Among other things, warm temperatures and a lack of rainfall in Europe this summer have caused several major waterways, including the Rhine, Po and Danube, to dry up, disrupting navigation in the region.

“Agriculture will obviously be affected by lack of water, but the bulk of the economic impact is likely to be felt through increased shipping costs,” the report says, as low water levels mean that ships have to carry smaller loads, which increases shipping costs. .

“Low water levels are reducing the ability of barges to transport both raw materials and finished goods down the river, straining supply chains,” Moody’s Investors Service said in a separate report on the question.

This last supply-side challenge is another driver of inflation. For example, transport costs on the Rhine have increased tenfold since the beginning of the year, the NBF report says.

“The situation could still deteriorate further,” he warned, as the Rhine could become “virtually impassable” if levels drop much further.

Moreover, there are no good alternatives to river transport, he said, “with Germany’s rail network already congested and its trucking industry suffering from a severe shortage of drivers”.

In addition to the effects on navigation, Moody’s noted that companies based along the Rhine have had to cut production due to both low water levels and the fact that low levels come with higher water temperatures. high, which limits the cooling capacity.

“If the worst were to happen, the entire energy sector would be in danger,” warned the FBN.

Already, as many countries turn to coal to replace disrupted Russian gas imports, coal shipments are being disrupted by transportation issues.

At the same time, the NBF noted that “Norway is curbing electricity exports to allow many of its hydroelectric reservoirs to recover and several French nuclear power plants have been forced to reduce/shut down operations” due to a lack of water for cooling the reactors.

These electricity supply limitations lead to “even higher operating costs,” Moody’s said.

“The low water level of the river shows how climate change is having a tangible negative effect on business operations, profits and credit quality, and may require strategic changes or mitigation measures,” Moody’s said.