Climate Change Is Costly For Manufacturing, Study Says

It’s no secret that climate change has disastrous consequences for coastal real estate and drought-stricken farmland, but the rise in global temperatures harbors potentially serious implications for a sector thrust into political focus in recent decades: manufacturing.

In a new study examining the impact of hotter weather on half a million Chinese manufacturers over the decade spanning 1998 to 2007, researchers found that an extra day of extreme heat, defined as exhibiting temperatures above 90 degrees Fahrenheit, leads to roughly half a percentage point drop in output, or nearly $10,000 for the average firm, in 2017 dollars.

That may seem miniscule, but that’s just one firm, and one day. In aggregate, the study authors note, rising temperatures could cost the global market for manufacturing products billions by the middle of the 21st century. In China — which became the world’s largest manufacturing nation, a title long held by the U.S., in 2010 — an annual one-degree shift in temperatures would lower the country’s manufacturing sector’s gross domestic product by close to a full percentage point, the study estimated.

Given China’s position as “essentially the factory of the world,” with its manufacturing products constituting 12 percent of global exports, there are sure to be ripple effects in the form of higher prices for products purchased by the U.S. and other nations, said Kyle Meng, an assistant professor at the University of California at Santa Barbara and one of the study’s authors. More specifically, the $47 billion loss ( in 2017 dollars ) to Chinese manufacturers’ output as a result of climate change projected by the study could lead those firms to raise their prices to compensate.

“We all know China is the world’s biggest emitter” of carbon dioxide, Meng said. “Our hope is that this would potentially lead to greater urgency on the part of both businesses in China and the government in China to greatly reduce their emissions.”

However disastrous for manufacturers on average, a temperature increase wouldn’t damage the productivity of all industries under that umbrella in equal measure, the authors noted.

Meng said he and his fellow researchers — from the Hong Kong Polytechnic University, Duke Kunshan University in China’s Jiangsu province and his own department at UCSB — had expected that higher-technology sectors, those least likely to involve laborers working outside, would see little impact. But, to their surprise, the effects of hotter weather were evenly spread between high- and low-technology producers, as well as between those relying predominantly on labor and those relying predominantly on capital, such as machinery and other equipment.

But certain industries, such as coal and iron mining, fared far better than others; in fact, those sectors saw slight increases in production, though those increases both amounted to less than 7 percent by mid-century. For plastics, textiles, and nonmetal mining, however, the results were more worrisome, with output declining by close to 20 percent roughly over the same period. For rubber and timber industries, production was projected to fall by roughly a quarter. The drop in output from China’s textile industry, in light of its sheer size, would prove most costly, with a $4.3 billion loss by the middle of the 21st century as a result of climate change.

While China ratified the Paris Climate agreement, a landmark accord of nearly 200 parties working to avoid a rise in global temperatures of two degrees Celcius, in September, President Donald Trump, a vocal supporter of American manufacturing on the campaign trail, announced in June that the U.S. would withdraw.

Whatever the impact of rising temperatures on manufacturers, the private sector appeared to foresee the costs. The chief executive of Dow Chemical Co., which lobbied Congress and the Environmental Protection Agency on the Climate Accord during the second quarter of 2017, publicly bashed Trump in the wake of the decision. The CEO of manufacturing behemoth Unilever Inc., which explicitly advocated for its “support for climate change & Paris Climate Agreement,” according to federal lobbying forms, said the “enormous outcry” over the decision was likely pushing companies to reduce their carbon footprints by innovating their technologies with a new sense of urgency.