By Jean Chemnick
But “greenflation” itself will ultimately play a role in transitioning the economy away from reliance on fossil fuels, a finite resource that depletes over time and that carries economic and national security risks, analysts say. That’s because high prices attract investment and encourage entrepreneurs to innovate by finding cheaper ways to do business and securing supply chains that ultimately bring prices down.
“I agree in part that, yes, of course, a lot of money thrown at one problem at one time may well lead to inflationary pressures,” said Gernot Wagner, a climate economist at Columbia Business School.
Wagner pointed to Austria’s runaway demand for home heat pumps to reduce heating and cooling costs. Waitlists for heat pump installation are 18 months long, he said, and the equipment costs more.
But that is driving more companies to start installing heat pumps, and fewer to service gas furnaces.
“So, you’re sending all the right signals, right?” he said. “That’s the beauty of the market.”
Quoted in: “Manchin says climate bill risks inflation. But does it?” by Jean Chemnick, E&E News/ClimateWire (21 July 2022).