{"text":[[{"start":8.96,"text":"With water levels at a historic low on the Rhine this sweltering summer, companies at Europe’s biggest and busiest port are paying part of the bill for the continent’s drought."}],[{"start":19.74,"text":"Cargo vessels carrying chemicals, oil and other goods to and from Rotterdam on the much-reduced river are being filled to only about 30 per cent capacity to lighten the load and prevent grounding. That means operators have to pay for about 100 extra barges a week and still cannot carry everything they transported before."}],[{"start":37.72,"text":"It is, says Lex Bezemer at the Port of Rotterdam Authority, “one of the most significant episodes we have experienced in recent decades”."}],[{"start":46.28,"text":"The port’s expensive workarounds represent only a fraction of the overall cost of a dry season that developed astonishingly quickly, implies big bills for agriculture, industry and even tech, and may be the forerunner of lasting changes in the way the continent carries out its business."}],[{"start":62.92,"text":"Massimo Tavoni, director of the Venice-based European Institute on Economics and the Environment, an independent research centre, warns that the drought is only a taste of what is to come as the world’s fastest-warming continent feels the impact of climate change."}],[{"start":77.08,"text":"“Droughts are dangerous. They are extreme events, but they are long lasting,” he says. “Europe is extremely exposed. It really is a hotspot for climate change.”"}],[{"start":87.32,"text":"June and July ranked as the hottest on record in western Europe, according to Copernicus Climate Change, the EU’s earth observation agency. The coming weeks are unlikely to provide much solace: little meaningful rainfall is forecast."}],[{"start":100.84,"text":"A large chunk of Europe is now living with critical soil moisture deficits and plunging river levels. At the Rhine’s shallowest point, in Kaub, Germany, they fell on Friday to the lowest point since records began, a “single-digit” level below which shipping may be unfeasible and the river split into two."}],[{"start":null,"text":""}],[{"start":117.88,"text":"Experts at institutions ranging from Zurich Insurance to Tavoni’s think-tank estimate this year’s flash drought is likely to deal a short-term economic blow to Europe of at least €50bn, which could rise significantly if the water shortages drag on. The total toll of this summer’s heat is likely to be much more — as high as €180bn, according to one bank."}],[{"start":141.04,"text":"This could also add to inflationary pressures, squeezing household disposable income and forcing central banks to keep interest rates higher for longer."}],[{"start":150.42,"text":"“The longer the drought lasts, the more the adverse impact builds,” says Oxford Economics’ chief Germany economist Oliver Rakau."}],[{"start":158.82,"text":"According to the European Drought Observatory, an EU research body, around half of the EU and UK are now under some level of drought. But the cost counting has barely begun."}],[{"start":169.62,"text":"French environment minister Monique Barbut said last week that this summer’s extreme conditions could cost France €10bn-€15bn. A drought in 2022 had resulted in €5.6bn of direct and indirect losses, she added, and while the full bill for this year will not be clear until the drought is over, “it will undoubtedly be much higher”."}],[{"start":191.86,"text":"The drought has also heightened concerns about whether Europe can support the rapid rollout of data centres, which many see as crucial for the continent’s economic growth but which rely on water for cooling, at a time when tens of millions of people across the continent are grappling with water restrictions."}],[{"start":null,"text":""}],[{"start":208.64,"text":"More than a third of Europe’s 3,000 data centres are in areas facing high or extremely high water stress, when the demand for water exceeds the available amount during a certain period, according to analysis by the World Resources Institute, an environmental think-tank."}],[{"start":224.54,"text":"“There is already intense competition for water resources in a normal year,” says WRI water security lead Liz Saccoccia. “During a drought year such as this one, that competition becomes more severe, increasing the risk of industrial disruptions, energy outages and agricultural losses.”"}],[{"start":225.04,"text":"A rapid shift"}],[{"start":241.64,"text":"When much of western Europe was hit by heavy rainfall at the start of this year, few expected that within months the region would suffer a severe drought. “The speed at which the 2026 drought transition is happening is most alarming,” says Balakrishnan Solaraju-Murali, a climate data specialist at Zurich Insurance."}],[{"start":260.44,"text":"In the past, if “reservoirs were full and soils were saturated by April, Europe was almost considered shielded against summer water shortages,” he says, but a wet winter is no longer enough to prevent a “summer disaster. Climate change has completely broken this framework.”"}],[{"start":277.46,"text":"As Europe bakes under the unrelenting summer sun, researchers are paying increasing attention to the economic fallout for the EU’s €18.8tn economy."}],[{"start":287.34,"text":"“Drought is a balance-sheet issue,” says Peter Bakker, president of the World Business Council for Sustainable Development, a CEO-led organisation of more than 230 global groups. He lists some of the economic activities it disrupts: “agriculture, energy generation, industrial production and vital transport routes”."}],[{"start":307.4,"text":"Already this year, nuclear power plants from France to Hungary have been forced to reduce operations because of a lack of water crucial for cooling, while hydropower has also been hit. This month, the Romanian military carried out controlled underwater explosions on the Danube riverbed, in an ultimately vain attempt to redirect vital cooling water towards the drought-threatened Cernavodă nuclear power plant. After the failure of those efforts, it began to shut down the plant last week."