The most recent study reports a rise in food prices and inflation with the warming climate

In a recent study published in the journal 'Communications Earth & Environment,' lead researcher Dr. Maximilian Kotz from the Potsdam Institute for Climate Impact Research (Germany) along with researchers from the European Central Bank (ECB) have unveiled that rising temperatures due to climate change are causing food prices and overall inflation to increase. The study, analyzing over 20,000 data points across 121 countries from 1996, shows that countries in warmer climates are experiencing higher inflationary pressures on food and other goods, a situation exacerbated by seasonal changes.
The analysis suggests that, in the future, nations situated in warmer zones are likely to suffer the most. For example, regions like the Middle East might see annual price rises of 1.5 to 1.8 percentage points per decade due to projected temperature increases, resulting in an overall inflation increase of up to 0.9 percentage points by 2035. By 2060, global food prices could rise by 2.2 to 4.3 percentage points annually due to climate change, potentially raising overall inflation by 1.1 to 2.2 percentage points.
Dr. Kotz highlights that while discussions on inflation and climate change often focus on rising energy costs due to mitigation efforts, the impact of climate change on food supply and prices is a significant factor. For instance, the 2022 heatwave in Europe not only reduced food supply but also increased prices by approximately 0.43 to 0.93 percentage points, contributing to a third of a percentage point rise in overall inflation.
Experts like Frances Moore from the University of California, Davis, and Matin Qaim from the University of Bonn, Germany, concur with the findings. Gernotas Wagner, a climate economist at Columbia Business School, also finds the results concerning, noting that the phenomenon, termed 'climatoflation' by Dr. Kotz, presents real and striking numbers.
The study further observes that while extreme weather events like heavy rainfall have historically had less impact on food prices compared to average temperature changes, the broader spread of higher temperatures could have more severe effects. If farmers can adapt better to warmer conditions, inflationary pressures might decrease, though such signs are not yet evident.
According to the study, maintaining price stability, defined by the ECB as keeping inflation around 2 percent, will become increasingly challenging due to rising food prices. This goal aligns with the ECB's mandate to preserve the purchasing power of the euro, ensuring low, stable, and predictable inflation rates over time. The revision of this strategy by the ECB Governing Council in July 2021 reaffirms their commitment to this objective, crucial for harnessing the benefits of price stability for the economy.