases in rainfall and increasing frequency of temperature oscillating around the freezing point can be expected to lead to higher levels of corrosion of transport infrastructures. Flooding in rivers and low water levels lead to interruptions of river navigation.

Coastal transport infrastructure can be damaged by a combination of sea-level rise and increased storminess. In many countries, a significant percentage of manufacturing industry is located along coastlines and estuaries and may require expensive coastal protection schemes. Transport infrastructure in river valleys also may be damaged or destroyed during floods. There are management implications for winter maintenance activities on roads and railways. Savings may be possible, especially in western Europe as winter temperatures rise, but more freeze-thaw activity is expected in CEE as winter minimum temperatures oscillate around the freezing point. Analysis of the levels of saving that can be expected in different areas are required, together with cost-benefit studies to examine whether further investment in comprehensive ice-detection systems can be justified.

Comprehensive studies of the likely impacts of climate change on transport are in their infancy in many countries. Broad-scale assessments are needed of likely climate-induced demands for transport as lifestyles and residential and migration patterns change. The evidence that currently is available (summarized in the Europe ACACIA report), suggests that fewer severe winters would be beneficial to the manufacturing industry, reducing disruption at all stages from the supply of raw materials through processing to marketing of finished goods. However, an increase in the frequency of hot summers could disrupt some industrial processes that use large quantities of water. There may be some absolute limiting factors in some countries, such as lack of water for power stations, that can be overcome only through massive capital investment or new technology (Perry, 2000).

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