A new climate study published in Communications Earth & Environment, a journal from Springer Nature, suggests that under projected warming of 2035, global warming could cause food inflation to increase by up to 3.2% annually, and overall inflation by up to 1.2% per year. The study also found that while both high- and low-income countries would experience climate-induced inflation, those in the global South would be affected more.
The paper suggests that the global economy is highly sensitive to climate change and extreme weather, through its impacts on food production, labor, energy demand, and human health. Therefore, understanding how weather might impact inflation could help forecast how future climate change will affect inflation risks and the global economy.
Co-lead author of the study, Maximilian Kotz of the Potsdam Institute for Climate Impact Research and the University of Potsdam, Germany, along with Friderike Kuik of the European Central Bank and colleagues, analyzed monthly national consumer price indices and climate data for 121 countries from 1991-2020. They combined their analysis with projections from physical climate models to estimate the impact of future warming between 2030-2060 on inflation.
They estimate that under projected warming of 2035, global warming would cause annual food inflation to increase by 0.9-3.2% and overall inflation by 0.3-1.2%. The study further projects that both high- and low-income countries will be affected, but impacts will generally be larger in countries of the global South, particularly those in Africa and South America.
The study’s projections indicate that warming will intensify inflation year-round in lower latitudes, while in higher latitudes these impacts will occur only during the summer. In addition, the study estimates that extreme heat during the summer of 2022 increased food inflation in Europe by 0.67%, and that this increase could be 30-50% larger in the 2035 warming scenario.
The authors conclude that climate change is likely to increase future food prices, but that mitigation efforts to reduce greenhouse gas emissions and technology-based adaptation measures could substantially limit this global economic risk.
