Energy transition and greenflation

Greenflation is the term that refers to the increase in prices related to the energy transition. Xavi Viñolas, editor of 11Onze Magazine, visits Energia, the new programme hosted by Eduard Berraondo, to talk about the economic cost of the fight against climate change.

 

Rising energy, raw material and food prices have pushed inflation to record highs. The causes are diverse and varied: climate disasters, geopolitics, and monetary policy play a key role. But part of this inflationary pressure is caused by the energy transition to a ‘greener’ production model. This is known as greenflation.

This increase in prices is directly related to the materials and minerals used in favour of renewable energies, “when demand rises for the production of batteries for electric cars, solar panels or windmills, the raw materials used to produce these products go up in price”, Viñolas points out.

A phenomenon that is a necessary paradox that goes with the effort to fight climate change: the more we want to accelerate this transition, the more expensive it becomes. And yes, the energy transition is necessary and inevitable, but, as the editor of 11Onze explains, “the transition has a cost, and at the current rate, this cost is unsustainable”.

That said, it is expected that in the long run, economies of scale, more funding for green projects, and above all, reducing the cost of this funding, will offset some of the effects of green inflation, ensuring the viability of the transition to a more sustainable model.

The European Union, shooting itself in the foot

Europe’s poor planning before deciding to dispense with multiple local energy sources such as coal or nuclear energy, without a domestic substitute, has weakened European energy sovereignty, unable to cope with the arrival of winter and the reopening of its economy after the pandemic.

On the other hand, the old continent’s eagerness to follow the geopolitical interests of the United States by neutering Russian oil and gas supplies has caused the price of energy to multiply exponentially, raising the cost of living of the population to unsustainable levels and, at the same time, endangering Europe’s failing manufacturing industry.

Unfortunately, Europe is becoming the region with the highest energy costs in the world, and much of this was an avoidable crisis. As Viñolas says, “natural disasters are beyond our control, but the sanctions on Russia and the sabotage of gas pipelines have wrecked the European economy, and these are things we brought on ourselves”.

 

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The lack of rain leads to a reduction in the water supply in many municipalities in our territory. These restrictions directly affect agriculture and, consequently, livestock farming. The increase in production costs and the loss of crops due to lack of water have a significant impact on the rise in inflation. Sílvia Garriga, 11Onze agent, explains it to us.

 

Global warming caused by human activity has exacerbated drought, an endemic problem in Mediterranean countries. A fact that is evident in the state of water reserves in aquifers and reservoirs in our territory. Catalonia has accumulated months of drought and water reserves have fallen to 33%, almost half of last year’s reserves.

Rainfall and water reserves are vital for agricultural production and have a direct impact on the prices we pay for products in the supermarket. This link between drought and inflation is not always obvious. As Garriga points out, “many of us have not been aware of the drought-induced increases in production costs“.

In addition to the rising costs of electricity, fuel, fertilisers, and animal feed, there is the loss of crops due to the lack of water, which leaves the agricultural sector with no profit margin. “If crops are lost due to the lack of water, demand does not decrease, and products have to be imported, which will end up being more expensive for the consumer,” explains Garriga.

More than 500 municipalities with water restrictions

Catalonia is suffering the worst drought since 2008 when water reserves in reservoirs and internal basins fell by up to 20%. Faced with this situation, the Catalan Water Agency (ACA) has been forced to decree a drought alert in several areas of the territory, approving limitations on water consumption in more than 500 municipalities.

In addition to the 301 that were already on alert, more than 100 municipalities in the regions of Alt Penedès, Anoia, Baix Llobregat, Barcelonès, Garraf, Maresme, Selva, Vallès Oriental and Vallès Occidental, which supply the Ter-Llobregat basin, and also those affected by the area of influence of the Darnius-Boadella reservoir, were added on Tuesday.

Although the situation is not expected to worsen so much as to reach exceptionality, at which point reserves fall below 25%, everything will depend on the rainfall that may fall during the remainder of the autumn. The long-term weather forecast maps suggest that, from November to January, there will be more rain than normal on the coast and in the counties of Girona, but less rain than usual in the western Pyrenees.

 

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Tourism is one of the businesses that shows one of the highest capital flow worldwide. As per the report from the United Nations World Tourism Organisation (UNWTO), in 2019, 1.4 billion of international tourists were recorded and up to between 100 and 120 million of jobs are linked to it.

