- Por: Will Bugler Global Technical Lead on Climate Risk and Resilience, KPMG
On 4 August the gauge at Kaub the shallowest chokepoint on the Middle Rhine – fell to 21 centimetres. This is its lowest reading since records began in 1880, arriving weeks before river flows in the Rhine normally reach their lowest point. Forecasters expect it to fall further as the drought that grips Europe continues. The number is significant as it governs how much cargo is able to move along one of Europe’s most important supply routes, linking the major port of Rotterdam to southern Germany and the continent’s industrial heartlands.
From gauge reading to profit warning
At 21 centimetres and falling, barges are forced to reduce their loads to 20% of normal levels, which makes the vessels uneconomical to sail. Smaller, shallow water vessels, or part full barges are used but shipping now comes at a premium. Benchmark freight rates for liquid bulk heading south of Kaub have risen roughly fourfold in two months.
For firms on the river this is not an abstraction. Polymer manufacturer Covestro, moves more than 30% of its finished products and takes in close to 75% of its raw materials via the Rhine. Specialist chemicals company, Lanxess, has stood up a crisis team and describes barge access as ‘very difficult’. Shell is pushing fuel deliveries onto rail and road; Thyssenkrupp is chartering shallow-draft vessels for its Duisburg blast furnaces.
Each firm is acting rationally in response to the problem, but collectively their actions create new problems. Every company on the river is currently reaching for the same solutions – rail wagons, tanker trucks, storage, shallow hulls. A collection of typical firm level climate risk assessment would see a diversified set of supply chains, however the collective picture turns the Rhine into a single point of failure with several hundred logos on it.
Germany’s Kiel Institute estimates sustained low water could shave 0.10.2% off national GDP in the third quarter alone: the aggregate of thousands of individually sensible decisions taken in response to a systemic climate evet.
The energy system runs on the same water
The impacts of the drought will also be felt as they ripple through other critical sectors. Water and energy primary among them. Neighbouring the Rhine, the Danube flows east towards the Black Sea. The Danube’s levels at Budapest have now dropped to around 10 centimetres in early August, well below the previous record of 33 set in 2018.
As a result, Hungary’s Paks nuclear power plant, which supplies roughly 40% of the country’s electricity, halted for the first time in 44 years for want of cooling water; households and businesses have been asked to cut evening electricity demand.
In Romania, one Cernavodă reactor went offline and naval engineers detonated explosives in the Bala Canal to steer more water toward the plant’s intakes. Elsewhere, France cut 6.3 GW across eight reactors in July for the same reason. Alpine hydropower inflows ran near half their seasonal norm, with Austrian output at 51% of normal and Swiss at 48%. German coal plants, meanwhile, struggle to receive coal because it arrives by barge.
Nuclear, hydro, coal, refining and freight are often discussed in separate rooms. This summer they failed together, because they all rely on river water, in sufficient volume, and at the required temperature.
Designed for a hydrology that has left
I have argued for years that our infrastructure planning and design assumes a stationary climate – that the distribution of extremes is fixed, and that the past reliably guides the future. Abstraction licences, barge economics, thermal discharge limits, inventory policies and thin margin logistics contracts all encode a river that behaved a certain way. Kaub’s record stood since 1880; Budapest’s since 2018. When records fall in successive years, the baseline is not a baseline any more.
That has a direct implication for the energy transition, and strengthens the argument for a rapid transition to distributed, renewable energy sources. Looking to gas every time the rivers drop, locks in both emissions and the centralised, thermally constrained architecture that fails under climate stress.
The water independent options are the obvious hedge: wind and solar consume almost no water in operation, storage and interconnection move energy across water-stressed regions, and demand flexibility and efficiency reduce the load when supply is tight. Distributed generation also removes the single-point exposure of a two-gigawatt plant tied to one river’s flow rate.
The impact of drought on Europe’s economy is well known. The European Water Resilience Strategy, published in June 2025, notes that drought affects around 4% of EU territory annually and cost an estimated €50 billion in 2022. The most recent, European Climate Change Risk Assessment also warned that “Europe faces the growing risk of a megadrought that spans large regions and lasts for several years, with severe impacts on crop production, food security, drinking water supplies and energy production.”
As is so often the case, the nature of the challenge is well understood but the pace of investment in resilience and a coordinated response is lacking. Businesses and societies are left to count the cost of inaction.
The rivers will rise again this autumn, and the temptation will be to treat this summer as an anomaly. What we know is that it is more like a preview of what will become just a regular summer. The cheapest moment to build an energy system that does not depend on a particular water level was in the years before the Kaub gauge fell to 21 centimetres. The second cheapest is today.
