Above, Al Jazeera in-depth report, about 30 minutes.
Below, interview with Washington Post reporter Sarah Kaplan, who recently dove into this topic.
Scott: And you talk about how this is only going to get worse. A study showed that rising temperatures could add as much as 1.2 percentage points to annual global inflation by 2035. Talk about that study and what these researchers found.
Kaplan: Yeah, so this was research from the European Central Bank and the Potsdam Institute for Climate Impact Research, and they basically looked at the correlation between high temperatures and prices in a bunch of different countries. And they found that there is this very strong link that when you have higher temperatures, there tend to be price spikes. All of that really can add up to cause not just price spikes for individual items, but inflation for everything that people need to buy.
Scott: And it’s not just food, right? I mean, I’ve done a lot of reporting on the rising cost of homeowners insurance, but you also talk about auto insurance. I imagined businesses will face higher premiums that they will pass on to customers too. How is that affecting the overall cost of living?
Kaplan: The cost of insurance is one of the main contributors to the high inflation that we’ve been seeing in recent years, and experts say that that is very much connected to the increased occurrence of weather disasters. I think one of the things that is really important about climate change is the way that it is creating weather that is not just more extreme, but it’s more unpredictable. You know, insurance is all about sort of weighing the risk of something and trying to price it accordingly. But if you don’t know what the risk is because it keeps changing, that makes the entire endeavor much more difficult.
Scott: So this kind of inflation is not something the Federal Reserve can address by raising interest rates. What can be done? I mean, aside from limiting the damage of climate change, are there adaptations that can help, say, protect crops and the workers who are growing them as extreme heat increases?
Kaplan: Yeah, I mean the adaptation will be specific to whatever product you’re talking about, right? So, for food products, and you know, particularly commodity crops, maybe it is research into more heat and drought tolerant varieties of wheat and corn and rice. I think for insurance, again, it’s going to be more research into understanding what the specific risks of climate change are. And you know, some experts say that there might also need to be real hard discussions about if there are some places where homes are simply too high risk to insure. That is obviously a very thorny subject. What climate change is doing is just again, increasing unpredictability, right? And the kinds of things that people have expected, whether it’s in the price they pay at the grocery store or the ease of getting insurance for their home or their car, is just not going to be the way it used to be. People are going to need to prepare for the unexpected, and probably for higher prices overall.
Nature – Global warming and heat extremes to enhance inflationary pressures:
Climate impacts on economic productivity indicate that climate change may threaten price stability. Here we apply fixed-effects regressions to over 27,000 observations of monthly consumer price indices worldwide to quantify the impacts of climate conditions on inflation. Higher temperatures increase food and headline inflation persistently over 12 months in both higher- and lower-income countries. Effects vary across seasons and regions depending on climatic norms, with further impacts from daily temperature variability and extreme precipitation. Evaluating these results under temperature increases projected for 2035 implies upwards pressures on food and headline inflation of 0.92-3.23 and 0.32-1.18 percentage-points per-year respectively on average globally (uncertainty range across emission scenarios, climate models and empirical specifications). Pressures are largest at low latitudes and show strong seasonality at high latitudes, peaking in summer. Finally, the 2022 extreme summer heat increased food inflation in Europe by 0.43-0.93 percentage-points which warming projected for 2035 would amplify by 30-50%.
Higher food prices make it quicker for precision fermentation to become competitive.