On one hand, climate change impacts inflation (“climateflation”) through its wide-ranging physical consequences, such as harvest disruptions that can drive food prices up. This impact triggers supply shocks and price volatility. It will amplify with every additional increment of global warming.
On the other, our dependency on fossil fuels (“fossilflation”) – the main cause of global warming – can significantly contribute to inflation. The current, historically high, inflation levels are mainly due to fossil fuel prices. Rising fossil fuel prices directly increase household energy bills, but also make other commodities and services more expensive.
Both climateflation and fossilflation affect the poorest households the most.