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2024-03-29 Rising Temperatures, Rising Prices: How Climate Drives Inflation

From Climate One | Part of the Climate One series | 58:57

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We’ve heard a lot in the last few years about inflation – how much of it we’re seeing, who’s to blame, when it might be tamed enough for interest rates to start falling again. But missing from a lot of those conversations is the role of climate disruption. And yet  extreme weather and unpredictability lead to destroyed inventory and higher prices on all kinds of things, from food to electronics and clothing. 


Increased climate risk also leads to higher costs of insurance for homes, autos and healthcare. First Street Foundation uses climate science to model climate risk everywhere in the U.S. Jeremy Porter, head of climate implications research, says his organization focuses on the symptoms of climate change: observable metrics like higher rainfall and increased wildfires. They created a tool called riskfactor.com that allows users to input their address and see what climate impacts will affect their property specifically. 


Porter says in addition to higher homeowners insurance rates, people are finding themselves unprotected against certain risks, like precipitation flooding, even for those who aren’t in designated flood zones.


“So now all of a sudden, they're exposed to this repeated and frequent flooding, whether it be basement flooding or something more serious,” he says. “We’re starting to see some of that make its way into the cost of home ownership – people having to pay for their own repairs.”

As we continue to live in places that are growing more and more at risk from climate threats, we'll be paying more for the home, auto and health insurance to protect ourselves and the things we have, says E&E reporter Avery Ellfeldt. 

“We want people to be able to afford health insurance, home insurance, car insurance. It's super important and critical for recovery. But at the same time, the market is trying to signal, ‘hey, this part of California, or this part of Florida is no longer safe and low cost to live in.’” 

London School of Economics Professor Nicholas Stern uses potholes as a way to explain how climate impacts direct and indirect costs of living.

“The first is your tires and your wheels are going to last less long. On average, they're going to be more expensive. These potholes are causing major road accidents and you're seeing very big increases in the insurance premiums. So you're going to see it in the maintenance of your own car, and you're going to see it in the insurance premiums that you face and because extreme weather events are undermining the roads more quickly, you're going to see it in the building and costs associated with the highways and that's going to come through your taxes.”

Stern says we have to think of climate change and the systems change necessary as requiring investment. 

“Now that investment is really going to drive a growth story, but that investment has to be financed. So there are going to be shorter run changes in price as a result of the investment we have to make. But we have to realize that this is a big investment with big returns in terms of lower cost and less instability in the future.”

Related Links:

Risk Factor: What Will Climate Cost You?

Rise in Sugar and Cocoa Costs Makes Halloween Candy Pricier

Climate Change is Exacerbating Inflation Worldwide

Extreme heat drives demand for payday loans