High temperatures could drive food inflation up by 3.2 percentage

New Delhi: Rising temperatures could drive food inflation up by 3.2 percentage points and overall inflation by 1.18 percentage points annually by 2035, as per new study.

The study was conducted by the Potsdam Institute for Climate Impact Research PIK and the European Central Bank ECB, to be published in Communications Earth & Environment.

This effect persists over 12 months in rich and poor countries alike, making climate change an important economic factor for price stability, the study pointed out.

It also projected that the pressure on overall inflation could be 0.3-1.2 percentage points at the temperatures that the world will likely see in 2035.

Researchers said the projections suggested that rising temperatures increase inflation all-year long in countries at low-latitudes, while in those at higher latitudes, inflation due to rising temperatures occurs only in summers.

Further, the authors, including those from Potsdam Institute for Climate Impact Research, Germany, estimated that heat extremes during the summer of 2022 raised food inflation in Europe by 0.67 per cent, an increase that could be amplified by 30-50 per cent under 2035 warming scenarios.

The researchers said that Africa and South America are likely to face a greater impact, but acknowledged the lack of detailed information in South East Asia on detailed information regarding price aggregates at monthly timescales.

The researchers also looked at the 2022 summer in Europe where heat and drought had a wide-spread impact on agriculture and the econom.

“We estimate that the 2022 summer heat extreme increased food inflation in Europe by about 0.6 percentage points. Future warming projected for 2035 would amplify the impacts of such extremes by up to 50 percent,” explains Maximilian Kotz, PIK scientist and first author of the study.

“These effects are very relevant for currency unions with a two percent inflation target such as the Euro zone, and will continue to increase with future global warming” said Kotz.

For the study, the researchers analysed monthly national consumer price indices and weather data across 121 countries between 1991-2020. They combined the results with projections from a physical climate model to estimate how rising temperatures impacted inflation between 2030 and 2060.