Climate change is making inflation worse. Experts warn that extreme weather and heat are causing crop failures and driving workers off the job. These disruptions contribute to supply chain failures, which leaders point to as one of the reasons for inflation.

As Christine Lagarde, president European Central Bank, stated in an interview, "If more and more climate disasters, droughts, and famines occur throughout the world, there will be repercussions on prices, on insurance premiums, and on the financial sector."

Why This Matters

Ballooning costs have made it difficult for everyday families to put food on the table and fill their cars up with gas. Economic inflation hit a 40-year high in the US at 9.1% in July. Elsewhere, like in the UK, inflation could reach 22% as gas prices continue to rise.

So far, leaders have attributed inflation to high gas prices (partly due to Russia’s invasion of Ukraine), supply chain problems, and sudden spikes in consumer demand. Experts, though, increasingly argue that there is a hidden “climate component” to the above factors and that leaders should heed the warning of a worsening environmental crisis. 

Still, pointing out each impact of such a wide-reaching crisis is difficult. As David Super, a Professor of Law and Economics at Georgetown University, explained to the Guardian: “Its impact is broad and systemic, so there’s no one item in the [Consumer Price Index] that you can say reflects climate change. We can say that grain and gas-oil costs reflect the Ukraine war, but you can’t do that with climate change because it affects so many things,”

“Heatflation”

In some sectors, the impact of climate change on inflation is obvious. Hot weather and drought devastate everything from wheat crops to tomato harvests, chip away at profits across the agricultural sector, and increase consumer prices. The already-battered wheat market suffering from losing Ukraine’s crop production could see high prices go even higher.

Meanwhile, dought in Europe is killing grazing land and wiping out corn crops, so raising cattle and producing dairy is now more expensive. The extreme weather translates into higher milk, butter, cheese, and meat prices.

In the US, metropolitan areas are home to 85% of the nation’s population and face the worst of the heat. Cities in America’s Sun Belt, like San Antonio and Phoenix, are growing dangerously hot, and experts predict the formation of an “Extreme Heat Belt” along the Mississippi River within the next 30 years.