The climate's cooking and we're running out of stuff
Across the world's markets and dinner tables, a new economic force is quietly reshaping what people pay to live — not through the familiar cycles of recession or policy, but through the slow, compounding pressure of a warming planet. Economists and central banks are now grappling with 'climateflation,' the recognition that extreme weather is no longer a temporary disruption to prices but a structural feature of the global economy. The burden falls hardest on those least responsible for the crisis: poor families in already-hot regions where food costs consume most of a household's income. What was once a footnote in climate science has become an urgent question for monetary policy — and for the social stability of nations.
- A single European heat wave in 2022 raised food prices measurably enough for economists to put a number on climate's grocery bill — a rare and sobering moment of clarity in a complex crisis.
- The danger is no longer seasonal: intensifying droughts, storms, and heat are damaging infrastructure, collapsing crop yields, and destabilizing insurance markets in ways that don't simply reverse when the weather clears.
- Central banks, designed to fight inflation with interest rates, are scrambling to model a force their textbooks never anticipated — one that shrinks supply rather than inflating demand.
- The Global South faces the sharpest edge of this crisis, where each degree of warming translates almost immediately into higher food prices for families already stretched to their limits.
- Policymakers now fear a self-fulfilling spiral: if people expect climate to keep raising prices, wage demands follow, locking in the very inflation they feared — a dynamic with precedent in the Arab Spring and recent rice crises.
The summer of 2022 offered Europe a preview of what economists are now calling 'climateflation.' A historic heat wave scorched olive groves in Spain, killed chickens in Britain, and brought northern Italy its worst drought in seventy years, devastating rice harvests. Researchers were able to isolate climate change's contribution to what followed: a 0.7% rise in food prices across the continent, nudging overall inflation up by roughly 0.3%. For the first time, there was a specific number attached to what warming costs at the grocery store.
The phenomenon extends well beyond food. As summers grow more intense, air conditioners strain electrical grids and push up utility bills. Heat warps roads and rail lines, raising transportation costs that companies pass to consumers. Hurricanes and wildfires are destabilizing insurance markets, sending premiums climbing. What once looked like temporary weather disruptions are beginning to look like permanent features of the economic landscape — a shift that is forcing central banks to rethink their most basic assumptions.
Measuring climateflation is difficult precisely because it moves through the economy in ways that are hard to isolate from recessions, geopolitical shocks, or structural differences between rich and poor nations. But the research is accumulating. One study projects that elevated temperatures alone could raise global consumer prices by as much as 1.2% annually by 2035. Food prices could climb up to 3% per year globally, driven by falling crop yields above 77 degrees, storm damage to staples, and drought-triggered livestock losses rippling through supply chains.
The geography of this crisis is deeply unequal. In developing economies, a 1.8-degree temperature anomaly translates to roughly a 1% inflation increase within three months. Cooler nations like Canada or Norway may even see modest price relief as growing seasons lengthen — but for most of the world, and especially the Global South, the trajectory is upward. Poor families, who already spend the largest share of their income on food, face the steepest climb.
The risk economists watch most closely is whether climateflation becomes self-fulfilling. If consumers expect prices to keep rising, they demand higher wages, which drives inflation higher still — the very outcome they feared. Food price spikes helped ignite the Arab Spring. A rice crisis in Japan in 2024 produced significant political fallout. Central banks are racing to understand and model these dynamics before consumer expectations become entrenched. As one Danish central bank economist observed, the surest path away from this future is a global green transition. Without it, a hotter world will almost certainly be a more expensive one.
The summer of 2022 brought a reckoning to Europe's dinner tables. A heat wave pushed temperatures to 115 degrees in Spain, withering olive groves. British chickens collapsed in the heat, and chicken-meat production fell 9% compared to the previous year. Northern Italy faced its worst drought in seven decades, decimating the rice harvests that feed risotto kitchens across the continent. When researchers analyzed what had happened, they found that climate change alone had warmed European summers by an average of 2.25 degrees Fahrenheit—and by as much as 10 degrees in some regions. That heat translated into a 0.7% jump in food prices across the continent, which nudged overall inflation up by roughly 0.3%. It was a rare moment when economists could point to a specific number and say: this is what climate change costs you at the grocery store.
This phenomenon, now called "climateflation," is only beginning to be understood. But the evidence is accumulating everywhere you look. As summers intensify, air conditioners work harder, straining electrical grids and raising utility bills. Heat buckles roads. Rail lines warp under the stress, and the transportation costs companies incur get passed along to consumers. Hurricanes, wildfires, and other extreme weather are destabilizing insurance markets, sending premiums skyward. For decades, droughts and storms have disrupted prices, but economists and central bankers are now asking a harder question: what happens when these disruptions stop being temporary and become the new normal?
