A new study by the Potsdam Institute for Climate Impact Research (PIK) in Germany suggests that average global temperature increases could lead to an annual inflation rate of up to 3.2% for food prices and 1.18% for overall inflation by 2035.
This research, highlighted by the Spanish newspaper La Vanguardia, underscores the significant impact that climatic factors such as rising temperatures and heavy rainfall have on inflation, based on historical data analysis.
However, the study did not separately examine which food items might be most affected.
Max Kotz, one of the study’s authors, explained that an analysis of over 27,000 historical data observations revealed that higher temperatures could drive up food prices, particularly in warmer regions and seasons.
The extreme heat of the summer of 2022 is estimated to have increased food inflation in Europe by about 0.6%. The expected warming by 2035 could amplify the effects of such extreme weather events by up to 50%.
Under future climate conditions, these impacts could become significant, potentially affecting food inflation by about 1-3% annually by 2035. This poses a threat to the price stability enforced by central banks such as the European Central Bank, which aims to keep inflation under 2%.
Meanwhile, the study anticipates that average global core inflation could increase by between 0.32% and 1.18% annually.
The report warns that rising or unstable prices threaten economic well-being, human welfare, and political stability, noting that the 2021-2022 cost of living crisis pushed an additional 71 million people worldwide into poverty, according to the United Nations (UN).
Climate-induced inflation affects both wealthy and poor countries, with global warming expected to impact food price inflation and overall inflation across high-income and low-income nations alike.
The study found that inflation rises with temperature increases, especially during the summer and in warmer areas at lower latitudes, where it persists throughout the year.
As such, the global south, particularly Africa and South America, will likely suffer the most. Conversely, at higher latitudes, there is a strong seasonality effect, peaking in the summer.
According to the report, a one-degree Celsius increase in the monthly average temperature can influence prices for up to a year, similar to the effects of heavy rainfall. However, the price impact is only transient when it results from severe drought.
The study also examined the extremely hot European summer of 2022, noting the broad impact of heat and drought on agriculture and the economy.