 

It is, therefore, a sector with an undeniable weight in the world’s economy, and more particularly, with a direct affectation to practically all the inhabitants in the planet either in an active form as travellers or in a passive one as locals.

 

The touristic sector asks for regulation and responsibility

Given its importance, since years ago there are more and more organisations, Companies and collective bodies that ask for a sustainable tourism system that can be kept over time and nourish the population. Everything points to the fact that this industry will continue growing during the next years and, therefore, if the current model does not change, the negative impact that it generates will increase at the same rate. We are all currently familiarised with sustainability as a concept and we even have adopted certain daily routines that contribute to respect the environment. An attitude that changes more or less when we travel: we leave lights switched on, recycling, take care of public spaces, using more ecological transport ways, spend the necessary water, using less plastic … actions that we may miss when we are on holidays and which, by themselves, do not generate an impact, although they may mean a higher issue when they are multiplied by 1.4 billion people.

Within this context, and with the urgency to change the touristic model into a more responsible perspective, it pops-up the sustainable tourism concept, understood as the one which “satisfies current needs without compromising the capacity of future generations to satisfy their own needs”, as it is described in the Brundtland report. It will be about then, to minimise the negative impact that tourism is currently generating and to maximise its benefits, mainly from the three big pillars: environmental, sociocultural and economical.

 

To reduce the environmental impact to preserve future 

Tourism very much depends on the environmental quality to survive and evolve but, paradoxically, this is one of the main activities that it harms. Infrastructures construction like airports and roads, highly polluted transport ways by land, sea and air, creation of equipment and touristic resorts like restaurants, shopping centres, golf fields or sportive areas are examples of the negative impact that it brings to any region. All of this brings also risk to the flora and fauna in the area, which in the past years has worsened the situation of hundreds of species, especially the marine ones, which have not been able to overcome the changes that human pollution has caused in their natural habitat.  

In parallel, it has been thanks to tourism that some natural areas have become protected areas or they are areas with especial care being taken orientated to preserve the space looking forward to the future. This is the positive impact where sustainable tourism should be betting: to achieve the maintenance of care of spaces both natural and urban, by governments’ organisms to favour both, local citizens and future visitors.

 

Controlling the sociocultural impact and to bet for the diversity wealth

The willingness to often travel comes motivated by the restlessness to know other Countries, together with everything that this implies: culture, language, food and costumes. Diversity within the globalism is foreseen, and this arouses respect, tolerance and knowledge by both parts, but especially from the visitor’s point of view. For sustainable tourism it is essentially this cultural preservation but, amongst everything the respect for it. Guaranteeing a value experience therefore, must mean to guarantee sociocultural wealth.

A non-planned tourism, other than being a nuisance to local inhabitants, can bring miserable consequences on their lives and their quality of life, an issue that some areas of Catalonia have already suffered first-hand in terms of gentrification, this is a disproportionate increase of dwellings’ and plots’ prices that turn into, those being inhabitants, to look for more economically viable alternatives, giving way to those who can invest, a fact that may not have a direct relation to tourism in some cases but which, without doubt, has meant an aggravating item. 

The increase in prices in touristic  is one of the reasons to destabilise local people, forcing them to assume higher prices, well above the standard prices they could find in any other street of the city outside the touristic path. If we look at Barcelona, coronavirus crises forced many restaurants in touristic areas to lower their prices to match those offered in the rest of the city, showing the prices war that tourism business means. Avoiding this through regulation policies could not only protect local citizens but ensuring tourists pay for the right price of the product.

 

Positive economic impact: investing in people

From and economical point of view, it makes sense that as a business, tourism should bring benefits to the related area, but the challenge is making it in an equitable and sustainable way. It will bring nothing to improve the turnover if this does not bring a positive impact in the welcoming area. This is, to have a true benefit it has to mean an advantage to all implied parties and, if managed in a controlled and efficient way, tourism can have the enormous power of enriching the population through the creation and maintenance of jobs both, direct and indirect. 