}],[{"start":null,"text":""}],[{"start":334.96,"text":"French energy provider EDF warned in July that it expected a 10 per cent fall in earnings this year, citing lower river levels and heatwaves affecting power generation as well as reduced market prices."}],[{"start":346.72,"text":"German chemical company Covestro declared force majeure for certain PET products and warned clients it might not meet delivery commitments from its plant in Dormagen due to low water levels on the Rhine. In the Netherlands, parts of some water channels have been closed to shipping traffic."}],[{"start":362.6,"text":"Low water levels on the Danube have already pushed up the cost of moving grain from central and eastern Europe to the Black Sea at a time when renewed escalation in the war between Russia and Ukraine has disrupted grain shipments through the region and increased pressure on alternative export routes."}],[{"start":378.12,"text":"Cezar Gheorghe, founder of Romanian grain consultancy AgriColumn, says the cost of moving grain by barge on the country’s stretch of the Danube to Constanța, its biggest port, has risen from about €11 a tonne before the harvest to €18-€20."}],[{"start":395.16,"text":"Around Vercelli in northern Italy, one of Europe’s most important rice-growing areas, Roberto Guerrini, rice farmer and president of the Vercelli-Biella branch of Coldiretti, Italy’s biggest farmers’ association, says some paddies have been left “completely dead, burnt, with the rice dried out” after irrigation water failed to reach them."}],[{"start":413.28,"text":"“I don’t remember an Italian summer with so little rain and such constant heat for two and a half months,” he says."}],[{"start":null,"text":""}],[{"start":419.64,"text":"Some farms in the broader Po Valley region are losing half or more of their production, Guerrini says, leaving many at risk of going out of business. Repeated shortages are also beginning to force farmers to consider replacing rice with other crops or leaving land unplanted rather than risk losing another harvest."}],[{"start":436.36,"text":"If the pattern of recent years persists, Guerrini warns, Italy’s rice-growing area could shrink substantially. “We really risk losing the identity of a territory,” he says."}],[{"start":446.24,"text":"Growth runs dry"}],[{"start":447.36,"text":"The sectors most immediately exposed to the lack of rainfall are agriculture and parts of industry. A recent European Central Bank working paper estimated average annual heat- and drought-related losses of real per capita value-added growth of 4.5 percentage points for agriculture in an extreme scenario, with the biggest impact concentrated in eastern Europe."}],[{"start":467.4,"text":"The more immediately consequential impact stems from the low levels on the Rhine, a key artery for German industry — the continent’s dominant economy."}],[{"start":475.76,"text":"Analysis by the Kiel Institute for the World Economy, a German think-tank, suggested that low water levels on the Rhine during a 2018 drought led to a 0.4 per cent decline in German GDP — equivalent to about €18bn today. The problem is that this time around, the drought is much earlier than that October dry spell and may last much longer."}],[{"start":496.22,"text":"The institute’s research shows that a month with 30 days of low water reduces inland water transportation by about a quarter and cuts German industrial production by about 1 per cent."}],[{"start":506.4,"text":"Water levels this year are already lower than in 2018, so the “impacts on trade could be similar [to that year] or maybe worse as supply shortages materialise,” says Marion Amiot, head of climate economics at S&P Global Ratings."}],[{"start":null,"text":""}],[{"start":520.1,"text":"Given the magnitude of the German economy, the Rhine shock alone will have implications for the whole of the euro area, according to Neil Shearing, chief economist at Capital Economics, who sees a temporary hit of between 0.1 and 0.2 per cent of Eurozone GDP."}],[{"start":537.8,"text":"Some of that activity should be made up later in the year or in early 2027 once the river returns to more navigable levels, he says, so he has not reduced full-year forecasts for the Eurozone — yet."}],[{"start":550.04,"text":"When other ways in which the drought is hitting economic activity are included, the bill for the dry season rises further still."}],[{"start":557.22,"text":"Given the sheer range of the sectors and countries affected by the drought, the estimate of at least a €50bn overall hit is “conservative”, according to researchers and economists including Murali at Zurich Insurance, Tavoni at the EIEE, and Ernst Hobma, economic researcher at the Netherlands’ Triodos Bank, which specialises in environmentally sustainable projects."}],[{"start":579.76,"text":"Murali thinks this year’s drought could “easily” be €50bn, adding “it could exceed such an estimate”."}],[{"start":585.6,"text":"Hobma, who has been researching the impact of this year’s intense summer, says that, although drought and heat are hard to untangle, water shortages could result in a 0.35 or 0.4 percentage point GDP loss for 2026 — or about €75bn — across the EU’s agriculture, transport and energy sectors."}],[{"start":606.96,"text":"The research, on which he has co-operated for Triodos, estimates that the total toll of summer’s extreme heat on food, energy, transport and labour productivity amounts to 1 per cent of EU GDP or €180bn. This includes non-drought effects such as wildfires, disruption to infrastructure and deaths caused by extreme heat."