Is climate change already affecting your household budget?
Everyone’s attention is gathered on COP28 (or you just started the Christmas party periods and you are dealing with a hangover). For another year heads of government from most of the countries in the world are gathered to discuss what they can do to address climate change and its impact on humanity.
There is already evidence that climate change is affecting our economy by disturbing agricultural production, affecting our properties and/or our productivity.
According to the London School of economics, the cost of climate change in the UK is projected to increase from 1.1% of GDP in 2022 to 3.3% by 2050. The main driver will be the loss of foreign trade and damages in our agriculture sector. But how does climate change affect your pocket ?
Impact on food production
One of the many ways that climate change is affecting our household budget is through its effects on agricultural production. Increased temperatures, more severe storms and increased droughts are reducing the land we used to use to grow crops, changing the yield (the amount of crops grown on each amount of land), affecting the global supply.
A very recent example is sugar production. Unusually dry weather has affected sugarcane production in India and Thailand, which are the world's 2nd and 3rd largest exporters of sugar. That has resulted in sugar prices soaring, for example in the UK granulated sugar is now selling at £1.15 on average per kg in October 2023 compared to 84p this time last year. That has as a consequence prices of other products to increase and of course making our holiday baking even more expensive.
Sugar is just a recent example of a product that has been affected by climate change and the consequences we see in our budget. Droughts affect other products too such as rice, a crop that needs a lot of water to grow - 1kg of rice needs 3000-5000 litres of water to be produced. More frequent droughts because of climate change are expected to slash rice production by 15% by 2050. This will have an adverse effect on the poorest as around 900 million of the world's poorest depend on rice for their everyday needs.
Olive oil is also no exception, a product that the Mediterranean diet depends on. The droughts that we saw in Spain this Summer, the world's largest producer and exporter of olive oil, in combination with the high temperature in Italy and Greece, who also produce a significant amount of olives, has as a result dramatically decreased olive production. It is estimated that the production of olive oil will be between 20% and 30% lower compared with the previous years, and we will see the prices soaring in 2024 [or if you read my blog I can give you some from my mom’s production at a friendly price ;) ]
We have spent the last 2 years seeing prices increasing because of the energy crises, however it seems that climate change and increasing droughts will be the driver of increased prices going into 2024.
Impact on housing costs
As a result of climate change the weather in the UK has been changing, we have wetter weather in the winter but also hotter temperatures in the summer. The risk of flooding has an increased direct impact on our finances, with higher insurance to protect our homes, but also an indirect impact; flooding does not only affects our homes but also damages public infrastructure which is an indirect cost to the citizens. According to Joseph Rowntree Foundation household costs because of higher insurance etc. will be increased from £4 to £37 per household per year
by the 2050s for residential property flooding. But the costs will be higher if we take into account indirect costs incurred by damages in indirect buildings from £19 to £174 per household per year.
As temperatures are rising and sea levels as well, more coastal areas in the UK will face higher risk of flooding, at the same time infrastructure in these areas such as ports will be severely affected. Researchers from the University of Bristol found that if the temperature increases around 1.8C, places including south-east England, north-west England and south Wales are set to experience significantly increased flooding. The annual cost of damage in the UK is estimated around £700 million, and that cost is expected to increase by around 20% if the temperatures continue rising.
The maps below show historical expected annual flood damage (EAD) in GBP billion at 2020 values, and calculated EAD percentage increase with 1.8 degrees global warming.
Image credit: University of Bristol and Fathom
Of course the above are only a few ways that climate change affects us economically, we need to bear in mind that we already see an impact on our environment and health. For example, environmental factors take the lives of around 13 million people every year. Climate impacts are already harming health, through air pollution, disease, extreme weather events, forced migration, and increased hunger and poor nutrition in places where people cannot grow or find sufficient food.
Unfortunately it doesn’t look like things can be solved soon or that our generation will not see the direct impact of climate change affecting our livelihoods, we actually already face it. But we should remain hopeful that the COP28 will provide some policy solutions that will improve our lives in the future.