The grocery store may not be where you’d expect to see the effects of climate change, but it’s becoming more evident. Food prices have risen by 25 percent in the past four years, with staples like beef, sugar, and citrus becoming increasingly expensive (source).
According to a recent study published in the journal Communications Earth & Environment (source), extreme heat is already impacting food prices and is projected to worsen. This analysis suggests that “heatflation” could lead to a 3 percent increase in food prices globally and a 2 percent increase in North America annually within a decade. Ultimately, extreme weather events could contribute to an annual increase of 0.3 to 1.2 percentage points in overall inflation, depending on carbon emissions levels.
While these figures may seem small, they are significant in the context of inflation targets. Gernot Wagner, a climate economist at Columbia Business School, described them as “massive” compared to the Federal Reserve’s goal of limiting inflation to 2 percent (source). Recent reports show consumer prices climbing by 3.2 percent over the past year (source).
This link between rising food prices and heat is evident when looking at past events. For example, Europe experienced price hikes due to heat waves in 2022, exacerbating food price increases driven by other factors like the conflict in Ukraine. The study conducted by researchers in Europe discovered that summer heat alone, which affected soy, sunflower, and maize harvests, could have contributed to a significant portion of the inflation increase that year.
The study analyzed price indices across 121 countries over 25 years to predict future inflation trends linked to climate change, with countries in North Africa and the Middle East expected to face significant price shocks due to high temperatures impacting crop yields.
Global economists find the study’s results concerning and believe that future studies might reveal even higher numbers. The impact of climate change on food prices poses a challenge to affordability in the future, with potential economic dislocation on a large scale.
The relationship between climate change and rising prices led to the term “climateflation,” coined in 2022 to describe the intersection of climate change and inflation. The use of terms like “heatflation” emphasizes the role of extreme temperatures in driving inflation, rather than shifts in precipitation patterns.
President Joe Biden’s landmark climate bill, the Inflation Reduction Act, may prove to be relevant as the effects of climate change continue to impact prices. Despite initial skepticism about the name, experts believe it accurately reflects the long-term implications of climate change on inflation rates.