On the contrary some multinationals, way away from applying a sustainable tourism system, choose to do the other way around, what is known as “scape”. These are business models where profits are not left in the welcoming Country nor bring any profit to the Country, like in hotels with an all-inclusive regime, where customers do not go away from the resort and, therefore, do not generate a positive impact to the area’s economy. They do create an impact indeed but negative as far as taxes is concerned, since the required infrastructures to welcome tourism are often financed through this business. It will require though to weight the generated impact of tourism against the cost that population  pays for. If there is no balance, then we are presumably facing a non-sustainable system and which will need to be revisited.

Tourism is in the end, our joint responsibility since we have all been involved for some time. There are actions that depend only on the individual responsibility and commitment to bet for a sustainable life model, also when we travel. The other side of the management, and that with a higher impact, belongs to the private and public organisations that will need to plan tourism facing next coming years with a clear motive: a bet for sustainability is a bet for the future.

 

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Mireia Cano, team leader at 11Onze, visits ‘Energia’, the new programme of ‘Canal 4 Televisió’ presented by Eduard Berraondo, to explain what the ‘natural law’ is and how it can help us to change our consumption habits to be more sustainable.

 

There are certain ethical and moral values that are intrinsic to our nature as human beings. They are the inheritance of behavioural patterns acquired during the process of evolution, which facilitated coexistence in the community through actions that favoured the common good. These values that characterise us have endured over time and are known as natural law.

Yet our behaviour and the choices we make do not always follow this pattern, nor are they always in harmony with the natural environment around us. Thus, the evolution of our consumption habits is often governed by the economic context, cultural norms, and social currents of the moment.

From words to deeds

Mireia Cano proposes a reflection on whether the decisions we make as consumers in our daily lives are in accordance with this natural law: “Are we really making the decisions we want according to our criteria? Are our consumption decisions conscious?

Many people would agree that it is preferable to live in a society and economic system that takes into account environmental respect, the dignity of people or the distribution of wealth, but do we take all this into account when we spend our money buying products or services from certain businesses? As Cano points out, “do the businesses we are enriching contribute to the world we want?”.

 

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The world’s most industrialised countries have been locked in a fierce battle with the world’s poorest at COP27 in Egypt over the climate change bill. Rich nations are reluctant to take full responsibility for increasingly extreme natural disasters caused by global warming. 

 

Beyond the measures countries are willing to take to limit global warming to 1.5°C, the big issue at the climate summit in Egypt (COP27) has been who should pay for climate change disasters and how those funds are articulated.

The least industrialised countries, which in many cases are experiencing the devastating effects of rising global temperatures, are demanding solidarity from rich countries, which have contributed the most to global warming. The aim is to address what is known in climate negotiations as “loss and damage” caused by natural disasters associated with climate change.

This summer’s floods in Pakistan, for example, left 1,700 people dead and more than 40 billion euros in economic losses. And extreme drought in recent months in parts of Africa has brought millions of people to the brink of starvation. Scientists agree that climate change is responsible for the virulence of these catastrophic events. 

 

A long-standing demand

At the Cancun summit in 2010, some of the world’s most industrialised countries, led by the United States, agreed to pay for climate change adaptation and mitigation projects in poor nations. To this end, they pledged $30 billion in ‘fast-start’ finance for 2010-2012 and $100 billion a year from 2020 onwards.

However, rich countries have fallen short. By 2020, the total amount provided was estimated at $83 billion, often in the form of loans rather than grants. Most surprisingly, the contribution of a country like the United States was less than $3 billion. This is a ridiculous amount considering its relative emissions, population size and wealth.

Moreover, mitigation projects have received twice as much funding as those focused on adaptation, even though experts are calling for a better balance. At last year’s Glasgow summit, rich countries were urged to increase funding for adaptation projects to at least $40 billion.

In this vein, a coalition of countries led by the US and Japan announced at the G20 meeting in Bali that it will invest $20 billion to drastically reduce the coal dependence of Indonesia, the fifth largest emitter of greenhouse gases. It is a similar plan to the one underway in South Africa to replace coal with renewable energy. 

 

A “loss and damage” fund

The most vulnerable nations believe that the amounts contributed by rich countries fall far short of what would be needed to compensate for the damage caused by climate change. They are therefore calling for a substantial increase in these contributions to compensate for loss and damage.

The V20, or Vulnerable Twenty, made up of the nations most threatened by global warming, estimate that they have lost $525 billion over the past two decades due to climate change, which is almost one-fifth of their wealth.

