Too hot to grow: The economic costs of extreme heat

• Extreme heat is emerging as a structural economic risk, with Europe highly exposed. • The economic transmission of heat stress is non-linear, with a critical threshold around 30°C beyond which productivity losses intensify sharply. • To gauge the macroeconomic stakes, we construct a stress scenario in which the five hottest years observed in each country between 2014 and 2024 are replayed in ascending order over 2026–2030 – the fifth-hottest year in 2026, the fourth in 2027 and so on, culminating in the country's hottest year on record in 2030. • The fiscal consequences fall most heavily...