Climate change could reduce household incomes, deepen inequality, and push millions more people in Europe into poverty, according to a study from Climate Analytics.
Combined heatwave and drought events already reduce average household incomes by nearly 3 percent across Europe, with some regions experiencing much larger losses. If global warming reaches 2.7°C by 2100, consistent with current global climate policies, average European household incomes could decline by 27 percent. In contrast, limiting warming to 1.5°C, the target set under the Paris Agreement, would reduce the income loss to 7 percent.
The research, published in Global Environmental Change as part of the ACCREU project, analyzed climate and economic data from 2004 to 2022. It found that heatwaves and droughts together cause significantly greater economic damage than either event alone. On average, heatwaves reduce household incomes by 0.7 percent, while droughts lower incomes by 1.8 percent. When these events occur simultaneously, particularly in drought-prone areas, average household income losses rise to nearly 3 percent.
The study – prepared by Jessie Schleypen — attributes losses to worsening health conditions, lower labor productivity, reduced agricultural output, and disruptions to critical water-dependent services such as transportation and energy generation.
Poorest Europeans Face Greatest Economic Risks
Climate Analytics found that the economic burden of climate change will not be shared equally. The poorest 20 percent of Europeans are projected to suffer the greatest losses, with household incomes declining by 4 percent, compared with losses ranging between 1.1 percent and 1.8 percent for the rest of the population. This widening gap threatens to intensify income inequality across the continent.
Several regions have already experienced severe economic impacts from repeated heatwaves and droughts between 2004 and 2022. Household income losses peaked at almost 10 percent in Madrid, while Central Hungary recorded a 9.4 percent decline and Central Spain an 8.8 percent reduction.
Millions More Europeans Could Fall into Poverty
The study projects that worsening climate conditions could dramatically increase poverty levels across Europe. In a world limited to 1.5°C of warming, around 60 million Europeans could be at risk of poverty. Under a 2.7°C warming scenario, that figure could more than double to 127 million people.
Southern and Eastern European countries are expected to be among the hardest hit. Greece, Spain, Romania, Bulgaria, and Cyprus face the greatest risks. Under a 2.7°C warming pathway, Spanish household incomes could fall by more than one-third, while Greek household incomes could decline by more than one-half.
Europe Struggles to Adapt to Rising Climate Risks
Despite decades of scientific warnings about the consequences of fossil fuel emissions, the report argues that Europe remains inadequately prepared for escalating climate impacts.
The UK’s statutory adviser, the Climate Change Committee, stated last month that government adaptation plans dating back to 2008 have “not been fit for purpose.” In France, the Haut Conseil pour le Climat warned in 2025 that the gap between adaptation requirements and implementation continues to widen.
Meanwhile, a Climate Analytics study prepared for the World Bank and published in January 2026 found that Germany still lacks comprehensive measures to protect citizens from increasing heat stress. Although some regions have begun developing heat-health adaptation plans, implementation remains slow and fragmented.
The findings underscore the urgent need for stronger climate adaptation strategies across Europe as extreme heat and drought events become more frequent and severe. Without accelerated action to limit warming and improve resilience, the economic and social costs of climate change are expected to rise sharply throughout the century.
BABURAJAN KIZHAKEDATH
