RUTH SUNDERLAND: Come clean on greenflation


RUTH SUNDERLAND: Politicians and central bankers should be truthful about the costs – and about the risks – of greenflation

  • ‘Greenflation’ – a Wall Street coinage for the rising costs of climate change action
  • Some economists and financiers fret that going green will drive inflation up 
  • Analysis suggests transition to net zero will cost around $150tn over 30 years 


Portmanteau words are one of the irritations of modern life. But ‘greenflation’ – a Wall Street coinage for the rising costs of climate change action – is about to enter the vocabulary.

Inflation is making a comeback in the UK, where we have the highest rate for a decade at 4.2 per cent. The US is seeing the biggest surge in more than 30 years, with consumer prices up by 6.2 per cent compared with a year ago. 

Central bankers, who are understandably reluctant to raise interest rates, argue this is a transitory, Covid-related phenomenon. 

A helping hand: Analysis suggests the transition to net zero will cost around $150trillion (£110trillion) worldwide over the next 30 years, a colossal sum

But some economists and financiers fret that going green will drive inflation up, and that this phenomenon could persist long after the pandemic fades into memory. 

Ethan Harris, the chief economist at Bank of America, is among those warning that the rush to renewable energy could add more than three percentage points to inflation in the US; similar arguments apply on this side of the Atlantic. The rationale is that there is a shortage of the skilled employees needed for a green transformation, which will push wages upwards. 

Coupled with the wage spiral is a spike in demand for commodities such as copper, which has hit record prices this year and is so important in green technologies some see it as the new oil. 

The BoA analysis suggests the transition to net zero will cost around $150trillion (£110trillion) worldwide over the next 30 years, a colossal sum. No less a figure than Larry Fink, chief executive of the world’s biggest investment manager, Blackrock, is also fretting about greenflation. 

Fink warns that combatting climate change will bring ‘much higher inflation’ and that investors will face a ‘significant shock’. It’s interesting, when such influential figures are expressing concern, that worries about greenflation do not receive more airtime. 

One reason is reluctance to dissent from the green orthodoxy because you risk denunciation as a climate change denier. fervour will run ahead of itself, and investment in traditional energy will stall before renewables are able to fill the gap. As a consequence, bills will soar even higher, with this year’s increases a mere foretaste. 

We are already seeing a flight from projects deemed not green enough, such as plans by West Cumbria Mining to open a mine to supply coking coal for the steel industry. 

The local authority approved it a year ago but it has been on ice ahead of Cop26. The mining group claims it will be the world’s first net zero coal mine and if it is not approved, dirtier coal will be imported. 

UK regulators also recently turned down plans by Shell to develop the Jackdaw gas field in the North Sea, even though it would make Britain less dependent on imports. 

None of this means we should scale back on our efforts to protect our planet. And of course, there are huge risks to the economy including extreme weather, agricultural blight, mass migrations and other horrible potential consequences of climate change. 

But politicians and central bankers should be truthful about the costs – and about the risks of greenflation.



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