The Guardian - The Trump administration has recently declared a war on climate change research inside the federal government and in the wider US research community, as well as a doubling down on carbon-based business models. But wishing the problem away won’t make it disappear. The real drivers of future inflation are not just tariffs, but the climate crisis and states backing off their decarbonization efforts.
The climate crisis is already affecting prices. The first driver for this is insurance markets. A combination of massively rising damage costs from droughts, wildfires and floods has seen insurance costs soar in many countries. Some insurers have moved to cut coverage in US states such as California and Florida, with the result that the state there is on the hook for damages it can never cover. Recognizing this, reinsurers – the companies that protect insurance firms – are pulling their coverage from insurance writers, creating a long-term rise in prices. The effects spread well beyond insurance markets. In the US you cannot get a mortgage or build without insurance. Housing is already in critically short supply. Prices can only go up.
The climate crisis is also having long-term effects on what we eat. The Potsdam Institute for Climate Impact Research and the European Central Bank have produced the first systematic assessments of how much climate change will impact inflation through impacts on food supplies. Assuming temperature increases projected through 2035, which are probably understated, food inflation will increase by 0.92 to 3.23% per year, while headline inflation will rise between 0.32 and 1.18% per year. US wildfires and Europe’s recent and persistent droughts and crop failures are really just the thin end of this inflationary wedge.
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