The severe heatwave this week is hitting Europeans not only through physical discomfort. Everyone is feeling the indirect cost of the heatwave, but for some, it is higher.
Household costs are skyrocketing as energy prices reach record levels, parents rush to find emergency care for children, and outdoor workers are the most affected.
A new study published this week by Climate Analytics shows that combined episodes of heat and drought reduce average household incomes by almost three percent across Europe.
If global warming reaches 2.7°C by 2100, which is the estimated trajectory under current global policies, European households could see, on average, a 27% decrease in incomes. Limiting warming to 1.5°C as outlined in the Paris Agreement would reduce this value to seven percent, as reported by Euronews.
"The massive heatwave currently sweeping across Europe is already threatening people's health, livelihoods, and ability to work. If extreme heat coincides with drought, the damages can be much greater," says Jessie Schleypen, the lead author of the study and senior climate economist at Climate Analytics.
Record-high electricity prices show up in bills
Financially, the biggest blow is seen in energy bills. Electricity prices soared to record levels on Tuesday evening as increased demand for air conditioning clashed with limited supply, according to Montel News agency.
Belgium hit a new record price for electricity at 1,038.25 EUR/MWh for a 15-minute period. The 15-minute price tracks the cost of electricity in 15-minute intervals and directly affects customers on variable tariffs. This is over 10 times the EU's average wholesale electricity price, which typically ranges between 50 and 100 EUR/MWh outside of crisis periods, as reported by Euronews.
The Netherlands reached 902.47 EUR/MWh, Denmark hit 786.83 EUR/MWh, and Germany – the largest energy market in Europe – peaked at 747.10 EUR/MWh.
The spikes in prices are concentrated in the evening when solar production decreases, but temperatures and cooling demand remain high. During this period, grid operators increasingly rely on gas power plants to meet demand. According to the European system, the most expensive energy source needed to meet demand sets the price for the entire grid, meaning that when expensive gas is needed, it wipes out the gains from cheap renewable sources.
The issue worsens during heatwaves as power plants lose efficiency when facing high temperatures. Solar panels lose between 0.3 and 0.5% of their output for every 1°C above 25°C, limiting their contribution just when demand peaks.
Gas-fired combined-cycle power plants suffer a similar effect, losing up to 0.9% of their energy output for every 1°C above the reference value.
In Germany, the amount of electricity not covered by renewable sources - known as residual load - reached 51.5 GW on Tuesday evening, about 10.4 GW above normal levels for that time of day. The higher the residual load, the more gas is needed, and the higher the price.
The hidden economic cost of the heatwave
The costs of the heatwave go beyond energy bills. In France and the UK, thousands of schools have closed or reduced their hours this week, leaving parents to figure things out.
"Schools will close earlier, and parents - let's be honest, mostly mothers - will have to magically fill the gap, sacrificing holidays or unpaid leave, bearing the consequences on their salary and their employer's view of how 'productive' they are," wrote author and women's rights activist Joeli Brearley on LinkedIn.
Her post garnered over 150 responses from parents sharing their experiences, with one commentator calling on governments to introduce extreme weather subsidies to cover emergency childcare costs.
For outdoor workers, the losses are devastating. Construction workers, delivery drivers, agricultural laborers, and factory workers lose valuable hours as the heat necessitates changes in work schedules.
Many areas in France have banned fieldwork in the afternoons to reduce the risk of fires from dry crops, a measure that cuts daily earnings for workers, many of whom are seasonal migrants.
Train cancellations in France and Belgium, introduced to prevent rail infrastructure distortion due to overheating, push more commuters to use cars, adding fuel costs to household financial pressures.
Who loses the most
Research by Climate Analytics shows these costs first impact low-income households. The poorest 20% of European households lose 4% of income during combined heatwave and drought events, compared to a loss ranging from 1.1% to 1.8% for the rest of the population.
Regionally, Madrid has seen income drops of nearly 10% during such events, central Hungary – 9.4%, and central Spain – 8.8%.
Despite scientific warnings spanning decades, European governments remain dangerously unprepared for the costs associated with extreme heat. The UK Climate Change Committee stated last month that government adaptation plans "have not been adequate to the task."
The advisory body in France, the High Council for Climate (Haut Conseil pour le Climat), warned that the gap between adaptation needs and concrete actions is widening.
A study by Climate Analytics for the World Bank, published in January 2026, found that Germany lacks "comprehensive solutions" to protect the population from increasingly severe heat stress, and the implementation of regional public health plans for heatwaves is still significantly delayed.
The consequences of inaction escalate over time, warns the Climate Analytics study.
In a global warming scenario of 2.7°C, household incomes in Spain would decrease by over a third, and those in Greece – by over half.
Across the continent, the number of people at risk of poverty could increase from 60 million (in a 1.5°C warming scenario) to 127 million (in the 2.7°C scenario). Greece, Spain, Romania, Bulgaria, and Cyprus would be among the most affected countries.
T.D.