According to a study published on March 22nd in Communications Earth & Environment, with the projected warming by 2035, global warming could lead to a maximum annual increase in food inflation rates by 3.2%, and an overall inflation rate by 1.2% annually. These findings also indicate that while both high and low-income countries will experience inflation due to climate change, the impact is greater on countries in the global South.
Climate change and extreme weather can have significant implications for food production, labor, energy demand, and human health, rendering the global economy highly sensitive to both. Understanding how weather can affect inflation helps in predicting how future climate change may affect inflation risks and the global economy.
Maximilian Kotz and colleagues from the Potsdam Institute for Climate Impact Research in Germany analyzed the monthly national consumer price indices and climate data from 121 countries between 1991 and 2020. They combined the analysis with predictions from physical climate models to estimate the impact of future climate warming on inflation between 2030 and 2060.
Researchers estimate that with the projected warming by 2035, global warming could cause food inflation rates to rise annually by 0.9%-3.2%, and overall inflation rates by 0.3%-1.2% per year. They anticipate that this will affect both high and low-income countries, with a generally greater impact on countries in the global South, particularly in Africa and South America.
The forecasts suggest that rising temperatures will exacerbate year-round inflation in low-latitude regions, whereas these effects will occur mainly during summers in higher-latitude areas. Additionally, extreme heat during the summer of 2022 led to a 0.67% increase in food inflation in Europe. Researchers estimate that under the 2035 warming scenario, this increase could be amplified by 30%-50%.
Researchers suggest that climate change could lead to higher future food prices, but reducing greenhouse gas emissions and implementing technology-based adaptation measures could significantly mitigate this global economic risk.
For more information, refer to the related paper: Link to the paper
