BONN - CLIMATE change presents a tough choice for governments determined to fight global warming as well as tackle the rising cost of living.
Climate measures inflate energy costs by putting a price on burning fossil fuels, and stoke food bills by using farmland and crops to produce renewable fuels.
Near-record oil and food prices coupled with a global economic slowdown have triggered unrest in several countries and demands to ease taxes on fuels and free up farmland for food.
Nobel laureate economist Joseph Stiglitz said: 'This important part of the global economy, food and energy, has been grossly distorted due to under-pricing of water and (carbon-free) air.'
The fight against climate change has made higher food prices inevitable, he added. 'People will have to adjust.'
Officials from more than 170 countries this week tried to forge a new climate pact in United Nations (UN) talks in Germany that included steps such as emissions trading and taxes to minimise emissions of planet-warming carbon dioxide, which will increase energy costs.
A summit in Rome tried on Thursday to unlock aid for the world's starving, and many there blamed record food prices on climate policies that supported using vast quantities of the world's crops for biofuels.
Cutting United States and European farm and biofuel subsidies would reduce food bills, but there was no alternative to taxes on fossil fuels like oil to cut greenhouse gases, said Mr Stiglitz.
A record oil price is already triggering street protests in Europe and unease in the US and India. This threatens support for a climate fight that this week includes the first US Senate debate on a climate change Bill.
'The state of the US economy, it's obviously slowed; makes discussion much more difficult,' said chief US climate negotiator Harlan Watson on Tuesday, a day after the White House said it would veto the Bill.
The slowdown and the prospect of 'earth-shaking' petrol prices were making Americans nervous, especially given the uncertainty of future benefits from reducing warming, he added.
Climate policies aim to curb emissions of greenhouse gases, such as carbon dioxide, from burning fossil fuels. But utilities pass on to consumers the extra costs of carbon taxes, emissions permits and supplying expensive solar power.
UBS analyst Per Lekander estimated that the European Union's emissions trading scheme accounted for 15 per cent to 20 per cent of European power prices. Renewable energy policies contributed about 2 per cent, but were set to rise rapidly under ambitious European Union goals.
'Clearly, there's an inflationary aspect,' he said.
UN scientists and renowned economists like Mr Nicholas Stern say the climate fight will cost fractions of a per cent in annual growth, but that is averaged over the long term with much more impact in the near term than later.
The costs of major food commodities are climbing, with prices of rice, corn and wheat at or near record highs. This has provoked protests and riots in some developing countries where people may spend more than half their income on food.
Climate change affects food in two ways, directly through events such as exceptional droughts, and via a policy response that has diverted food crops into the production of biofuels like ethanol, meant to be less carbon-emitting than petrol.
The price link is debated - US Agriculture Secretary Ed Schafer estimated that US biofuels' consumption of corn was responsible for just 3 per cent of global food price rises.
Aggressive US biofuels targets will raise conventional ethanol production to more than double current levels, a US State Department official said on Wednesday.
'Say, you double that to 6 per cent (food price impact), it's still by no means the driving force, which is oil, the weather and emerging market demand,' the official added.
Climate change can also add to household bills through water. Globally, 'very dry areas' have more than doubled since the 1970s, according to a Citi report published in January.
This results in businesses spending more money to increase supply, through desalination plants or new pipes, or to lower demand via water meters. These costs may be passed to consumers.
REUTERS
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