Raising the Temperature on Food Prices: Climate Change, Food Security, and the Social Cost of Carbon

Climate change will directly affect food availability and security. Because food production is fundamentally a biological process that is a function, in part, of temperature and moisture, the agricultural sector’s potential vulnerability is particularly large. While there is ongoing scientific debate over the magnitude of the effect of climate change on overall agricultural production, the welfare effects of increased food insecurity could be substantial. This is because food is a necessary good, such that climate change driven food shortages could significantly raise food costs relative to traditionally manufactured goods. However, U.S. policymakers rely on climate change models that do not reflect these fundamental differences between agriculture and other economic sectors. This paper modifies DICE-2010, an integrative assessment model, by disaggregating agricultural goods from the aggregate consumption good and updating the agricultural damage function. By more accurately measuring the cost of potential food shortages due to climate change and similar shortages in non-market goods, we find that the social cost of carbon increases by a magnitude of approximately one-third In preliminary results.