Wake up and smell the coffee: rising food prices show destabilising impact of climate crisis | Heather Stewart
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Your morning – and afternoon – coffee is the latest staple to be threatened by climate chaos: the price of quality Arabica beans has soared to the highest level in almost 50 years last week amid fears of a poor harvest in Brazil.
Warnings follow that orange crops were destroyed by the catastrophic floods in Valencia, Spain; and skyrocketing olive oil prices in recent years as the southern Mediterranean is hot.
The cost of the beans accounts for only about 5 percent of the price of a fancy latte, according to the economic research group Economy of capitalso the impact on coffee drinkers is likely to be minimal, but almost every week seems to bring new news of climate-induced price increases.
In the rich world, they cause inconvenience and make life more difficult for low-income households. In developing countries, they can mean total starvation.
Sometimes these price spikes follow extreme weather events, as in the case of the floods in Spain. Scientists tell us that such events have already become more frequent as a result of the climate crisis and will continue to multiply. Or the spikes could be the result of warmer temperatures becoming the new and alarming norm, forcing farmers to rethink long-standing cultivation patterns.
Document for United Nations Department of Economic and Social Affairs recently said, “Major crops such as corn, soybeans, wheat, rice, cotton and oats show suboptimal growth when exposed to excessive heat.”
It further warns that dwindling water availability is another damaging factor – with pests and diseases becoming more widespread – as climate patterns change.
If a single food product or a specific region is affected, the impact on shoppers’ baskets, at least in the developed world, can be minimal: retailers can find alternative producers and shoppers can substitute other products. But economists are increasingly gathering evidence that global warming is putting systemic upward pressure on food inflation – as well as injecting instability into the global food production system.
Challenges can be compounded by climate-related transportation difficulties, as when the number of ships that can pass through the Panama Canal each day had to be cut off due to low water level.
Research published earlier this year in the journal Communications Earth & Environment found that climate pressures could add an average of 0.9 to 3.2 percentage points to global food price inflation over the next decade, depending on how much hotter we allow the planet to get. In hard-hit regions, the impact could be much worse.
This is yet another reason that action to limit emissions is essential and strengthens the case of countries that fought for a greater financial agreement from the rich world at the Cop29 summit. But even in the best-case scenario, climate-related price chaos is here to stay.
All of this raises the question of whether policymakers have the tools to deal with this new era of uncertainty. Raising interest rates isn’t meant to be the right response to supply shocks anyway, but it seems particularly ill-suited to addressing climate-induced scarcity.
The president of the European Central Bank, Christine Lagarde, discussed some of these issues last year at the annual central bankers’ celebration in Jackson Hole, Wyoming. in a speech it called into question whether conventional monetary policy could work in what she called an “era of shifts and disruptions.” (Lagarde also mentioned other important structural changes, such as the geopolitical realignment of trade patterns.)
Economist Isabella Weber has shown that corporations have extraordinary pricing power in the grip of shocks like this, which they use to build profit margins at the expense of consumers.
She believes that governments may need to use unconventional approaches to manage the resulting inflation – including price ceilings and potentially even hoarding buffer stocks of staple foods for emergencies.
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The latter sounds like a last resort, but Liz Truss’ Energy Price Guarantee – a drastic intervention in the UK energy market to protect households from a spike in bills following Russia’s invasion of Ukraine – would have been unthinkable until it was.
Clearly, a significant part of the response to climate-induced price rises must also be investing in global resilience in the face of the coming crisis: flood protection, more weather-resistant crop varieties, and research to deal with pests and diseases.
But as economist Andrew Sissons argued recentlyin the current political environment, there is a problem with many of these solutions – they are expensive and long-term.
Judging by the series of global elections over the past 12 months in which incumbent presidents have been ousted, voters are impatient for a spike in the price of essential goods. The price of a carton of eggs, which appears repeatedly in the US campaign, for example.
There is no logic that cash-strapped people are willing to shoulder the costs of insulating the economy against structural changes like these – or that politicians are willing to discuss the trade-offs honestly. And populists, including reformists in the UK, are always ready to do so lashed out at environmental costs as wasteful and unnecessary.
Ed Miliband’s UK green investment may be an honorable exception – but Labour’s current plans are a shadow of the £28 billion a year once promised, and returns in the form of lower bills look a long way off. Or, as Sissons puts it, “The things that actually work to address cost-of-living crises may not mesh well with election cycles.”
Food price shocks are only one facet of the climate crisis, but their increasing frequency is a warning sign that we are entering a new, more volatile era, with a set of policy tools created in calmer times.
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