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A Warmer World Will Dent the Productivity of Factories

December 1, 2017

As the mercury rises, industrial facilities will become less efficient. That’s the finding of a new study, which crunched data about production rates from half a million Chinese manufacturing plants from 1998 to 2007.

The research, published in the Journal of Environmental Economics and Management, suggests that factories across China will see their output fall 12 percent by the middle of the 21st century if they don’t adapt to climate change. That would be equivalent to a loss of $39.5 billion in 2007 dollars.

There would be two major effects at play. The first, which we’ve described in the past, is that humans are affected by extreme temperature. When it’s hot, they work less, and they are less productive when they do manage to work.

But the new analysis shows that both light industries, such as food manufacturing or timber processing, and heavy industries, like chemical refining or metal smelting, find their productivity dented by the heat. Because light industry is more reliant on humans and heavy industry is more reliant on equipment, that suggests high temperatures are taking a toll on the productivity of both labor and capital.

In other words, the machines themselves are less productive in the heat.

Perhaps even more intruiging, thought, is that high-tech industries, such as production of medical supplies or manufacturing of computer parts, appear to feel the same effects. “This is striking, as firms in high-technology industries tend to operate in air-conditioned environments,” the researchers write.

The findings are, of course, limited to China. But they are likely to apply to the rest of the world. Either way, the global economy is interconnected. As the authors point out, “any climate change damage to the Chinese manufacturing sector is likely to affect global prices and thus welfare around the world.”

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