Rich countries have been as resistant as possible to climate agreements including the word ‘offsetting’ or any other term that connotes legal liability. Nor have they been inclined to create such a specific fund dedicated to loss and damage. But at least during COP27 they have shown a willingness to discuss it, which is a step forward.

How could it be financed? As some experts point out, a tax of ten dollars for every tonne of CO₂ generated would raise around 60 billion dollars a year in the United States alone. Unfortunately, however, many are concerned that the potential support would come out of existing foreign aid budgets, as was the case when the UK set up the International Climate Fund.

 

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The facts are clear: the time to act if we want to slow climate change is now, according to a UN report. This would require cutting greenhouse gas emissions by almost half by 2030 and to zero by mid-century. Otherwise, the battle will be lost.

 

Greenhouse gas emissions reached record highs in the past decade. Although the rate of growth has slowed, the report “Climate Change 2022: Mitigation of Climate Change” warns that limiting global warming to 1.5 °C will only be possible with immediate and deep cuts in emissions.

To achieve this, major transitions in the energy sector are needed, according to the report by the UN’s Intergovernmental Panel on Climate Change (IPCC). These include a substantial reduction in the use of fossil fuels, widespread electrification, greater energy efficiency and the use of alternative fuels such as hydrogen.

It should be noted that between 2010 and 2019, for example, the price of solar power and lithium batteries fell by 85% and wind power by 55%, which has enabled the spread of these alternative energy sources.

“We are at a crossroads,” said Hoesung Lee, chairman of the IPCC, after the release of the report. Lee believes it is feasible to slow climate change if the political will is there: “The decisions we make now can secure a liveable future. We have the tools and know-how required to limit warming.”

 

Critical years ahead

The problem with climate change is that we are running out of time. According to the report, to limit warming to about 1.5 °C, global greenhouse gas emissions need to start falling from 2025, in just three years, and fall by almost half by 2030. In addition, global net carbon dioxide emissions should fall to zero by the early 2050s.

“Having the right policies, infrastructure and technology in place to enable changes to our lifestyles and behaviour can result in a 40-70% reduction in greenhouse gas emissions by 2050,” explained Priyadarshi Shukla, one of the study’s authors.

In addition, Shukla said, “global Gross Domestic Product (GDP) would be just a few percentage points lower in 2050 if we take the actions necessary to limit warming to 2 °C or below, compared to maintaining current policies.”

 

Multiple policy options

According to the report, emission reduction in urban areas can be achieved through reduced energy consumption (with more compact and walkable cities), electrification of transport in combination with low-emission energy sources, and increased CO₂ capture through green spaces. One of the research leaders, Jim Skea, highlighted in particular the importance of energy efficiency in buildings to curb urban emissions.

Moreover, some solutions can even help limit the impacts associated with climate change. For example, networks of parks and open spaces, wetlands and urban agriculture can reduce the risk of flooding and heat-island effects.

Reducing emissions in industry, which accounts for a quarter of the total, will require new production processes, low and zero emissions electricity, hydrogen and, where necessary, carbon capture and storage, according to the report. It will also require more efficient use of materials and waste reduction.

For basic materials such as steel, building materials and chemicals, the report notes that low- to zero-greenhouse gas emission production processes are already being tested.

The report shows that while financial flows are three to six times less than needed to limit warming to below 2 °C by 2030, there is sufficient capital and liquidity globally to achieve the required investment. It therefore calls for clear signals from governments and international institutions, as well as greater coordination.

 

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How can something that does not physically exist pollute? The fact is that cryptocurrency mining farms require a large amount of energy. In fact, if bitcoin were a country, it would be among the 30 largest consumers of electricity in the world, as 11Onze agent Aitor Canudas explains.

 

Just a few days after the first bitcoin transaction, which took place in January 2009, cryptocurrency pioneer Hal Finney expressed his concern on Twitter about the CO₂ emissions that this cryptocurrency would generate. And he was not wrong.

A Cambridge University study estimates that the bitcoin network consumes more than 121 TWh of energy annually, which means that, if it were a country, it would be “among the 30 largest consumers of electricity in the world”, according to Canudas. In fact, to give us an idea of the magnitude of the data, the 11Onze agent indicates that this cryptocurrency consumes almost as much electricity as Sweden and generates more CO₂ emissions than Las Vegas.

