Liberals are touting a new study linking climate change and inflation, but economists say that the real causes are more likely to be massive government interventions in the economy purporting to save the climate.
The study, authored by four European researchers and published in the scientific journal Communications: Earth and Environment on March 21, argues that “temperature increases cause nonlinear, persistent increases in food and headline inflation,” according to its text. While corporate media outlets, climate activists and Democrats have boosted the study’s findings, the forces related to climate change that are likely to drive persistent inflation are massive government taxation, spending and regulation pushed by policymakers to fight climate change, according to economists who spoke with the Daily Caller News Foundation.
Climate activists, including Climate Power — which is spending $80 million to support President Joe Biden in 2024 — have touted the study’s findings, while outlets including The Associated Press, ABC News, Axios, The Los Angeles Times and The Hill have also pushed the study since its release. Democrats on the Senate Budget Committee also promoted the study on X, formerly Twitter, stating thats its findings demonstrate another way “that climate change is raising costs for families and threatening our entire economy.”
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— Daily Caller (@DailyCaller) January 1, 2024
“Energy inflation permeates the rest of the economy. So many people want to say, ‘Look at core CPI and we’ve removed energy.’ No, you haven’t, because energy goes into every good and service that’s in the consumption bundle, and so you’re raising the cost of everything,” Michael Faulkender, the America First Policy Institute’s chief economist and a former assistant secretary of the treasury, told the DCNF. “It was Putin’s price hike, it was pandemic supply chain issues, it’s ‘greedflation,’ it’s ‘shrinkflation,’ and now it’s climateflation. It’s anything but their policies being responsible for it.”
Democrats and other defenders of the Biden administration have variously blamed Vladimir Putin, the pandemic as well as corporate greed or price-gouging for inflation.
“We find a rich response of inflation in different price aggregates to fluctuations in a variety of weather conditions. The strongest and most consistent signal arises from fluctuations in average monthly temperatures,” the study states. “Although larger in food prices, these impacts also translate into considerable effects on headline inflation. We find limited evidence for impacts on other price sub-components asides from weak evidence in the electricity sector.”
The study projects that food inflation could jump by as much as 3% annually over the next 10 years due to the impacts of climate change, especially increasing temperatures and heat waves. The study states that the food inflation Europe endured in the summer of 2022 would be amplified by between 30% and 50% by 2035 given the warming the study projects will occur by then.
“Inflation is a monetary issue. It has to do with the money supply. The Earth’s average temperature does not affect the amount of currency in circulation,” Ryan Young, a senior economist for the Competitive Enterprise Institute, told the DCNF. “Climate change policies, rather than climate change itself, do tend to increase inflation. They do this by increasing deficit spending, which central banks are more or less obligated to finance … Typical climate change policies have an additional, smaller effect on inflation by reducing productivity. Green products are often less durable and less efficient, and they take up investment dollars that could have gone to other uses.”
The U.S. money supply, or the total amount of money circulating in an economy, as of January 2024 reflected an increase of nearly $5 trillion relative to January 2020, just before the pandemic occurred, according to data from the Federal Reserve Bank of St. Louis. Inflation has been a persistent problem for the Biden administration and the American economy since 2021, with the consumer price index (CPI) increasing by 18.5% since President Joe Biden took office.
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The Biden administration has pursued “the most ambitious climate agenda in history,” proposing to reshape America’s power grid, cracking down on oil and gas leasing and seeking to force electric vehicles to eventually dominate the American auto market. The Inflation Reduction Act (IRA), Biden’s signature climate bill, contained $369 billion for green initiatives, but Goldman Sachs projects that the actual price tag for those programs could ultimately reach about $1.2 trillion.
Europe has also seen massive inflation since 2021, and the European Union intends to spend hundreds of billions more euros on climate policy and initiatives through 2027, according to the European Commission.
Three of the study’s four authors — Christiane Nickel, Eliza Lis and Friderike Kuik— are affiliated with the European Central Bank, an institution that significantly underestimated inflation in 2021 and 2022 amid an energy crisis and massive fiscal stimulus in response to the pandemic. While the European Central Bank and several of its affiliated researchers were involved with the study, the paper does not reflect the official positions of the institution or the “Eurosystem,” the study notes.
“Climate change won’t drive inflation. It is so gradual that prices have time to adjust,” Diana Furchtgott-Roth, the director of the Heritage Foundation’s Center for Energy, Climate and Environment, told the DCNF. “The effects of warming are swamped by the far greater demand of upwardly-mobile people asking for air conditioning and other energy-intensive goods.”
“It is the solutions to climate change that drive up prices,” she continued. “Intermittent electricity, with wind and solar powering on and off with the wind blowing and the sun shining, and then backed up with gas that kicks in when wind and sun stop generating energy, is more expensive than continuous energy. That’s why electricity bills are rising.”
The authors of the study did not respond immediately to requests for comment.
