Criticism of renewable energies has been silent these days. The war and climate crisis show that moving away from (Russian) fossil fuels both protects the climate and increases energy security. Nevertheless, the question is how expensive it will be for the economy and society if our economic system is to be able to make do with almost no fossil fuels by 2050 for climate protection and energy security. Arguments are made that hardly seem compatible:
- On the one hand, greenflation – that is rising energy prices due to new environmental technologies – is expected, which will effectively make the population poorer. The core argument is the high CO2 price required for climate protection. Former Chief Economist of the World Bank, Joseph Stiglitz, emphasises that cheap fossil fuels need to lose their cost advantage. If CO2 emissions are to be halved by 2030 to meet the 1.5°C climate protection target, this implies a CO2 price of USD 50 to 100 per tonne of CO2. Consumers will have to pay for this to make the energy transition possible. This will inevitably lead to greenflation.
- On the other hand, some climate protection advocates also anticipate greendeflation. For instance, they underpin their forecast by referring to significantly lower prices for solar modules. In 2008, the prices for a solar module were around USD 4 per watt. Today it is around USD 0.20 to 0.30 per watt.
With respect to solar energy, the term greenflation is undoubtedly wrong. The same applies to the price development of wind energy or batteries for electromobility.
What is inflationary and what is deflationary?
The International Energy Agency (IEA) is now trying to objectify the discussion regarding greenflation using detailed analyses to show which climate protection measures or technologies have an inflationary effect and which have a deflationary effect on energy prices. The IEA explains that, in addition to the CO2 reductions already planned as a result of the UN Climate Change Conference in Glasgow (COP26), a further 14 gigatonnes (GT) of CO2 must be saved by 2030 – an enormous feat without question.