The challenge in measuring climateflation is that it moves through the economy in ways that are difficult to isolate. When coffee prices spike or water bills climb, teasing out how much of that increase stems from human-caused global warming versus other factors—recessions, geopolitical conflicts, differences in how much poor countries spend on food compared to wealthy ones—requires painstaking analysis. A hurricane hitting one coastal region may barely move the national inflation needle, while a heat wave spanning an entire continent could reshape it. Mark Blyth, who directs Brown University's Rhodes Center for International Economics and Finance, points out that traditional economics textbooks define inflation as too much money chasing too few goods. "There's no textbook that says, 'The climate's cooking and we're running out of stuff,'" he says. "It isn't taught that way. It generally isn't thought about that way. Now people may be beginning to realize this."
Central banks have become the primary institutions studying this problem, driven by their mandate to keep prices stable. Historically, weather-related price spikes have been temporary enough that central banks could ignore them without raising interest rates. But as extreme weather events grow more frequent and intense, that calculus is shifting. One early study suggests that elevated temperatures alone could increase global consumer prices by as much as 1.2% annually by 2035, assuming central banks do nothing to counteract it. In Europe, the figure could reach 0.76% per year—enough to consume a significant portion of the European Central Bank's 2% inflation target. Much of this effect would come through food prices, which researchers estimate could rise by up to 3% globally each year. The mechanism is straightforward: when temperatures climb above 77 degrees, crop yields begin to fall. Storms make staples like beans and fish more expensive. Droughts trigger some of the largest price increases, particularly for meat, as widespread crop failures and livestock losses ripple through supply chains.
But the geography of climateflation is deeply unequal. The hotter a region already is, the more vulnerable it becomes to further price increases as temperatures rise. This means the Global South—where temperatures are already high and poor families already struggle with bills—faces disproportionate harm. In developing economies, each 1.8-degree Fahrenheit increase in temperature anomalies leads to roughly a 1% increase in inflation about three months later, according to research from the University of Oxford and the Dutch central bank. By contrast, cooler places like Canada and Norway might actually see prices fall as warmer weather extends growing seasons and reduces heating demand. But in most of the world, prices are expected to rise more than they fall.
There is a darker possibility that economists are now watching closely: what happens when climateflation becomes self-fulfilling. If consumers expect prices to keep rising because of climate change, they may demand higher wages. Those wage increases then drive inflation higher, creating the very outcome people feared. This dynamic has historical precedent. Food price spikes helped trigger the Arab Spring in 2010 and 2011. In 2024, a rice crisis in Japan sparked significant political fallout. When people buy groceries every week, large price changes quickly become sources of political anger and instability. The question facing central banks and policymakers is whether they can manage climate inflation before consumer expectations about future prices become entrenched in wage negotiations and broader economic behavior. As one Danish central bank economist put it, the best way to avoid the damages from climate change is a global green transition. Without it, a hotter world will almost certainly be a pricier one.
Notable Quotes
There's no textbook that says, 'The climate's cooking and we're running out of stuff.' It isn't taught that way. It generally isn't thought about that way. Now people may be beginning to realize this.— Mark Blyth, Brown University Rhodes Center for International Economics and Finance
The best way to avoid the damages from climate change is to have a global green transition. Absent that, a hotter world will also probably be a pricier one.— Marcus Molbak Ingholt, senior lead climate economist at the Danish central bank
The Hearth Conversation Another angle on the story
So when you say climateflation, you mean the direct cost of climate change showing up in what people pay for things?
Partly. It's the heat itself raising prices—crops fail, infrastructure breaks, supply chains snap. But it's also about expectations. Once people believe prices will keep rising because of climate, they start acting in ways that make it true.
That seems like the scarier part.
It is. A temporary spike in food prices is painful. But if it changes how workers negotiate wages, how businesses set prices, how central banks think about interest rates—then you've got a structural problem, not a weather problem.
The article mentions the Global South being hit hardest. Why there specifically?
It's already hot. When you're already near the temperature threshold where crops start failing, even a small increase in heat becomes catastrophic. And poor families spend a much larger share of their income on food than wealthy ones do. A 3% food price increase in a rich country is annoying. In a poor country, it's the difference between eating and not.
Is there any scenario where this doesn't get worse?
Yes. A rapid global green transition that actually slows warming. But that's not what the research is modeling. The models assume we keep going as we are, and they're saying prices will rise 1.2% annually by 2035 just from heat alone. That's before you account for storms, droughts, all the other extremes.
And central banks can't just raise interest rates to fight it?
They could, but that creates a different kind of pain—unemployment, slower growth. You're choosing between inflation and recession. The real answer is preventing the warming in the first place. Everything else is damage control.