A joint study conducted by the Potsdam Institute for Climate Impact Research (PIK) and the European Central Bank (ECB), has attempted to quantify the impact of climate change on food price inflation. Under the authors’ central specification, global warming will put upward pressure on food inflation of between 1.5-1.8 percentage-points per year by 2035, globally. There is a clear message: the impact of climate change will be large enough to have a meaningful impact on headline inflation over the course of the coming decade, which central bankers will not be able to ‘look through’ as transient.
Despite numerous climate records being shattered, Chinese coal production hit a new high of 4.68bn metric tons in the twelve months to March. The use of air conditioning in China and India is expected to soar in the coming years, as incomes and temperatures climb. The installation of renewables capacity is failing to keep up with rising power demand, leaving coal to close the gap. Current warming begets more warming. August power prices for Dallas have jumped to $168.70 a megawatt-hour, the highest level in five years for this time of the year.
The EU’s insurance regulator has called for urgent action, as climate change increases the frequency and severity of extreme weather events, pushing up the price of cover. Economic losses from weather- and climate-related extremes have been mounting. Higher spending on defence and the green energy transition/climate mitigation, is putting pressure on European budget deficits. Recent revisions have altered the trajectory of the Eurozone general government deficit, which was revised from 2.8% to 3.6% of GDP in Q3 last year, widening further to 4.1% in Q4 2023.
