ECB (European Central Bank) paper estimates inflationary effects of climate change:

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  1. Climate change will increase global inflation by as much as one percentage point every year as food costs climb, according to new research coming from the European Central Bank.
  2. In a report published this week, analysts predicted rising temperatures mean annual inflation will be between 0.32 to 1.18 percentage points higher by 2035.
  3. “Climate change poses risks to price stability by having an upward impact on inflation,” said the researchers Maximilian Kotz, Friderike Kuik, Eliza Lis and Christiane Nickel. That would “place global incomes under pressure from rising prices and could impact inflation expectations, thereby requiring monetary policy to react.”
  4. Warmer temperatures will boost annual food inflation by between 0.92 and a hefty 3.23 percentage points, the research paper found.
  5. While the so-called global south, where temperatures are hotter, should face more of the pain, it will also mean particular challenges for economic blocs such as the European Union.
  6. ECB chief too had said in Aug 2022 that 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.

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