Isabel Schnabel, member of the Executive Committee of the European Central Bank (ECB), placed on the table the three faces of climate inflation:
“As the number of natural disasters and extreme weather events increases, so does their impact on economic activity and prices. For example, exceptional droughts contribute to sharp increases in food prices, which puts a heavy burden on the burdens of people struggling to make ends meet,” said Schnabel in March 2022 to explain the concept of ‘climateflation’ (in English).
Fossil-inflation (or ‘fossilflation’) refers to the increase in the cost of goods and services produced by measures adopted by governments against climate change. In Europe, the goal is that polluting emissions will be 55% of those registered in 1990 by 2030, before reaching climate neutrality in 2050. Therefore, higher taxes on fossil fuels seek to decarbonize the economy and fight against global warming, which will bring more inflation.
The concept of green inflation (‘greenflation’) refers to the increase in the cost of raw materials required for new decarbonization technologies. “Most green technologies require a lot of metals and minerals, such as copper, lithium, and cobalt, especially during the transition period,” Schnabel said. “Electric cars, for example, use six times more minerals than their conventional counterparts. An offshore wind plant needs seven times more copper than a gas-fired plant,” Schnabel added. Aluminum, tin, nickel, and cobalt are other important minerals for ecological transition, whose prices will increase by 10 in 2022