‘Greenflation’ threatens to derail climate change action

Author: Ruchir Sharma
Source: Financial Times

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Fossil fuels will be needed in the green transition but vital supplies are being squeezed

The writer, Morgan Stanley Investment Management’s chief global strategist, is author of The Ten Rules of Successful Nations.

The world faces a growing paradox in the campaign to contain climate change. The harder it pushes the transition to a greener economy, the more expensive the campaign becomes, and the less likely it is to achieve the aim of limiting the worst effects of global warming.

New government-directed spending is driving up demand for materials needed to build a cleaner economy. At the same time, tightening regulation is limiting supply by discouraging investment in mines, smelters, or any source that belches carbon. The unintended result is “greenflation”: rising prices for metals and minerals such as copper, aluminium and lithium that are essential to solar and wind power, electric cars and other renewable technologies.

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