}],[{"start":628.62,"text":"Such factors represent a supply-side hit that will only add to the pressure on Europe’s economy as it struggles to recover from a succession of shocks including the energy surge after Russia’s 2022 full-scale invasion of Ukraine and this year’s Iran war."}],[{"start":null,"text":""}],[{"start":643.92,"text":"While agricultural losses have relatively little impact on headline GDP, lower harvests can push up food prices."}],[{"start":650.96,"text":"David Rees, head of global economics at asset manager Schroders, says drought could add to a wave of food price inflation likely next year, driven also by fertiliser shortages stemming from the Iran war and the El Niño weather phenomenon."}],[{"start":665.92,"text":"Higher food prices could help tip the balance towards interest rate rises by the European Central Bank, dragging down economic growth, he warns."}],[{"start":673.88,"text":"The cost of drought could also rise long-term."}],[{"start":676.76,"text":"A new analysis by FAIRR, an investor network focused on risks in the food sector, estimates that chronic water stress is already imposing $6.4bn of hidden annual costs on 18 of the world’s largest listed livestock companies through items such as the rising price of feed and alternative water supplies. This could rise to $7.1bn by 2050."}],[{"start":698.88,"text":"“Water is very expensive,” said Henry Throp, research manager for climate at FAIRR. “You just don’t see it on the balance sheet in the way you’re expecting.”"}],[{"start":708.72,"text":"Getting ready for the future"}],[{"start":710.6,"text":"As businesses struggle with the effects of the drought, one big question is when it will end. With soil so dry, intense rainfall could bring additional risks, leading to flash flooding and adding further costs. A prolonged drought would hit businesses even harder."}],[{"start":725.96,"text":"The European Commission warned on Wednesday that forecasts point to more warm weather throughout August and into September, while El Niño could bring “warmer-than-normal conditions” in the run-up to next spring."}],[{"start":737.44,"text":"With climate change making ever more of a mark, Bakker at the World Business Council for Sustainable Development calls for companies to prepare better for drought."}],[{"start":745.92,"text":"Only about 15 per cent of EU businesses have completed formal “adaptation plans” even though 42 per cent said they had experienced increased climate-related costs over the past year, according to WBCSD research."}],[{"start":759.08,"text":"This summer the phenomenon has become still more marked. Terms related to extreme heat, drought and wildfires have been mentioned in a record one in 10 earnings calls in recent weeks for European companies with more than $1bn in market value, according to data from AlphaSense."}],[{"start":774.32,"text":"Paul Munday, global climate adaptation and resilience lead at S&P, argues that over the coming years, adaptation spending in Europe is likely to increase, with companies that provide “resilience solutions”, such as water-efficiency technologies, early-warning systems or drought-resistant crops, benefiting."}],[{"start":793.8,"text":"“The key point is that [drought] is increasingly being treated not as a one-off disruption, but as part of a new operating reality for companies in Europe,” agrees Geoff Townsend, an industry fellow at Ecolab, a water treatment and chemicals company."}],[{"start":809.48,"text":"Some businesses are already taking action. After the waters of the Rhine receded in 2018, BASF doubled the number of its “low-water-capable vessels” and rolled out an early-warning system to provide notice up to six weeks in advance, alongside the Federal Institute of Hydrology."}],[{"start":null,"text":""}],[{"start":826.44,"text":"France’s EDF is seeking to become more water efficient. At its Lacourt hydroelectric plant in southern France, a new turbine can generate power with river flows of just 3.5 cubic metres a second, compared with 6.5 cubic metres for the plant’s older units."}],[{"start":842.72,"text":"Grain and oilseed farmers across Europe are harvesting in the small hours to take advantage of the slight overnight dew, allowing their crops to meet minimum moisture content thresholds and to reduce the risk of the machinery igniting the parched fields."}],[{"start":855.84,"text":"Data centre operators are increasingly designing facilities around water scarcity, says Michael Winterson, secretary-general of the European Data Centre Association."}],[{"start":865.68,"text":"Around a third of installed European data-centre capacity now uses non-water-based cooling, he says, while closed-loop systems — which reuse water rather than discharging it — are becoming increasingly common in southern Europe."}],[{"start":877.8,"text":"“I don’t believe water scarcity will put the brakes on data centres. I believe water scarcity will force us and regulators and society to look at how we design and operate data centres in Europe,” Winterson says. “This summer is a clarion call.”"}],[{"start":893.24,"text":"Back in Rotterdam, the port authority is closely monitoring weather conditions and working on how to ensure goods keep moving across Europe. It says more work is being put into building “strong connections between inland shipping, rail and road transport”."}],[{"start":907.32,"text":"The challenge facing Europe is for such efforts to outpace the spreading droughts — of this and future years."}],[{"start":913.24,"text":"Vercelli’s rice growers are calling for state help to build reservoirs to capture autumn and spring rainfall. “But this should have been done 30 years ago,” said Guerrini of the farmers’ association. “This work wasn’t done, and now we are paying the consequences.”"}],[{"start":929.08,"text":"Additional reporting by Olaf Storbeck"}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":931.92,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787540191_3632.mp3"}