Climate Change as an Economic Factor: The 2026 Heat Wave Costs Germany About 25 Billion EUR
El Niño is already casting a shadow: Adaptation and prevention are key to economic resilience
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Extreme weather events, such as heat waves, are increasingly causing significant economic costs. This is the conclusion of the latest joint study by Allianz and Allianz Trade. Published for the first time and set to appear annually, the “Allianz Climate Risk Tracker” uses two new indicators—the climate change Score and the Climate Stress Score—to analyze the extent to which the climate in individual countries has already changed and the current level of physical climate stress. In addition, the study calculates the specific economic losses resulting from the 2026 heat waves in Europe and the potential impacts of a strong El Niño on growth and inflation in 2027.
“Heat is a widely underestimated risk,” says Frank Sommerfeld, CEO of Allianz Versicherungs-AG. “It takes a toll on people, infrastructure, and the economy alike and exacerbates many existing hazards such as drought, wildfires, and extreme weather.”
The study shows that extreme weather, in particular, is increasingly becoming an economic test of resilience. Over the past five years, economic losses in Germany totaled approximately 50 billion EUR, which is, on average, nearly twice as high annually as in the years 2000 through 2019. This means that losses in Germany have risen significantly faster than on a global scale (+54%). Insured losses rose by 80% over the same period (worldwide: 76%) to just under 17 billion euros annually. This means that only 33.5% (worldwide: 32.8%) of economic losses were insured during this period.
“The Allianz study makes it clear: Germany is particularly hard hit by climate-related damage. To limit the risks, greenhouse gas emissions must be significantly reduced, and measures to adapt to increasing heat must be consistently advanced,” says Sommerfeld.
Heat Waves Cause the Second-Highest Absolute Economic Loss in Europe in Germany
Germany is currently not yet sufficiently prepared for heat waves in particular. Accordingly, the economic impact here is greater than in many other European countries.
“The heat waves of the summer of 2026 alone are expected to reduce German economic output by a total of around 25 billion euros,” says Milo Bogaerts, CEO of Allianz Trade in Germany, Austria, and Switzerland. This means that Germany has the second-highest absolute heat-related economic loss among the 30 European countries studied—behind Italy’s 28 billion euros—and ahead of France’s 20 billion euros. In total, the estimated losses in Europe amount to 113 billion euros.”
The losses stem primarily from heat-related declines in labor productivity, longer breaks and absenteeism, as well as limited access to cooling. This results in production shortfalls and lower value added, which in turn lead to declines in GDP.
El Niño Threatens to Be the Next Costly Stress Test in 2027
While Europe has weathered the heat waves of 2026, the next climate phenomenon is already looming: in 2027, further economic risks are expected due to a very strong El Niño.
“El Niño may be geographically farther away than a heat wave during the European summer—but in fact, the economic consequences are also felt in Europe, both in terms of economic output and through potentially rising food inflation,” says Bogaerts.
In one scenario based on the temperature effects of the strong 2023–2024 El Niño, the study calculates the impact on 144 economies:
“All in all, El Niño could cost the economies analyzed approximately 392 billion euros (451 billion U.S. dollars) in economic output by 2027,” says Hazem Krichene, senior climate economist at Allianz. “China, the U.S., and India would collectively bear nearly 60% of the gross losses.”
But Europe would not escape unscathed either: The 27 EU member states face a potential net loss in economic output of around 21 billion euros (24 billion U.S. dollars; 0.09% of GDP). Germany could lose around 5.5 billion euros (6.3 billion U.S. dollars in economic output; approx. 0.1% of GDP). At the same time, the German inflation rate could rise by 0.13 percentage points (pp), and food inflation by 0.21 pp. Across the EU, the estimated effects are +0.31 pp for overall inflation and +0.5 pp for food prices.
Temperature Ranking: Northern and Eastern Europe Are Warming Particularly Rapidly
“Economic damage caused by climate change is likely to continue in the coming years, as Northern and Eastern Europe in particular have risen sharply in the temperature rankings over the past decades,” says Krichene.
Among the focus countries analyzed, Norway will have the highest temperature increase in 2025 at +3.74°C compared to the historical reference period (1950–1970), ranking third globally. Switzerland, Sweden, Estonia, Finland, and Slovakia are also more than 2.6°C above their historical levels. Germany ranks in the upper middle range of the countries analyzed in terms of temperature change.
For the first time, the study examines two different dimensions of climate risk using the Climate Change Score (CCS) and the Climate Stress Score (CSS). While the CCS measures how much climatic conditions have changed compared to the period from 1950 to 1970, the CSS reflects the current stress caused by heat, drought, and heavy precipitation. The combined stress is particularly high in Nigeria, the Philippines, Malaysia, Brazil, Côte d’Ivoire, Morocco, and Turkey, among others. Germany ranks comparatively low on both indicators, placing 132nd on the Climate Change Score and 134th on the Climate Stress Score among the 175 countries and regions studied.
Extreme Weather: Germany in the Middle of the Pack Long-Term, Relatively Unscathed in 2025
The picture is also highly varied when it comes to direct economic damage caused by extreme weather. Small economies can lose a significant portion of their economic output due to a single disaster. In 2025, damages in Jamaica amounted to 39.4% of GDP, in South Sudan 5.2%, in Sri Lanka 4.1%, and in Thailand 2.9%.
Germany got off relatively lightly in 2025: The underlying database did not record any extreme weather events causing economic damage in Germany in 2025. By contrast, based on the long-term average since 2000, Germany records just under six extreme weather events annually, which cause an average of about 0.1% of GDP in damages each year. This places Germany in the middle of the pack internationally (137th out of a total of 227 countries).
“A calmer year like 2025 is a brief respite, but not a permanent all-clear,” says Krichene. “The heatwave of summer 2026 shows how quickly the tide can turn. It is therefore crucial to invest in adaptation and preparedness in a timely manner. Long-term prevention, forward-looking financing, and clear responsibilities make more economic sense than ever-increasing expenditures to repair damage that has already occurred.”
Prevention Beats Repair
An international comparison shows that countries with established early-warning systems, risk maps, forward-looking financing, and clear lines of responsibility are better prepared for climate risks than countries that primarily react after a disaster. For example, Morocco has been investing in early warning systems and risk mapping since 2016 with support from the World Bank. Europe is also stepping up its preparedness efforts, including through a 15 billion euro facility from the European Investment Bank (EIB) for water resilience from 2025 to 2027. Nevertheless, adaptation efforts remain patchy in many places. It is therefore crucial to shift from crisis management to prevention: investments made before a disaster strikes strengthen economic resilience and can limit future damage.
Note: This article has been translated using a computer system without human intervention. LUMITOS offers these automatic translations to present a wider range of current news. Since this article has been translated with automatic translation, it is possible that it contains errors in vocabulary, syntax or grammar. The original article in German can be found here.
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