Study Warns: Climate Change to Fuel Rise in Food Prices and Inflation

A recent study conducted by an environmental scientist in collaboration with the European Central Bank reveals that as temperatures rise due to climate change, food prices and overall inflation will experience an upward trend.

Examining monthly price data of food and various goods alongside temperature and climate factors across 121 nations since 1996, researchers have determined that “weather and climate shocks” will contribute to an increase in the cost of food. The projected rise is estimated to be between 1.5 to 1.8 percentage points annually within the next decade, with even higher impacts expected in regions already experiencing elevated temperatures, such as the Middle East.

These findings, published in the journal Communications, Earth, and the Environment, indicate that by 2035, climate change-induced extreme weather events alone could lead to an overall inflation increase of 0.8 to 0.9 percentage points. Although seemingly modest, these figures hold significance for financial institutions like the US Federal Reserve, which actively combat inflation.

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Lead author of the study, Max Kotz, a climate scientist at the Potsdam Institute for Climate Impact Research in Germany, underscores the broader implications of these findings, stating, “This is really another example of how climate change can undermine human welfare and economic stability.”
Looking ahead to 2060, the study predicts a further escalation in climate-triggered inflation, with global food prices anticipated to surge by 2.2 to 4.3 percentage points annually. This translates to an increase in overall inflation ranging from 1.1 to 2.2 percentage points.

A recent study reveals that as temperatures rise due to climate change, food prices and overall inflation will experience an upward trend.

Gernot Wagner, a climate economist at Columbia University’s business school, comments on what he terms “climateflation,” highlighting the striking nature of the data presented in the study.

Through an analysis of 20,000 data points, Dr. Kotz and European Bank economists establish a causal link between extreme weather events, particularly heatwaves, and rising prices. While discussions around inflation and climate change often focus on rising energy prices, Dr. Kotz emphasizes the additional impact of productivity shocks stemming from climate change-induced weather phenomena.

The study underscores the 2022 European heatwave as a pertinent example, wherein high temperatures significantly reduced food supplies, resulting in a two-thirds of a percentage point increase in food prices and a one-third of a percentage point rise in overall inflation. Dr. Kotz further notes that these price increases were even more pronounced in regions such as Romania, Hungary, and parts of southern Europe.

Frances Moore, an environmental economist at the University of California, Davis, who was not involved in the study, acknowledges the credibility of the findings, particularly the observed relationship between regional temperature anomalies and national inflation.

Dr. Kotz concludes that the inflationary pressure on food and other prices is exacerbated in areas and seasons characterised by hotter temperatures. Consequently, while regions like Europe and North America may experience some impact, the Global South, with its limited resources, may face more severe consequences.

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