2023 Heat Record: Adapting With Heat Insurance, Subsidies, And Strategy

The recent announcement by the European Copernicus Institute, declaring 2023 as the hottest year on record so far, may have made headlines in newspapers, but not many might be truly alarmed by the news. The new piece of information might just as well find its place, sitting alongside all the horrific news we keep hearing about global warming.

However, what needs attention is the frequency with which these news items are appearing, prompting us to ask how we are preparing for a warmer future. PHILADELPHIA, PA AUGUST 4: Construction worker Felipe Campuzano pours water on his face to cool ... [+] off as he digs a sanitation pipe ditch during a heatwave on August 4, 2022 in Philadelphia, Pennsylvania.

(Photo by Mark Makela/Getty Images) Heat stress is expected to cost the world millions of dollars in losses, with a report released in November last year, contributed to by almost 150 scientists indicating that Africa's economic output will be impacted by as much as 4%. Developed countries will not be spared either.

In the United States, an estimate suggests that over more than 0.5% of economic output is at risk in 62% of counties due to heat, with states like Texas potentially losing 3 5% of their output,i.e., about $10 billion. Agriculture and construction are likely to be most impacted. It's not just humans that will be affected; the global value of beef production could decrease by 20% and dairy production by 7%, that is around $38 billion and $22 billion by the end of the century.

The costs of heat are calculated based on methods such as loss in work hours or sick leaves, hospitalization costs, cost to government to compensate workers, and loss of dairy or meat outputs. These costs naturally prompts one to wonder: How are we preparing for this costly affair of gradual increase in heat? Is there a need for a more robust global mechanism to understand how the world is preparing for a warmer planet? Heat Stress Products: From Subsidies To Insurance There are initiatives popping up across the globe to cope with heat.

These initiatives underscore the growing range of private and public strategies developed to adapt to heat stress, from subsidies to insurance for humans and cattle. While insurance for livestock, such as cattle to help small scale farmers' profits, seems logical, the other types of heat insurance schemes do raise the question of whether they are truly necessary.

In China, a heat stroke subsidy is provided during the hot months. A first of its kind when it started in 2012, the amount given out ranges from 240 Renminbi a month to 150 Renminbi across different provinces of China, i.e., between $30 to $40. Studies estimate that with the increasing number of hot days, this could be a big cost for the national budget.

In Japan, during the summer of 2022, insurance companies introduced one day insurance products for the first time, specifically designed to cover hospitalization fees for heat related illnesses. Following their introduction, there was a significant uptake in demand. The number of these policies issued increased a hundredfold within just three weeks.

One wonders, the usefulness of these insurances, and whether it could be more appropriate for employers to ensure safer and more comfortable working conditions during hot days? And as for subsidies, one cannot help but wonder how effective they really are in addressing the real problem. In India, there is a similar heat insurance initiative for self employed women as many as 21000 women enrolled.

That is more understandable as they do not have public health safety net. However, it will be interesting to see how many women have actually claimed this insurance. The trend of insurances is extending to the agriculture sector as well, particularly to cattle. insurance products specifically designed for livestock are beginning to emerge.

For instance, in the UK, last year, an insurance product for dairy farmers was initiated. Similar government run schemes for livestock have been operational in countries with high livestock populations, such as Kenya. Although less successfully so far. An earlier version of the scheme had to be remodeled to avoid losses.

Nonetheless, the above examples do make it evident that the market for heat stress products can be expected grow. Annual Climate Summit COP In The Hot Seat For Preparing The World For Heat Adaptation is a key term used in climate negotiations each year at United Nation's COP, the biggest climate summit held every year.

Heat, along with storms and droughts, is an integral part of adaptation. National Adaptation Plans are the mechanism through which countries communicate with each other about the steps they are taking to adapt to global warming. The United Nations asks countries to submit these adaption plans. While 65% of the world's countries—128 countries—have developed national adaptation plans , covering 61% of the global economy and 65% of the population, there is still a significant gap in terms of detailed strategies and timelines for implementation.

Surprisingly, the United States, that is also very vulnerable to heat, is yet to submit its first National Adaptation Plan to the United Nations. Last month at COP 28 in Dubai, the world was supposed to come out with global goals on adaptation —a useful north star for national adaption plans—but unfortunately, there was no consensus, and instead a framework to set the goal on adaptation was launched to carry forward the agenda for setting targets.

There are already views that it is still unclear how this will really be effective, since this discussion to have a global goal on adaptation has been in place since the Paris Agreement in 2015. We can only hope that perhaps, there will be some better mechanism to address the growing challenges of heat, especially in countries that face similar heat stress problems.

Given the rising costs of heat stress and the emergence of new market products that may or may not be useful, what could help is perhaps a systemic, coordinated approach to exchange lessons learnt. Only then can we start adapting effectively to a warmer world. Views are personal..