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The clean energy transition promises not only to reduce greenhouse gas emissions and other forms of pollution, but also to boost economies through growth in the green energy sector. However, if the costs of fighting climate change continue to increase as quickly as some experts predict, the benefits of green energy may be outweighed by the cost of slowing down climate change in the first place. This piece explains how so-called ‘greenflation’ could stall or even reverse the clean energy transition. Read on to learn more about this potential roadblock on the path to climate action, and how we can overcome it together.

Understanding ‘Greenflation’

So what exactly is ‘greenflation’? Put simply, it refers to inflated energy prices created by efforts to reduce carbon emissions. This might sound counterintuitive—don’t clean energy policies reduce greenhouse gas emissions? That’s true, but in pushing for renewable power sources and energy efficiency improvements, we also increase demand for certain types of fossil fuels.

The Potential Dangers of ‘Greenflation’

Most of us have heard about climate change and environmental problems, but there’s another more hidden and less discussed threat, called ‘greenflation.’ Many experts are warning that ‘greenflation’—rising prices due to increasing energy costs—could threaten our economic stability. In fact, energy inflation is already underway: over the past decade or so, U.S. household energy bills have increased by 25 percent despite only a 4 percent rise in total household expenditures, according to GreenPeace USA.

Policy Makers Should Act now

The cost of clean energy is falling at an unprecedented rate, and will soon reach price parity with fossil fuels. While clear public policies are essential to accelerate climate action and stimulate private sector investments in clean energy, policy makers should also implement measures that take into account greenflation’s impact on renewable investments and consider new solutions to address its implications.

A Clean Energy Future is Possible

To realize it, however, we will need to take some major strides towards curbing our demand for energy and aggressively pursuing greater efficiency across multiple sectors. The potential for renewable energy is enormous. The International Renewable Energy Agency estimates that under business-as-usual conditions, global wind power capacity could reach nearly 2.5 terawatts (TW) by 2030 and 5 TW by 2050, while solar PV capacity could more than triple to 1.8 TW in 2040 and 6 TW in 2050.


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