What is greenflation?
Widespread price hikes are also affecting the energy transition, specifically in the rising cost of materials and minerals used in green technologies. Marifé Fariñas, from 11Onze’s Back Office team, explains how the green revolution is driving up the price of raw materials.
No, the green revolution is not the cause of high inflation, but it is true that part of the price increase is attributable to the energy transition. As Fariñas explains, “the green revolution has increased the price of raw materials, some by as much as 90%”. This price increase, directly related to the materials and minerals used in favour of renewable energies, is known as ‘greenflation’.
This phenomenon is a paradox that necessarily goes with the effort to fight climate change, “fleeing from fossil fuels increases the demand for renewable energies, but this demand increases the price of the materials that make up these products,” says Fariñas.
Although a reduction in the demand for these raw materials cannot be the solution if we want to achieve the energy transition goals, economies of scale, more financing for green projects, and above all, reducing the cost of this financing, can offset part of the effects of green inflation.
Making these changes implies increasing production, but as the Back Office agent says, “although this implies production costs, experts do not believe it will be a threat to the viability of green energy”.
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