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Europe’s drought is a problem for coal, nuclear, and hydro plants—but the economic impact goes way beyond energy

August 11, 2022, 11:04 AM UTC

Good morning. David Meyer here in Berlin, filling in for Alan.

Tomorrow, the Rhine river is expected to fall below the critical level of 40 centimeters (15.75 inches) at Kaub, to the west of Frankfurt.

That will make it effectively impassable to most barges, and those that can still traverse the chokepoint won’t be able to carry much—indeed, some vessels have already been forced to sail three-quarters empty in recent days (fully laden vessels require a depth of 1.5 meters at Kaub). This makes journeys expensive to the point of being uneconomical.

The immediate worry is about Germany’s deepening energy crunch—major coal-fired plants, which are currently needed owing to Russia’s natural-gas squeeze, will have to get their dirty black stuff via pricier road and rail. Uniper, the energy wholesaler that’s being bailed out by the government thanks to the gas crisis, warned last week of output cuts.

But there are many other effects, too, on agriculture (irrigation becomes virtually impossible) and industry (with raw materials becoming a problem, the chemicals giant BASF may soon have to curb production). Economists warned this week that the water crisis could knock as much as half a percentage point off German GDP.

And if you zoom out, this is far from just being a German problem.

Italy has declared a state of emergency around the Po river in the north, where the European drought has whacked hydroelectric power production and threatened supplies of the clams used in spaghetti alle vongole. The Po is at its lowest recorded level.

In France, authorities were this week forced to ease environmental rules around the temperature of discharged water from nuclear power stations, so they can keep running—the plants need to cool their systems using river water—and the agriculturally essential Loire has dried up in parts, following the hottest July on record.

Meanwhile, over in Hungary they’ve recorded their driest seven months in 120 years, and water management authorities at the overly warm Lake Velence have had to install water-circulating machines to keep fish oxygenated; in Germany “fish savers” are using electric dip nets to stun fish and move them somewhere cooler.

Josef Aschbacher, the head of the European Space Agency (ESA), has as good a view as any over the situation, thanks to the ESA’s constellation of Copernicus Sentinel observation satellites. They’ve recorded new extremes this year, and he told Reuters he’s deeply worried about the economic impact beyond immediate energy concerns.

“Today, we are very concerned about the energy crisis, and rightly so. But this crisis is very small compared to the impact of climate change, which is of a much bigger magnitude and really has to be tackled extremely fast,” Aschbacher said.

More news below.

David Meyer


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This edition of CEO Daily was edited by David Meyer.

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