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The Price of Climate Change: How Volatile Food Prices Spur Social Unrest

During 2007-8 and again in 2010, a series of extreme weather events in a number of the world’s largest food producing countries including Russia, Ukraine, China, Australia and Brazil caused massive crop failures. Heat and lack of precipitation killed half the crops in some areas of Russia, which supplies 14 percent of the world’s wheat. The decline in production triggered export restrictions in several exporting countries that feared being unable to satisfy their own demand. This in turn escalated a cycle of rapid price increases and supply shortages, culminating in sudden price spikes. As a consequence, the number of rural and urban poor and malnourished people increased significantly around the world. In Pakistan, for example, the number of poor people increased by 14.7 million in 2008, while national poverty rates in nine low-income countries increased by 4.5 percentage points. What followed is a stark warning sign of how climate change can impact global food supply and in turn spur political instability and unrest.

Being a basic need, food is and has always been an inherently political commodity, exerting significant influence on political stability.

The global food price crisis and Egypt’s Arab spring

Being one of the world’s biggest importers of wheat, Egypt is highly vulnerable to price changes on the international food market. Egyptian households spend more than 40 percent of their income on food – much more than consumers in any other emerging economy. Following the global food crises and the resulting food price inflation of more than 20 percent, many Egyptians were no longer able to afford sufficient food, leaving millions of people food insecure. When wheat prices almost doubled in January 2011, the Egyptian population took their discontent to the streets, ultimately ousting the Mubarak regime. Soaring food prices acted as a catalyst, but they were neither a necessary nor sufficient condition for the violent civil unrest of 2011 and 2013. The extreme price increase happened in a situation in which the Egyptian state was already facing a multitude of stressors and pressures: high population growth, a “youth bulge” (with one third of the population under the age of 25) driving massive unemployment, corruption, lack of state legitimacy and rapid urbanisation, which interacted to create an explosive mix.

Food price volatility and fragility: risk factors

What the Egyptian example shows is that the fragility risks posed by high or volatile food prices are highly context-specific. Taking examples such as Egypt as a starting point, empirical analyses have identified a number of specific factors that shape food insecurity-related fragility risks.

First, when looking at whether or not food price volatility causes or aggravates fragility, levels of poverty and urbanisation are key risk factors. Price spikes affect poor people more heavily, as they spend a large share of their income on food. Similarly, urban dwellers are more vulnerable as they depend on food supplies from rural areas. Second, the risk of conflict is also higher when a country has a youthful age structure (“youth bulge”) or where there is a high degree of grievances from relative deprivation of certain social groups. And lastly, weak institutions and poor governance of natural resources make a society more susceptible to the risk of violent conflict involving food price spikes.

Another particularly important factor is national policy, such as consumer subsidies and regulation of export markets. This also applies to Egypt, which has a long-standing tradition of subsidising food to counter recurrent shocks and maintain political stability. Partly these subsidies were used by the regime to compensate for a lack of legitimacy, thus forming part of the social contract that held state and society together. However, many of these funds were diverted to other uses or misdirected to rich population groups. In 2009, 28 percent of subsidies did not reach the most vulnerable households, further eroding the government’s legitimacy.

Egypt is not an isolated case: governments in developing countries often fail to direct subsidies to those most in need, with the result that inappropriate or badly designed government responses exacerbate fragility risks. They frequently use subsidies to raise prices for domestic producers at the expense of consumers, or they favour subsidies for urban consumers, thereby reinforcing rural/urban inequalities. Misguided national responses like subsidies threaten to undermine a government’s legitimacy, thus spurring social unrest and conflict. On the other hand, the example of Russia or Ukraine shows that many governments of food-producing and exporting countries tend to take unilateral, protectionist measures such as tariffs or export bans to mitigate climate impacts, with fatal impacts on food security elsewhere.

Climate change exacerbates these risks

In the years to come, higher temperatures, increases in the frequency and severity of extreme weather and climate-driven water scarcity will disrupt food production around the globe more frequently and more heavily. Disasters such as droughts, flooding and coastal surges will cause significant damage to crops, making food prices more volatile and food provision more insecure. In Southern Africa, corn yields are projected to drop by 30 percent, while almost all major crops in South Asia are expected to decline at a rate of 5 to 10 percent by 2050.

Changes in temperature and precipitation are highly likely to further increase food prices by 2050, with estimates ranging from 11 to 78 percent for rice prices and from 17 to 67 percent for wheat prices under different scenarios. At the same time, climate change poses a serious challenge to attempts to increase productivity, which is necessary to meet the increasing demands of a growing world population. As the pressures of climate change increase, both national governments and international organisations need to be aware of the risks associated with volatile food prices and provision and the challenges of adequate policy responses to mitigate price volatility.

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Volatile food prices and provision is one of seven compound climate-fragility risks that the report A New Climate for Peace identifies as threats to global security. In addition to this global risk analysis, the report also analyses how existing policy processes and institutions in the fields of climate change adaptation, development and humanitarian aid, and peacebuilding are ready to address compound climate-fragility risks. In addition, the ECC Factbook covering all seven compound climate-fragility risks lets readers further explore case studies like the one on Egypt.