The reason is that the processes necessary for cryptocurrency operations require a large amount of computer equipment, the “mining farms”, and therefore a huge amount of energy. “This set of computer processes needed to validate transactions and generate new blocks represents 0.2 % of the world’s electricity consumption“, specifies Aitor Canudas.

The problem is particularly relevant in the case of bitcoin, since, as Bill Gates recently warned, this cryptocurrency is the one that consumes the most electricity per transaction. According to estimates by the Massachusetts Institute of Technology (MIT), the use of bitcoins generates a carbon footprint each year of between 22 and 22.9 megatonnes.

The dirty source of clean energy

While we usually see electricity as a clean energy, this basically depends on its origin. Particularly in Asia, and especially in China, much of the electricity generated comes from burning coal, which is highly polluting. Therefore, the fact that a very high percentage of mining farms are located in this region to achieve the most affordable electricity prices multiplies the carbon footprint.

In order to preserve the environment, Aitor Canudas points out the need to increase the percentage of renewable energies in the electricity used “to create the new blocks and make bitcoin transactions”. Another alternative pointed out by the 11Onze agent would be to resort to alternative cryptocurrencies, such as cardano, “which in theory pollute less than bitcoin”.

 

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There is an increasing consensus in our society that accepts that economic growth must respect sustainability standards, and that debates how to link ecology and economy.

 

Economic growth, as a pillar of the capitalist system, has often been associated with the urban condition, the growth of cities, and the unrestricted expansion of their metropolitan areas. Both the services and the infrastructure needed are expanding, changing the territory and, in return, leaving aside the natural environment and the consequences of its alteration.

It is now clear that this has caused an ecological emergency, and many consciences have changed. They have now the opinion that the economy cannot forget nature, which is an increasingly accepted idea. It is probably outside the more purely urban fabric that more steps are taken in this direction, driven by the sensitivity of landscape conservation and natural heritage.

Following this goal of protection and appreciation of this heritage, the local world created the Landscape charters. Since 2006, Decree 343 of the Generalitat develops Law 8/2005 for the protection, management, and planning of the landscape, although some counties such as Alt Penedès have already had their own since 2002.

 

How does economy fits in sustainability?

The promotion of those sectors that are better adapted to nature and territory, such as wine, are one of the most common bets. It is a type of industry that combines agriculture and tourism, bringing benefits to the region in a minimum of two ways and enhancing the landscape. Some studies show that sales increase when the buyer links them to an environment.

Maintaining this sustainability, however, is sometimes not that simple. The first issue is related to tourism, about which we have talked, and the protection of the landscape as an exclusive setting against overcrowding. This can affect, in fact, the comfort and daily life of the inhabitants themselves. Secondly, we could go back to everything that the industry requires, which will eventually give jobs and leave profits in the form of taxes, such as the creation of industrial estates.

A matter of mobility and energy

The infrastructures for mobility and transport and the generation of energy needed to move everything are perhaps the two factors where the economy finds it more difficult to become sustainable. The local world has responded with great caution and concern to the increasingly imminent plans for the creation of wind or photovoltaic parks that, while seeming to lead to the generation of cleaner energy, are thought to clash in full with landscape care.

One of the territory’s arguments is that if urban areas are the big consumers of energy, they should also be impacted by generating them—and proposals have been made, such as covering the roofs of industrial areas with solar panels. However, the paralysis of decisions due to the debate—in Catalonia only a wind turbine has been installed in twelve years—does not stop what others can do, and there are those who consider that opportunities are being missed. Recently, for example, a wind farm project was presented in Aragon to feed our country with renewable energy.

But big cities have more open debates between growing or guaranteeing ecological minimums and, as we have mentioned, transport is a key one. Recently, the proposal to expand El Prat Airport has returned to the forefront, a project that from a business sector is seen as a country project, essential to position Barcelona and Catalonia as an attractive and accessible hub for business, whereas many citizens and groups see it as completely unsustainable, as they call for a much deeper discussion about how and how much we want to grow. Surely the latter is the key to the debate we need to face soon.

 

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After a temporary reduction caused by the pandemic, the carbon footprint is growing again and climate change is accelerating. Individuals, businesses, and regulators can help reduce greenhouse gas emissions. Let’s look at how it is evolving and what measures would help mitigate it.

