Rising temperatures and extreme weather events are expected to have a global impact on agriculture.
Rising average temperatures could increase annual food inflation by 3.2% per year and general inflation by 1.18% by 2035, according to a new study by the Potsdam Institute for Climate Impact Research (PIK).
In it, scientists looked at how climate factors, such as high temperatures and extreme rainfall, affected inflation, but did not look separately at which foods might be most affected.
“After examining more than 27,000 historical observations, we found that rising temperatures can lead to higher food prices, especially in hot regions and seasons,” said Dr. Max Kotz, one of the authors of the study.
“Under future climates, this impact could be significant, at around 1-3 percentage points per year on food inflation by 2035, jeopardizing the price stability commitments of central banks such as the ECB, which aim to keep inflation below 2%”.
At the same time, core inflation may increase by an average of 0.32-1.18 percentage points per year around the world, according to the study.
Rising or volatile prices threaten economic and human well-being, as well as political stability, the report notes. According to the UN, the cost of living crisis in 2021-2022 has driven another 71 million people into poverty worldwide.
“Climate” inflation hits both rich and poor countries
Global warming is expected to affect food and core inflation in both high- and low-income countries.
Inflation rises as temperatures rise, most notably in summer and in hot, low-latitude regions, where it will persist throughout the year. For this reason, the southern regions of the world, especially Africa and South America, will suffer more, according to the study.
At the same time, there is a strong seasonality in high latitudes, the peak of which falls in summer.
According to the report, a 1 degree Celsius increase in average monthly temperature affects prices throughout the year, as does excess rain, but the impact on prices is short-lived if it is caused by excess drought.
The authors of the study carefully examined the extremely hot European summer of 2022, when heat and drought had a large-scale impact on agriculture and the economy.
“According to our estimates, extreme heat in the summer of 2022 increased food inflation in Europe by about 0.6 percent. Future warming projected for 2035 will increase the effects of such extreme situations by 50 percent,” Kotz added.