LatestClimate Crisis is causing food prices and overall inflation to rise: report

Climate Crisis is causing food prices and overall inflation to rise: report

According to a recent study by an environmental scientist and the European Central Bank, as temperatures rise due to climate change, food prices and overall inflation would rise as well. The study was published in the journal Communications, Earth and the Environment, researchers estimate that “weather and climate shocks” will cause the cost of food prices to rise 1.5 to 1.8 percentage points annually within a decade or so, even higher in already hot places like the Middle East. They base this estimate on monthly price tags of food and other goods, temperatures, and other climate factors in 121 nations since 1996.

That means that by 2035, the effects of climate change alone will produce a rise in overall inflation of 0.8 to 0.9 percentage points, according to the report.

According to Max Kotz, the study’s lead author and a climate scientist at the Potsdam Institute for Climate Impact Research in Germany, these figures may seem insignificant, but they are important to banks that combat inflation, such as the US Federal Reserve.

According to Kotz, “the physical effects of climate change will have a persistent effect on inflation.” “In my opinion, this is just another illustration of how climate change can jeopardize the welfare of people and the economy.”

Furthermore, the study projected that by 2060, the portion of inflation caused by climate change would increase, with a 2.2–4.3 percentage point yearly increase in global food costs. This corresponds to an increase in overall inflation of 1.1 to 2.2 percentage points.

Not involved in the study, climate economist Gernot Wagner of Columbia University’s business school stated that “climateflation” is “all too real and the numbers are rather striking.”

Kotz and economists from the European Bank examined 20,000 data points to determine a real-world causal relationship between extreme weather, particularly heat waves, and increasing prices. They were shocked to see sticker shock when they looked at future projections for climate change.

According to Kotz, there is more to the issue than just growing energy costs as a result of attempts to reduce global warming when economists discuss inflation and climate change.

“We are aware of these productivity shocks that brought on by climate change, its resulting weather phenomena, heat waves, and other factors that lower agricultural productivity,” Kotz stated. “Those then have a domino effect on headline inflation and food inflation as well.”

The study uses the heat wave that hit Europe in 2022 as an excellent illustration. According to Kotz, the extreme heat reduced food supplies, which led to a two-thirds increase in food prices and a roughly one-third increase in overall inflation. Prices increased considerably more in Hungary, Romania, and some other

Frances Moore, an environmental economist at the University of California, Davis who not involved in the study, stated, “I find the main result on the historic relationship between regional temperature anomalies and national inflation to credible.” “The results hold significance. Customers find price fluctuation in necessities like food to be quite upsetting.

According to Kotz, the data revealed that hotter regions and seasons have greater inflationary pressure on food and other prices. Accordingly, he argued, the Global South, which could afford it less, might not be as badly damaged as Europe and North America.

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