Climate change is already taking a toll on your wallet

In r/Costco — a Reddit group dedicated to the popular retail chain — there was dismay. The big bottle of olive oil they had been buying for years — the best and cheapest, they said — suddenly cost twice as much as it used to.

“This is crazy steep!” one member wrote in March. “Why is olive oil so expensive?”

You might think that soaring grocery prices come with the rest of inflation, nothing more, nothing less. But economists suspect a co-conspirator we’ve heard a lot about: climate change. Especially since every month in 2024 was the hottest on record. June, with its heatwave in northeastern North America, also set a new record.

According to the European Central Bank and the Potsdam Institute for Climate Impact Research, rising temperatures could add up to 1.2 percentage points to global inflation each year by 2035. The effects are already being felt: drought in Europe is devastating the olive harvest. In West Africa, heavy rains and extreme heat are causing cocoa plants to rot. Forest fires, floods and natural disasters are also driving up insurance premiums.

Researchers predict even greater economic effects.

Storms, droughts, floods…

Temperatures will become unbearable for crops and workers. Severe storms and prolonged droughts will disrupt transportation and trade flows. Rising risks will make it harder to insure any property, home or business.

At present, it is not possible to specify the effect of climate change on prices beyond a few products. Too many factors – wars and transport problems – are also boosting costs at the moment.

But economists are clear: a warmer world will be more expensive.

At the grocery store

The global price of olive oil is at a record high, according to data from the International Monetary Fund. This is linked to another unwelcome record: 2023 was the second warmest year on record in Europe.

The olive trees suffered from the mild winter and produced little fruit¹. Then, when summer came, he did 45 ^oC and the rare olives fell before ripening.

The hot air dried out vegetation and soil, causing plants to wilt and die across much of Europe.

The continent’s olive oil production is barely half its normal level, according to the U.S. Department of Agriculture. With the European Union producing more than 60 percent of the world’s olive oil, the shortage has been felt in grocery stores around the world…and by members of Costco’s Reddit forum.

Food is among the products most likely to cost more because of climate, Kotz notes. Plants lose water through their leaves, stop forming flowers and fruit, and lose the ability to photosynthesize. Crops, livestock and fisheries are highly sensitive to environmental changes.

Cocoa, rarer and more expensive

Cocoa – already at a record price² – could be very vulnerable to future temperature increases, says Jerry Nelson, an agricultural economist at the University of Illinois.

Cocoa plants are genetically very similar, so less likely to have mutations that could help them in a changing environment.

In addition, the high heat and extreme humidity in West Africa make the work of farmers dangerous.

According to a study by the Intergovernmental Panel on Climate Change (IPCC), the risk of simultaneous crop failures in major maize-producing regions could increase from 6% per year in recent decades to 40% if the world warms by 1.5%. ^oC compared to pre-industrial temperatures – a threshold that the planet is expected to exceed within 10 years.

By 2035, climate change could push up annual food price inflation by 3.2%, well above central banks’ target rate of 2%.

Insurance and transportation

Rising insurance costs for equipment and buildings will also impact commodity prices, as will new challenges that extreme weather events can cause in the global supply chain.

The drought in Central America, for example, has caused water levels in the Panama Canal, a crucial shipping route, to drop. Panamanian authorities have had to limit the tonnage allowed and the number of passages.

Ayman Omar, a professor at American University, said the situation in Panama is emblematic of the problems that will affect supply chains as temperatures rise and extreme weather events occur. A flood, a drought, a hurricane — taken in isolation — may have only a marginal effect on the cost of transporting a good. But if multiple events occur at once, “we are not in a position right now to absorb all of those hits,” Omar said.

“We’re going to see a lot of climate-related issues, whether it’s heat or flooding,” Omar said. “Even if it doesn’t impact your components and your production, it impacts your transportation and distribution.”

Sooner or later, he added, “availability goes down and cost goes up. In the long run, that’s the reality.”

This article was originally published in the Washington Post.

1. Read the article “Climate change: in Greece, olives are becoming rare”

2. Read the article “Cocoa at $10,000 per ton: A very bitter bean for chocolatiers this Easter”

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