Climate change could potentially increase global inflationary pressures: scholars

Jakarta—Experts from the Potsdam Institute have revealed that climate change affects life on Earth and significantly impacts global inflation. Their latest findings, published in Communications Earth & Environment Journal on March 21, 2024, highlight how global warming and extreme heat can potentially increase inflationary pressures, especially on basic necessities and foodstuffs.

“In this study, we found that projected temperature conditions in 2035 as a result of future global warming will lead to increased inflationary pressures worldwide,” said the researchers from the Potsdam Institute. They explain that the results show a potential food inflation of 3.23 per cent per year globally, a significant figure.

The researchers also highlighted the importance of greenhouse gas mitigation in reducing these inflationary pressures.

“After 2035, the magnitude of expected inflationary pressures will differ depending on the emissions scenario, highlighting that effective mitigation measures can significantly reduce the impact,” they explained.

In addition, the impacts of climate change have also begun to be felt in some aspects of the economy. One example is the increase in housing prices in areas of high climate risk and the shortage of food commodities worldwide. According to the researchers, food is the largest component of inflation affected.

However, the impact of inflation is not evenly distributed around the world. The greatest pressure is felt in countries in Africa and South America. This indicates the need for appropriate policy approaches to address growing inflationary pressures.

The researchers also warned that if greenhouse gas emissions are not reduced, the inflationary impact could worsen.

“In the best emissions scenario, exogenous pressures on inflation will only increase slightly in 2060 compared to 2035,” the researchers said.

However, in the worst-case scenario, food inflationary pressures are expected to exceed 4 per cent per year in much of the world. This emphasizes the urgency of taking concrete action to reduce emissions and address the impacts of climate change to maintain global economic stability. (Hartatik)

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