To the climate change They make not only temperatures rise, but also the price of food. If the environment and animals have been harmed by the climate crisis, the economy is also being affected — and this is reflected in inflation. “Climate impacts on economic productivity indicate that climate change could threaten price stability”, reads a statement from the scientific journal Nature.
A study published this Thursday in the journal Nature Communications Earth & Environment shows that “the global warming could lead to an increase in food inflation of up to 3.2 percentage points per year and an increase in global inflation of up to 1.2 percentage points per year”, if the increase in temperatures predicted until 2035 is confirmed.
The warming projected for 2035 could lead to food inflation of 1.49% per year until 2035, in a scenario of low emissions, on average, across the world. This inflation would be higher, at 1.79% per year, in a scenario of higher emissions”, Maximiliam Kotz, author of the study and researcher in the area of climate impact, tells PÚBLICO. In a forecast until 2060, Maximilian says that, according to projected climate conditions, “these impacts could be much greater in a high emissions scenario (above 4%)”.
Scientists analyzed monthly national consumer price indices and weather data from 121 countries between 1991 and 2020. While the situation will have a uniform impact on richer and less wealthy countries, researchers say it will have a greater impact overall. in the global South, especially in African and South American countries. According to the statement, projections suggest that “rising temperatures increase inflation throughout the year in low latitude regions, while this effect only occurs in summer at higher latitudes.”
Floods, drought and extreme heat caused by climate change could be one of the reasons for the crisis in rising prices of some food products, as has already been reported. Last year, in Spain, olive oil saw a 52% increase in consumer prices, due to crop failures due to drought.
Going back to the period between 2020 and 2021, the phenomenon of price increases was also felt in Brazil, with the price of coffee increasing by 70%, due to droughts and frosts that destroyed plantations. In Canada, for example, the production (and export to France) in 2022 of mustard seeds was also affected by climate change.
In India, the government banned wheat exports in 2022, due to the strong heat waves that were felt last May. The decision was taken after the capital New Delhi recorded a temperature of 49ºC, which caused prices to skyrocket even more than they had already seen since the war in Ukraine.
This year, the drought in Zimbabwe was worsened by the climate phenomenon El Niño, and food insecurity has increased. Agricultural productions have been disrupted and the corn harvest could even halve during 2024.
Risk assessment is essential
In the article, the researchers mention that “the potential impact of climate change on inflation dynamics is increasingly important for the conduct of monetary policy and for the ability of central banks to fulfill their price stability mandate in the future”. Therefore, making an assessment of climate risks in relation to inflation is an important measure to “guide governments’ mitigation and adaptation efforts, as well as to inform monetary policy regarding the risks posed by climate change”.
“Temperature increases cause non-linear and persistent increases in food inflation and global inflation”, reads the new study. To PÚBLICO, author Maximilian Kotz highlights that the main conclusion of the study is “that climate change will exert upward pressure on food and global inflation” from now on. Furthermore, he says that “the effects are of considerable magnitude from the point of view of the objectives of inflation of most central banks (2%)”.
“The strongest and most consistent signal” of the impact of climate change on prices “arises from fluctuations in average monthly temperatures”, explain the experts in the report. The report states that “central banks may also have to make monetary policy decisions in response to climate and meteorological shocks”. Furthermore, “persistent pressures towards rising inflation can have adverse effects on purchasing power, often with regressive distributional effects and potential impacts on the social sector”.
Countries at the same level
The researchers report finding “that the effects of rising temperatures are consistent across both higher-income and lower-income countries.” This means that “historical adaptation to rising temperatures through socioeconomic development has been limited”.
This approach regarding the impact of climate change on inflation in countries with more and less income was the most surprising factor for Max Kotz. “What surprised me most was discovering that richer countries do not seem to be less affected than poorer countries — this is what is typically found in the literature on the impact of the climatebut for inflation there doesn’t seem to be a big difference”, reveals the author.
Regarding the next steps, the researcher states that “it would be great to further explore the specific channels through which climate impacts affect inflation. For example, will it be mainly through raw food products?”, he asks.
Furthermore, the author of the study highlights the intention to explore “how impacts can propagate along supply chains”. And, from a political point of view, Max Kotz emphasizes that “there is a need to reduce emissions to limit climate change and its potential negative effects on the economy and people’s lives”.
In order to try to mitigate the effects of climate change, Max says that the main factor that the team considers preponderant in this regard is “limiting climate change itself. Reducing emissions to keep global warming within the limits established in Paris Agreement would have great benefits from an inflation point of view.” In addition, it states that “adaptation can play a role in reducing these impacts”.
Text edited by Claudia Carvalho Silva
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