business news in context, analysis with attitude

CBS News reports on a working paper by researchers at the European Central Bank and the Potsdam Institute for Climate Impact Research that "analyzed historic price fluctuations along with climate data to figure out how that has affected inflation in the past, and what those effects mean for a warming world.

"The upshot: Climate change has already pushed up food prices and inflation over all, the researchers found. Looking ahead, meanwhile, continued global warming is projected to increase food prices between 0.6 and 3.2 percentage points by 2060, according to the report."

According to the piece, "Global warming affects crops in several ways. Yields of corn, a staple crop in many warm countries, fall dramatically after the temperature reaches about 86 degrees Fahrenheit. A 2021 study by NASA researchers found that global corn yields could drop by 24% by the end of the century. Rice and soybeans — used mostly for animal feed — would also drop but less precipitously."

The story notes that "in the European Union, climate change is already pushing up food costs, the researchers found. Last summer, repeated heat waves dried up the continent's rivers, snarling major shipping routes and devastating farmland.

"The resulting crop failures in Europe have occurred at the same time that Russia's war in Ukraine has driven up the price of wheat. Weather extremes pushed up European food prices by an additional 0.67 percentage points, the researchers found. In Italy, the rising cost of staples has caused the price of pasta to soar."

The story notes that these rising costs are not set in stone:  "Where inflation will fall within that range will depend on how much humanity can curtail emissions and curb the damage from climate change. But even in a best-case scenario in which the entire world meets Paris Agreement climate targets, researchers expect food inflation to rise."

KC's View:

We get a lot of email about the impact of inflation of retailers and consumers, with a lot of it centered on casting political blame this way or that.  What this report suggests is that the folks focused on the politics of inflation ought to be just as concerned about being rigorous about curtailing emissions and trying to reduce the impact of climate change as much as possible - because the inflation crated by climate change is likely to be a lot more permanent.