 

The energy needs of human activity alone generated 36 billion tonnes of carbon dioxide (CO₂) last year, according to the International Energy Agency. A benchmark for the magnitude of this figure? Suffice to say that the entire world population put on a scale would not amount to 400 million tonnes. In other words, the CO₂ we emit in just one year is one hundred times the weight of the whole of humanity.

Carbon dioxide is the most abundant greenhouse gas and has contributed most to global warming in recent decades. Direct and indirect emissions of carbon dioxide, together with methane, nitrogen oxide, sulphur hexafluoride, hydrofluorocarbons, and perfluorocarbons, make up what is known as the “carbon footprint”. This is an environmental indicator coined in the 1990s to measure the contribution of human activity to global warming.

The reality is that we are far short of the targets set to halt climate change. Scientists warn that net CO₂ emissions should be reduced to zero by 2050 if we are to avoid catastrophic consequences. Rising global temperatures lead to extreme weather events and rising sea levels due to melting ice.

 

Climate emergency

The UN estimates that since 1990 carbon dioxide emissions have increased by almost 50 percent. In fact, the World Meteorological Organisation notes that current levels of CO₂ in the atmosphere are similar to those of three million years ago, when the Earth’s average temperature was 3°C higher and sea levels were much higher than they are today.

It is, therefore, logical that one of the Sustainable Development Goals set by the UN should focus on the need to curb climate change. The formula is to take measures that will lead us to a low-carbon economy in the coming years.

In fact, the vast majority of the world’s countries signed the Paris Agreement in 2015, an international treaty that aims to limit global warming. Yet, our carbon footprint has continued to grow. Greenhouse gas emissions were only reduced in 2020. And the reason was the economic slowdown caused by the pandemic. 

The Climate Transparency Report estimates that emissions from the G20 countries, which are responsible for 75 percent of greenhouse gases, grew by four percent again in 2021. China, India, Indonesia, and Argentina are already at higher levels than in 2019.

By geographical area, China, the United States, the European Union, and India account for more than half of the gases emitted in the last decade. In terms of activities, those producing the most CO₂ are power and heat generation (40%), transport of goods and people (20%) and industrial activity (20%).

 

Calculate your personal carbon footprint

The amount of greenhouse gases that each individual generates in their daily lives as they move around, eat and consume resources is known as their personal carbon footprint. To avoid a global temperature rise of more than 2°C, The Nature Conservancy, an environmental NGO, estimates that we should halve it by 2050.

There are numerous tools available to calculate your personal carbon footprint. In particular, the UN calculator takes into account aspects such as the characteristics of our home, our energy consumption, the type of transport we use on a daily basis, the amount of flying we do, our eating habits, and how much we recycle.

Some measures to reduce our personal carbon footprint are to opt for responsible consumption, commute in a more sustainable way, moderate our energy consumption and reduce the amount of waste we generate.

The weight of business

Far greater than the personal carbon footprint is the footprint left by businesses in processes such as manufacturing or transporting goods. This is known as the corporate carbon footprint. Hence the importance of focusing on this area to reduce global warming.

Businesses can reduce their environmental impact by improving their energy efficiency or increasing the percentage of renewable energy they consume. They can also use offsetting tools, such as investing in environmental projects, paying green taxes or buying CO₂ emission rights.

 

A growing trend

Thousands of companies already publish their carbon footprint, but not all of them calculate it in the same way. Most large multinationals ignore indirect emissions, those that are part of their value chain but do not depend directly on them. 

A paradigmatic example is Amazon. Pressure from activists and investors led this online retail giant to make its carbon footprint public for the first time last year. However, it has just been revealed that in its report it only accounted for a small part of the emissions generated by its sales.

Unlike other retailers, Amazon only accounted for the total environmental impact of its own products, which account for only one percent of its sales. The company does not account for the emissions generated by the use of another brand’s product once its delivery drivers deliver it to the customer.

 

An incentive for sustainability

The high impact of business activity on the environment has led more and more people to call for companies to be required to publish their carbon footprint in their annual reports.

So much so that the Securities and Exchange Commission, the US stock market regulator, has just proposed that listed companies in the US have to disclose their greenhouse gas emissions. And, very importantly, that they do so according to the same criteria.

Forcing companies to publish their carbon footprint can, according to many experts, make a decisive contribution to shortening the path to an emission-free economy. More and more investors are taking environmental issues into account in their investment decisions.

 

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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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