Deutsche Bank has now presented a study in which it impressively demonstrates the extent to which energy prices are currently fueling inflation and making consumers' lives more and more expensive.

She points to the risk that Germany currently imports more than 50 percent of its natural gas and more than a third of its crude oil from Russia.

She also speaks of an energy price shock caused by the synchronous recovery of the economy all over the world with only moderately growing energy supply and logistical problems in many places.

But she also mentions a factor that comes on top of all this: “greenflation”.

Christian Siedenbiedel

Editor in Business.

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The bank analysts write that this “energy price inflation caused by climate policy” should not be underestimated.

It weakens the argument that the current general price increase is only temporary.

ECB Governing Board member Isabel Schnabel recently argued in a similar way: She admitted that the central banks might have to change their traditional approach of simply “looking through” energy price fluctuations in order to orient their monetary policy – ​​if the energy price increase is increasingly taking on structural components as a result of climate policy.

How much greenflation is in the inflation rate?

The Deutsche Bank writes that there is already a lot of “greenflation” in the current high inflation rate. It relies, among other things, on calculations by the Bundesbank. The CO2 price introduced last year contributed around 0.3 percentage points to the inflation rate. Together with the shortage of certificates in emissions trading, the Berenberg economist Holger Schmieding assumes that 0.5 percentage points are already included in the current inflation rate. And the economist Volker Wieland even says that, according to calculations by the German Council of Economic Experts, direct and indirect price effects may have contributed more than one percentage point to consumer price inflation in 2021.

"In addition, the path to a climate-friendly economy requires enormous private and public investments in new infrastructure," says the study.

"These climate-relevant capital goods are competing for the already limited production capacities," write the bank analysts, referring to the shortage of skilled workers.

This intensifies the price pressure, for example in the capital goods, construction and trade sectors.

Is it actually fossil inflation?

However, this view of “greenflation” is not without controversy.

The environmental organization Greenpeace, for example, promotes a completely different perspective.

"My central thesis is: The perspective price driver will be the disclosure of the externalities of the use of fossil fuels," says Greenpeace finance expert Mauricio Vargas.

In other words, there are already so-called external costs of fossil fuels – burdens on the environment that represent real costs but cannot yet be directly read by the consumer from the price of petrol or heating oil.

"This apparent free lunch is coming to an end because societies are no longer willing to accept the socialization of external costs," says Vargas.

If these costs were passed on to the consumer via a CO2 price, there would be no new

These costs, in turn, could be reduced through the use of renewable energies. "Green technologies, especially renewables, tend to have a more deflationary effect because they reduce costs," says Vargas. So it is exactly the opposite of what is often claimed: it is not climate policy that drives up costs and makes life more and more expensive for consumers - but rather it lowers costs if you also include all costs for the environment, and ultimately makes life so cheaper for people.

In addition, according to the Greenpeace finance expert, the chances of the green transformation having a price-dampening effect are underestimated.

The supporters of the "greenflation" theory do not sufficiently see how much learning effects can reduce costs over time with renewable energies, but also with storage technologies, says Vargas: "These learning effects suggest that in the next few years e-cars could be operated more cheaply than their combustion engine counterparts.”