Sometimes climate change shows up where you least expect it – like the grocery store. Food prices have risen 25 percent over the past four years, and Americans have been shocked by the rising cost of staples like beef, sugar and citrus.
While many factors, such as supply chain disruptions and labor shortages, have contributed to this increase, extreme heat is already driving up food prices and is likely to get worse, according to a recent study published in the journal Communications Earth & Environment. The analysis found that heat inflation could drive up food prices around the world by as much as 3 percentage points per year in just over a decade and by about 2 percentage points in North America. For overall inflation, extreme weather can lead to anywhere from a 0.3 to 1.2 percentage point increase each year, depending on how much carbon emissions countries pump into the atmosphere.
While that might sound small, it’s actually “massive,” according to Gernot Wagner, a climate economist at Columbia Business School. “That’s half of the Fed’s overall objective for inflation,” he said, referring to the Federal Reserve’s long-term objective of limit it to 2 percent. The Department of Labor recently reported that consumer prices rose 3.2 percent over the past 12 months.
The connection between heat and rising food prices is intuitive – if wheat starts to wilt and die, you can bet that flour will become more expensive. When Europe fried in heat waves in 2022, it pushed up food prices that had already soared due to Russia’s invasion of Ukraine (known as the breadbasket of Europe), researchers at the Europe Central Bank and Potsdam Institute in Germany found in the new study. Europe broke a record 9.2 percent inflation that year, and the summer heat alone, that hurt soybean, sunflower and corn cropscould have accounted for nearly a full percentage point of that increase.
To find out how climate change could drive inflation in the future, the researchers analyzed monthly price indices for goods in 121 countries over the past quarter century. No place on the planet seems immune. Countries in North Africa and the Middle East, where warm temperatures are already pushing the comfort limits of some crops, are expected to experience some of the biggest price shocks.
The study’s results were striking, Wagner said, but at the same time very credible. He thinks the calculations are probably on the conservative side of the spectrum: “I wouldn’t be surprised if follow-up studies actually come up with even higher numbers.”
This adds to a worrying picture for the future affordability of food. “The coronavirus pandemic has shown how sensitive supply changes are to disruptions and how those disruptions can wake up inflation,” David A. Super, a professor of law and economics at the Georgetown University Law Center, wrote in an email. “The disruptive effects of climate change are orders of magnitude greater than those of the pandemic and will cause economic disruption on a much larger scale.”
The world began paying attention to the dynamic between climate change and higher prices, or “climate inflation”, in March 2022, shortly after Russia invaded Ukraine, when German economist Isabel Schnabel coined the term a speech warns that the world is facing a new era of energy inflation. A few months later, Grist coined the term “heat deflation.” in an article about how blistering temperatures sent food prices soaring.
The difference between the terms is similar to “global warming” vs. “climate change”, with one focused on warmer temperatures and the other on broader effects. Still, “heat inflation” might be the more appropriate term, Wagner said, since price effects of climate change mostly come from extreme heat. The new study did not find a strong link between shifts in precipitation and inflation.
The research lends some credence to the title of the landmark climate change bill signed by President Joe Biden in 2022, the Inflation Reduction Act. While it’s an open joke what the name was a marketing term meant to capitalize on Americans’ concerns about rising prices, it may end up being more appropriate than people expected. “We should not make fun of the name Inflation Reduction Act, because in the long run it is exactly the right term to use,” Wagner said.
