KEY FACTS

Increasing temperatures could boost average inflation by as much as 1.2 percentage points every year until 2035, warned researchers from the Potsdam Institute for Climate Impact Research and the European Central Bank in Germany.

Climate change could drive the cost of food up by as much as 3.2 percentage points a year, said the peer reviewed report, which was published in the journal Communications Earth & Environment.

The findings come from an analysis of monthly consumer price indices and weather data across 121 countries over the last 30 years, which was used to figure out how changing temperatures affect inflation and then combined with climate models projecting future warming over the next few decades over a range of emissions scenarios.

While the above figures consider inflation in the context of the worst-case, highest emissions scenario—where little has been done to mitigate the greenhouse gas emissions coming from human activity that are driving climate change—the researchers said climate change will push inflation up even under even the best-case emissions scenario, with overall inflation rising an average of 0.3 percentage points and food inflation 0.9 percentage points each year through 2035.

Under the best-case emissions scenario, the researchers said the upwards pressure from increasing temperatures on inflation would only be “marginally larger in 2060 than in 2035,” though warned food inflation would exceed 4 points per year across large parts of the world under the worst-case scenario.

Overall, the researchers said their results show climate change will put “persistent upward” pressure of “considerable magnitudes” on inflation over the next few decades regardless of emissions trajectories, adding that mitigating greenhouse gas emissions and new technological solutions like space cooling projects could help limit the risk to the global economy.

TANGENT

The researchers took Europe as a case study to see how changing temperatures have impacted prices and inflation historically. They found that the extreme heat during the summer of 2022 boosted overall inflation in Europe by 0.34 percentage points and food inflation by 0.67 percentage points. The figure adds another dimension to an already grim toll from that summer, where the extreme heat killed an estimated 70,000 people.

WHAT TO WATCH FOR

The researchers warned that while rising food prices and inflation will hit people living in wealthy and poorer countries alike, it is the global South, particularly countries in Africa and South America, that will be hit hardest. The models also project year-round temperature-driven inflation in low-latitude regions, while only seasonal changes at higher latitudes. The disproportionate impact of climate change, which also includes the impact of other climate-driven issues like weather disasters, displacement and food security, is a perpetual sticking point in negotiations of global climate agreements to mitigate further emissions.