Sunday, January 09, 2022
The energy transition is fueling prices
Experts warn of “greenflation”
The prices of raw materials are rising. At the same time, more of them are needed for energy transition projects. According to experts, a disastrous spiral of scarce supply and high demand can arise and trigger “green inflation”.
According to economic experts, the sharp rise in raw material prices for copper, platinum and lithium, for example, is jeopardizing the planned global transition to carbon dioxide-free electricity generation. “We have to be careful that our beautiful energy turnaround does not fail due to a lack of raw materials,” said the head of the Institute for the German Economy, Karl Lichtblau, of the editorial network Germany (RND). The Cologne economist sees problems with 22 chemical elements and referred, among other things, to a shortage of copper, platinum and lithium. Among other things, copper is needed for wind turbines, platinum for hydrogen production, and lithium for battery production.
The global chief strategist of the US investment house Morgan Stanley, Ruchir Sharma, spoke to the RND of “greenflation”, a wave of price increases caused by the energy transition: “Rising demand and falling supply will keep prices skyrocketing.” The economic effects could derail the entire global climate policy in the coming years.
The problem of “greenflation” is not only due to the current rise in raw material prices, stressed Sharma. In addition, new environmental guidelines are making future production of copper and aluminum, for example, more difficult in the long term. All of this could make carbon dioxide-free electricity significantly more expensive than previously thought.
Hickel: In the end it hits the low-wage earners
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The Bremen economist Rudolf Hickel warned the RND of the socio-political consequences: “Greenflation can still pose considerable problems.” Hickel referred to an addition of market-related and politically wanted price increases, which in the end could put a strain on low-wage earners and transfer recipients in particular. The overall effect of these price increases has “not yet been adequately analyzed” in Berlin.
“I am very concerned that in the end there will be a lack of the necessary acceptance – and then the entire project will fail politically,” said Hickel. Comprehensive social compensation is required, which accompanies the entire energy transition – and which urgently needs to be worked on now. At this point, the coalition agreement between the SPD, FDP and the Greens is completely inadequate.