Prolonged inaction on climate change has left those at the bottom of the socio-economic ladder exposed to the fluctuations of an unpredictable global market, writes Thomas Perrett
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Food inflation in Britain has reached its highest level in 45 years, having risen from 18.2% in February to 19.1% in March. The price of food has seen a 25% increase over the past two years – equivalent to the same price growth seen across the preceding 13 years.
In response, the Bank of England is expected to raise interest rates, which it hopes will dampen inflation by suppressing consumer spending and reducing demand. But food inflation is being driven primarily by external factors, rather than excessive levels of consumer demand.
This includes climate change-induced extreme weather which has pushed up prices, causing prolonged disruption to global supply chains.
According to think tank Positive Money, poor crop yields in Spain – the world’s largest olive producer – has increased olive oil prices by up to 25%. Meanwhile coffee supply shortages in Brazil have pushed the price of coffee up by 70% between April 2020 and December 2021.
India – the world’s second-largest wheat producer – has been affected by hail storms and rising temperatures, which have exacerbated supply chain disruption and incurred major losses to farmers. Prices had already risen due to the ongoing impact of Russia’s invasion of Ukraine, which rendered export markets in the Black Sea obsolete.
Opponents of climate action have consistently claimed that expensive green technologies will hurt ordinary consumers, causing punitive tax rises and exorbitant costs to be passed on to them.
The Net Zero Scrutiny Group (NZSG), for instance, a Conservative backbench parliamentary pressure group led by Steve Baker MP, has characterised net zero policies aimed at reducing Britain’s dependence on volatile, international energy and food markets as expensive and unworkable.
Baker himself has criticised the “eye-watering costs” which the implementation of net zero will apparently impose. He has claimed that policies intended to reduce greenhouse gas emissions by installing heat pumps in lieu of gas boilers could spark “a terrible revolt” and that “the cost of net zero could deliver a political crisis greater than the poll tax”.
But the recent crisis in what Positive Money terms ‘Climateflation’ has indicated that, far from costly net zero policies imposing costs on consumers, the failure to insulate the country from global supply chain shocks induced by fossil fuel usage will undermine the economy’s resilience – with severe consequences for those on lower incomes.
Those from disadvantaged socio-economic backgrounds, who are more likely to spend an increasingly higher percentages of their income on essentials, typically suffer from rapid fluctuations in food and energy prices.
According to think tank the New Economics Foundation (NEF), 37% of families will be unable to afford basic living costs by next year, as the poorest 10% of households will see their earnings fall £2,300 below the rising cost of basic goods between April 2022 and April 2024. Recent NEF forecasts have indicated that price increases in essential goods are likely to outstrip rising incomes three times faster for the poorest households than for those on middle incomes, while only the wealthiest families will see their incomes rise relative to inflation.
Disputing that raising interest rates would alleviate the burden of inflation, the NEF has called on the Government to “rebuild the UK’s income safety net, invest in our public services and reduce the country’s reliance on expensive fossil fuels”.
A substantive programme of investment in renewable energy could save as much as £10.2 trillion by 2050, as the abundance and rapidly declining costs of solar and wind power provide an effective alternative to oil and gas, the extraction of which is becoming increasingly unviable. While the costs of solar PV modules declined by 89% between 2009 and 2019, alongside a 79% decline in the price of onshore wind, oil is experiencing a falling Energy Return on Investment (EROI) – meaning that more energy is required to extract the same amount of oil, typically declining in quality.
However, consumers have been left at the mercy of international fluctuations in food and energy prices due to the inability of successive governments to adequately divest from fossil fuels, exacerbated by Russia’s invasion of Ukraine, which has seen fertiliser prices spiral causing farmers to delay production.
Researchers at Edinburgh University found that as many as 100 million people globally could be left malnourished if prolonged rises in the price of fertiliser continue. The researchers also predicted that food costs could rise by 81% this year, with spikes in fertiliser prices a primary contributing factor.
As food prices have soared, the profits of not only the world’s largest fossil fuel companies, but the giant multinational food suppliers, have increased dramatically. According to trade union Unite, the four largest global agribusiness corporations made $10.4 billion in profit last year – an increase of 255%.
Supermarkets too have taken advantage of price inflation during the post-pandemic period, using their market positions to shore up profit margins. Tesco, Sainsbury’s and Asda increased their profits by 97% in 2021, as Britain’s top eight food manufacturers made profits totalling £22.9 billion, a increase of 2021 since the pandemic.
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Taken together, three important industries affected considerably by extreme weather overseas and the spiralling cost of gas – food, energy and transportation – comprise 57% of overall, economy-wide inflation, as corporate profiteering, worsened by market concentration precluding competition from driving down prices, has passed the burden of runaway inflation onto consumers.
Specialisation has seen just four companies control 90% of grain production, and just six firms control 63% of the world’s commercial seeds and 75% of agrochemicals used globally. As eight countries now account for around 90% of the world’s wheat exports, the escalation of the climate crisis and stagnation in world leaders’ decarbonisation programmes could see import-dependent countries, which have for decades relied upon strong currencies and balance of payments deficits to stabilise inflation, exposed to volatile economic circumstances.
Major food producers have also accumulated enough in profits to pay out substantial amounts to shareholders. In 2022, Nestle paid £8.5 billion to shareholders while prices rose by 7.5% in the second half of the year. Unilever, having made £4.3 billion in profit last year, paid £1.3 billion to its shareholders while hiking prices by 12%.
The increasing frequency of natural disasters caused by climate change has disrupted global supply chains, exacerbated levels of inflation in essential goods, and hit ordinary consumers hardest.
Prolonged inaction on climate change – from refusing to prevent banks investing in fossil fuels to failing to provide low carbon insulation and clean energy – has left those at the bottom of the socio-economic ladder exposed to the fluctuations of an unpredictable global market.
Yet, not all have been equally affected – the largest food manufacturers and fossil fuel companies have raked in substantial profits.
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