Green inflation: The cost of transitioning to clean energy on global prices

Green inflation: The cost of transitioning to clean energy on global prices

While the world agrees on the necessity of transitioning to renewable energy to combat climate change, a new term is appearing in economic dictionaries: "green inflation." This term refers to the price increases resulting from the cost of the environmental transition—the gap between the current price of renewable energy and the price needed to replace fossil fuels. Economic analysis of this phenomenon reveals that the clean energy transition will not be immediate but will come with a transition period characterized by price volatility. The primary cause of green inflation is the increased demand for critical metals required for green technologies, such as lithium, cobalt, and copper. As the production of electric vehicles and wind turbines has increased, the prices of these metals have doubled, driving up the cost of finished products. Furthermore, investment in electricity grid infrastructure requires hundreds of billions, and this investment will be partially financed by h…