The huge bottles of olive oil that everyone agrees is the best and cheapest brand of olive oil have now gone up in price to double their usual cost. The price hikes at the pantry may seem like just another example of inflation that’s hard to swallow.
But economists say there may be another reason behind some price spikes, one that will become more significant in the years ahead: climate change. This is particularly the case, as every month so far this year has been the hottest on record. June, which saw a severe heatwave across much of the country, looks likely to set another record. In March, a study by scientists at the European Central Bank and the Potsdam Institute for Climate Impact Research found that rising temperatures could add up to 1.2% to annual global inflation by 2035.
The effects are already being felt: drought in Europe is worsening, devastating olive harvests. Heavy rains and extreme heat in West Africa are damaging cocoa plantations. And recurring forest fires, floods and weather disasters are also driving up insurance costs.
As human-caused greenhouse gas emissions wreak havoc on the planet, researchers predict further economic impacts, leading to temporary price increases and a greater risk of longer-term inflation, especially as heatwaves become more frequent. Rising temperatures will make conditions unbearable for crops and workers. More severe storms and prolonged droughts will disrupt supply chains and disrupt trade flows. And increased risk and uncertainty will make it harder to secure everything from a home to a new business. “These are really big impacts,” says Max Kotz, a climate economist at Germany’s Potsdam Institute and lead author of the March study. “And the clearest way we can mitigate them is to try to mitigate climate change itself.” Experts say it’s hard to pinpoint the impact of climate change on prices right now, since there are many other factors already driving up costs, including wars and supply chains. But economists have no doubt that a hotter world will also be more expensive.
The global price of olive oil hit an all-time high this year, according to data from the International Monetary Fund. In early 2023, warm winter conditions interfered with the trees’ ability to produce fruit. When summer temperatures reached 110 degrees Fahrenheit, the few olives that did grow fell from the vine before they could ripen. The hot air drained moisture from plants and soil, plunging much of the continent into drought and causing plants to wilt and die. Studies show that these high temperatures—which in some cases would have been “virtually impossible” without human-caused climate change—helped cut the region’s olive oil production to nearly half its usual levels, according to the U.S. Department of Agriculture.
Because the EU produces more than 60% of the world’s olive oil, the shortage is being felt in grocery stores across the planet. Kotz points out that food is among the most vulnerable commodities that can be affected by climate-driven price increases, as plants lose more water through their leaves, stop producing flowers and fruit, and eventually become unable to photosynthesize. Crops, livestock, and fisheries are also highly sensitive to changes in their environments, he says. Producers can often weather weather-induced price increases, minimizing their impact on consumers.
Those adaptation strategies will become less effective as the effects of climate change become more frequent and severe, said Jerry Nelson, an agricultural economist at the University of Illinois. He pointed to cocoa, which has hit record prices this year, as a crop that could be particularly vulnerable to future warming. The high temperatures and extreme humidity in West Africa also make farmers’ work dangerous.
The Intergovernmental Panel on Climate Change predicts that disasters will increasingly strike multiple agricultural regions at the same time, leading to food shortages around the world. One study found that the risk of simultaneous crop failures in major corn-growing regions could increase from 6% annually in recent decades to 40% if the world warms to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial temperatures—a threshold the planet is likely to exceed within the next decade. But studying the behavior of food prices during extreme weather events is helping researchers begin to tease out the relationship between climate change and grocery bills. In their study, Kotz and colleagues plotted changes in consumer price indices for 121 countries against monthly temperature data over the past three decades.
After adjusting for other factors — global recessions, conflicts within countries — they found that for every 1 degree Celsius (1.8 degrees Fahrenheit) increase in temperature in a given month, food price inflation would increase by about 0.2% over the following year. By 2035, climate change could increase annual food price inflation by as much as 3.2%, the study found, exceeding the 2% overall inflation target set by many central banks, including the U.S. Federal Reserve, where officials are still struggling to keep prices in check after two years of interest rate hikes.
Sarah Kaplan*
*Climate correspondent, covering humanity’s response to global warming.
Rachel Siegel**
**Economics Correspondent
Published by special arrangement with The Washington Post Licensing and Syndication Service.
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