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Climate change affects the German economy

Climate change affects the German economy

Originally published: TruePublica (September 17, 2019)   | 

In 2018, one of the longest dry spells on record left part of the Rhine in Germany at record low levels for months, forcing freighters to reduce their cargo or stop using the river altogether. Some inland ports lay idle and it is estimated that millions of tons of goods had to be transported by rail or road, raising costs significantly–twice or three times as much by rail and around five times as much by road, according to Handelsblatt Today.

The Rhine is vitally important to life and commerce in the region. Roughly 80% of the 223 million tons of cargo transported by ship in Germany each year travels the Rhine, which links the country’s industrial heartland to Belgium, the Netherlands and the North Sea. Parts of the Danube and the Elbe–Germany’s other major rivers–were also drying up.

The slump in the river’s water levels dented Germany’s economic growth by 0.4% in the final quarter of 2018 and by 0.3% in the preceding three months, according to estimates from JPMorgan economist Greg Fuzesi in January. Fuzesi said at the time he anticipated a 0.55% contribution to GDP in the first quarter of this year as the river’s water levels normalize. At least 0.7 percentage points had been shaved off economic growth last year, adding to a series of shocks that almost tipped the nation into a recession.

Problems included:

  • Ships carrying the large and heavy components of a wind farm could no longer reach Kubler’s Mannheim terminal.
  • Because they cannot be carried on rail, or for more than a couple of miles on roads, Kübler’s storage area at its terminal lay empty.
  • This stopped the building of the wind farm.
  • A trade group in Germany put farmers’ losses at several billion dollars.
  • The German chemical giant BASF had to decrease production at one of its plants because the Rhine, whose water it uses to cool production, was too low.
  • Gas stations in the region that relied on tankers to deliver from refineries in the Netherlands ran out of fuel.
  • About half of Germany’s river ferries stopped running, according to the Federal Waterways and Shipping Administration
  • River cruise ships had to transport their passengers by bus for parts of their journey.
  • Thousands of fish in the Swiss section of the river died because of the heat and low oxygen levels.
  • In November, natural gas prices increased 13% throughout Europe as coal barges could not reach coal-powered plants.
  • The world’s largest chemical company BASF, which operates the world’s largest integrated chemical plant on the western bank of the Rhine, said the overall cost of 2018 dry season was $285 million.
  • Steelmaker ThyssenKrupp could not receive raw materials to one of its mills in Duisburg, forcing the company to delay its shipments to customers including automotive giant Volkswagen.
  • Contargo, which usually moves approximately 50,000 containers a month on around 40 barges, was forced to reduce its operations to three barges. Its statement noted the situation had become so extreme that barges could no longer navigate the Middle Rhine without danger.
  • Tourism was among the hardest-hit sectors since the river is frequently used by boats cruising up and down the Rhine to visit castles, vineyards and other sights.

In January and February this year, Rhine barge operators introduced a low water surcharge on exports and imports, as–we noted–did Montreal shipping companies, when, due to the lower water level of the St Lawrence river, ships had a limited loading capacity and fewer containers could be loaded on board,.

Bloomberg reported that water levels at many Rhineland locations were now back to normal for the time of year and barges that handle hundreds of fuel shipments up and down the river each year were able to reach all destinations fully loaded—something they had not been able to do for months, according to Rotterdam-based broker Riverlake Barging.

BASF’s CEO Martin Brudermueller is calling for new locks and dams to be built to keep the river navigable in dry season. The shipping lane could be made deeper, but that would take years, if not decades, and would cost millions.

“Our research shows an increase in instability,” said Hagen Koch, who studies rivers at the Potsdam Institute for Climate Impact Research. “The extremes are going to happen more often.” The Rhine’s flow relies not just on annual rainfall, but also on enormous long-term reserves of water in the Alps. Melting snow and glaciers, as well as Lake Constance, feed the upper parts of the river, but with climate change, those reserves are lower. There are reasons to believe such weather will become more frequent with a warming climate.

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