Climate Change-Induced Inflation Uncertainty in Temperate and Tropical Regions: Does Renewable Energy Offer a Solution?

This study examines the impact of key climate change indicators, including maximum temperature, minimum temperature, and precipitation, on inflation uncertainty across tropical and temperate regions. Using data from 53 countries between 1990 and 2020, the analysis applies Panel Structural Vector Autoregression to uncover regional differences. The findings reveal that maximum temperature significantly contributes to inflation uncertainty in tropical regions, while precipitation plays a major role in temperate regions. The study highlights the critical role of renewable energy in reducing climate-induced inflation volatility, particularly
in tropical areas. The results emphasize the need for region-specific monetary policies that focus on stabilizing food prices, promoting renewable energy in tropical regions, and strengthening infrastructure resilience and water management in temperate regions. Integrating renewable energy into economic strategies is essential for lowering inflation uncertainty and fostering sustainable growth in the face of climate challenges.