BEER AND CLIMATE CHANGE
SPIRITS: NO LONGER SOARING

By: Cassandra Gugoff
Research Associate
October 2007

The effects of global warming have been felt for many years, and businesses are slowly beginning to take notice of the potential adverse impacts a changing climate may have on their industries. Particularly, the noticeable changes in weather patterns have alerted wineries of the potential tragedy awaiting their industry. The best vintners seek to form a balance between sugars, acidity, and the varietal flavors, which give each grape a distinct and unique flavor. Temperature is critical in the period directly before harvest, for this is when the balance is confirmed. Warmer growing seasons and fewer frosts are causing the grapes to ripen too early, which means that the sugars and acidity never fall into balance and the varietal flavors do not have the chance to develop. Within this century, global warming is likely to force vintners to tear up their grape crops and switch to grapes that grow in warmer climates. This is positive for northern climates that are warming and producing better wines, such as England and Canada, but it is a tragedy for places such as Bordeaux and Champagne that will soon be unable to produce their legendary products. While little has been written on this potential uprooting of a well-established industry, there are signs that suggest a similar fate may soon befall Germany's breweries.

In prehistoric times, primitive populations discovered beer and found that it could provide much-needed B vitamins and calories, while ensuring a "safe and ready supply of a potable, portable beverage." Since around 800 BC, beer has been established as a staple of the typical German's diet, giving it the nickname "liquid bread". Germany has even put the importance of quality beer into its laws with the enactment of the Reinheitsgebot (Purity Law) in 1516. Today, the price of the Germans' "liquid bread" is rising. For the famed Oktoberfest this year, a 5.5 percent price increase has been levied, driving the price of the one-liter mug up to $10.70 each, the highest price ever. While these price hikes are outraging German consumers, they might become a new reality as changes in weather patterns and trends to develop biofuels continue.

Changes in Weather Patterns Destroying Vital Crops

Climate change has had a marked impacted on global weather patterns and led to growing concerns among wineries about their multi-billion dollar industry. A similar fate may befall beer brewers as the earth's climate continues to warm, causing an increase in the severity and frequency of storms. The 2006 European heat wave brought an uncharacteristically hot and stormy summer, which greatly damaged Germany's vital barley crop. Malting barley is legally an essential ingredient in making beer. According to the Reinheitsgebot (Purity Law), still proudly upheld in Germany, brewers must use only hops, barley, water, and yeast in their beers in order to guarantee that they are "good and healthy." This means that brewers are legally unable to substitute barley with rice or corn, which both provide the same component in the brewing process. Also, being arguably the most particular of all, German brewers will only accept the highest quality barley for their malt. The vast amounts of rain that fell just prior to harvest can result in damages to the barley kernel and/or the pre-harvest sprouting or germination of barley kernels. These side-effects reduce the ability and/or rate of germination during malting. German brewers will not accept the inferior barley because these damages can lead to lower malt extract, reduced processing performance, and, most importantly, off flavors. The bad weather has cut the usable yieldhigh quality barley from 1.6 million tons to 1.2 million tons in one year. The price, therefore, has risen from 270 euros a ton two years ago to around 385 euros according to the Bavarian Brewers' Association. That's more than 40 percent.

Trends to Develop Biofuels Reducing Barley Crops

A second set of challenges facing the brewers is presented by the growing trend to develop biofuels in Germany.  The highly encouraged “Biokraftstoffquotengesetz” (German Biofuel Quota Act) sets the obligatory minimum quota of percentage of biofuels at 8% by 2015. Germany also plans to uphold the EU-wide target of 10% by 2020 proposed in a communication from the EU Commission on 10th January 2007.  As a result, the German government has begun to subsidize corn and rapeseed production to ensure that the necessary amounts of these crops are available for use as biofuels. Barley farmers are highly susceptible to the conversion, due to the current poor crop yields of barley.  Many farmers are getting out of the barley business altogether and adopting the easier, more lucrative, and heavily subsidized crops needed for environmentally friendly biofuels. Obviously this move to rapeseed and corn is further draining the already weak supply of barley. Many citizens blame the move on the government for its subsidization of biofuel crops and plead for it to cease, because, as elementary economics predicts, the higher demand translates to higher prices. 
           
Among the many far-reaching and global impacts of global warming, the effects on Germany’s brewery industry may be among the most curious of all. When Germany raised its sales tax by 3 percent at the beginning of the year, brewers decided to shield consumers from its effects, but they cannot avoid passing on the rise in barley prices.  Since the esteemed Reinheitsgebot is so strict about the necessity of barley, German brewers would have to use low-quality barley if they were to maintain beer prices.  The meager harvest provided large volumes of poor grade malting barley, but many German breweries insist that a fervent demand for perfection is what makes their beer world-famous. Hence, German consumers must make a heartbreaking decision:  pay more for your beloved beer or sacrifice quality for a cleaner environment. Subtle differences such as these, which are caused by climate change, are transforming the world as we know it and permanently altering the lives and businesses of countless people.  If you feel as though you are not being affected by the detriments of global warming, simply take a look around, in your local pub perhaps, and you, too, will grasp the enormity of the issue.