Climate inflation in Switzerland: why the heat drives up prices (cross-border guide)

Context

In a nutshell

• The scarcity of goods increases prices according to the economy
• Climate inflation drives up fuels and foodstuffs
• Rhine drought hampers logistics and river transport
• Central banks study new cost control tools

Key facts

• What: Rising prices due to climate change and drought
• When: Measurements and estimates for the period 2026-2035
• Where: Switzerland and Europe
• Who: Experts, ECB, FINMA, Oxford Economics and Potsdam Institute
• Amount: Inflation target 2%, up to 3% in 2027 and annual increase 1.5%-1.8% by 2035
• Measurement: Dry rivers and goods on the road even on public holidays with a 6% exemption

One of the fundamental laws of economics states that the scarcity of a good increases its price. This rule applies today to various products, from fuels to agricultural ones, due to the drought affecting Europe. Experts predict that as a result of the so-called climate inflation that in recent weeks in Switzerland has already had its impact on the price of fuels, the cost of shopping in supermarkets will increase starting next year. The term climateflation was popularized by Isabel Schnabel of the ECB, which distinguishes it from other forms of inflation related to energy or ecological transition such as fossilflation and greenflation. The main objective of the authorities remains containment

Operational details

The lack of rainfall for prolonged periods and heat waves also have a significant impact on agriculture in both Switzerland and much of Europe. The effects, although not yet fully quantifiable, are already measurable on pastures, crops, farms, pastures and the availability of fodder with a consequent increase in costs for the entire sector. Summer crops, in particular corn, potatoes, sugar beets and sunflowers, are among the most affected. In the cantons of Bern, Freiburg and Zurich, the cantonal agricultural bodies report estimated yield drops of between 20% and 35%. Recently, it was learned that more than 1,100 farms have already reported drought damage to Hail Switzerland, the company that protects the sector in the event of adverse weather conditions, with preliminary compensation exceeding CHF 18 million. The situation is so serious that the Confederation has granted extraordinary support to the Swiss agricultural sector to mitigate the losses recorded by local producers, allocating a federal emergency fund of 45 million francs approved by the Federal Council on 14 July.

Analysis of economic and food forecasts

The lack of land products and climate inflation in general are of great concern to central banks, starting with the European one. Until now, financial institutions have considered these increases as isolated events and there have been no

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Key points

Managing the economic impacts of climate change requires careful financial planning and a constant assessment of the cost of living in Switzerland. Residential consumers and households face progressive price increases that affect both basic foodstuffs and energy products and fuels at the pump. In the metropolitan area of Zurich alone and in the Canton of Ticino, health insurance premiums and energy costs increased by 6% and 4.2% respectively on an annual basis, compressing the savings margins of domestic economies.

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Economic planning checks and tools

To deal with the expensive life and economic fluctuations related to climate inflation, it is useful to regularly monitor your financial and social security situation. Federal and cantonal authorities continue to publish statistical updates via the Federal Statistical Office to track consumer price changes, attested at an annual rate of 1.2% according to data updated in May 2024.

Meanwhile, the Swiss productive and economic sectors are calling for structural responses to

Source: rsi.ch