Closing factories and stopping agriculture: Droughts hurt world’s largest economies

Severe droughts in the world's largest economies, from the United States to Europe and China, are further complicating supply chains, increasing food and energy prices, and putting more pressure on the global trade and economic system.

Many cities in China are facing the longest sustained heatwave since 1961, according to the China National Climate Center. This has led to industrialization being halted due to a lack of hydroelectric power.

In the US, the drought that began two decades ago appears to be the worst in 1,200 years, according to a study by the University of California.

Droughts in Spain, Portugal, France, and Italy are set to be the worst in 500 years, according to Andrea Toreti, senior researcher at the European Commission's Joint Research Center.

The most recent United Nations Climate Science Report notes that global warming has increased the risk of drought in the Mediterranean region.

The United Nations says the number of droughts worldwide has risen by 29% since 2000 due to land degradation and climate change.

The drying up of rivers in Europe harms trade

In Europe, rivers such as the Rhine and Po in Italy that serve as arteries of trade are at historic lows, forcing manufacturers to halt shipments.

Lower river levels have also reduced hydroelectric generation across the continent. This has affected a major alternative source of natural gas, which is in less supply due to Russia reducing gas flows, according to Euro News.

Meanwhile, the heat forced France to cut production at many nuclear reactors because the river water that cools them is too warm, according to The Guardian.

Germany, the largest consumer of Russian gas in Europe, plans to burn more coal instead of gas to generate electricity. But low levels on the Rhine impede shipments, according to Reuters.

Water levels on the Rhine are critically low, causing huge traffic for essential cargo deliveries of coal and oil to Dutch ports, which could further worsen Europe's energy crisis, according to the Daily Mail.

The report said that the drop in water levels has dried up the earthen dams that protect low-lying areas in the Netherlands from the North Sea's access to reservoirs used for drinking and agriculture.

In a river between Poland and Germany, 5 tons of dead fish have been hauled out of the water due to the low water levels combined with toxic chemicals, according to CNN.

The Spanish olive oil yield is also expected to fall by up to a third amid hot and dry conditions, according to Euro News.

Sharp decline in the US

In the United States, a sharp decline in the water supply in Nevada and California has left large areas of farmland uncultivated this year, even though the area is home to the country's largest agricultural industry, according to NPR.

The Colorado River has fallen so dramatically that the US Bureau of Reclamation announced on August 16 a second consecutive annual shortfall. This has led to the second year of mandatory water cuts in both Arizona and Nevada, as well as Mexico, according to AP.

“Farmers expect to earn about 10% of their $3.4 billion annually industry,” said Wade Noble, general counsel for four irrigation districts in Yuma County, Arizona, which is a major producer of vegetables. He added, “The region's income is lower and buying and selling is declining.”

In the US, agricultural forecasters expect farmers to lose more than 40% of the cotton crop, according to Farm Policy News.

China's grain and energy crisis

In southwest China, Sichuan Province has been hardest hit by the reduced rainfall, as it relies heavily on hydroelectric power to generate electricity, according to CNBC.

Higher temperatures have also increased the demand for air conditioning, threatening to overload the power grid.

Water levels in some parts of the Yangtze River have fallen to their lowest levels, according to China's Ministry of Water Resources. The river is the longest in China and is a crucial source of hydropower, transportation, and water for crops.

In central, southern, and western China, authorities reported droughts in six provincial-level regions, which together accounted for a quarter of the country's grain production last year, according to NPR.

On Sunday, local authorities activated the top emergency response amid the energy supply crisis, and it extended order from last week to a number of factories to shut down or reduce production in order to leave electricity to residents until Thursday, when temperatures are scheduled to drop again, according to CNBC.

These restrictions imposed by China, though limited, have affected a number of global manufacturers such as Apple supplier Foxconn Technology Ltd., Volkswagen AG, and Toyota Motor Corp, according to CNN.

The report pointed out that Tesla, Inc. has asked the Shanghai government to help ensure its suppliers have an adequate supply of electricity amid the energy crisis. It said that 16 of them were not able to produce at full capacity.