Rising temperatures and rising prices: the inflationary impacts of climate change and the need for degrowth-based solutions to the ecological crisis

This paper highlights the role of climate change as a persistent, systemic, long-term inflationary driver. The inflationary impacts of climate change have been commonly overlooked in the economic literature. As global temperatures rise and extreme weather events become more frequent and severe, the inflationary effects of climate change will only intensify. These effects could be further exacerbated by the considerable pricing power of the corporate sector. As a persistent inflationary driver, climate change poses a serious threat to central banks’ ability to maintain price stability mandates. The traditional tools of monetary policy will be ineffective in curbing climate change-induced price pressures. Further, growth-based Green New Deal and related fiscal policies will be ineffective at mitigating climate change and reducing its inflationary impacts. Unless degrowth solutions are sought, climate change and its price effects will only intensify over time.