Democrats this weekend pushed what would be the biggest US spending yet to slow global warming, but from the name of the measure you don’t necessarily know it has something to do with the climate. you can’t.
$370 A billion-dollar bill aimed at transitioning the country from fossil fuels to solar, wind and other renewable energy, called the Inflation Reduction Act, is set to pass the House of Representatives this week. (In case you didn’t know, Senator Joe Manchin III cited inflation as a major reason for not supporting the previous version of the bill.)
In fact, everywhere in the world there is a direct link between climate change and rising prices, so the name fits. Today I will explain the relevance and how spending these billions of dollars can actually help reduce future inflationary pressures, not increase them.
The problem of “fossilization”
Fossil fuels can experience abrupt shifts in supply, and those shifts can shock energy markets and accelerate inflation around the world. We are seeing it now with the Russian invasion of Ukraine, and we have seen it before. Did. at one point, Inflation rises to 9%.
In the summer of 1979, President Jimmy Carter Solar panels on the roof of the West Wing of the White HouseThe gesture was symbolic; Carter and his advisers knew that investing in renewable energy was one way he could protect consumers from inflation.
This is because, unlike oil and gas, wind and sunlight are free (although building power plants that use them is expensive). There are also cloudy and windless days, but supplies are immune to geopolitics.
“With fossil fuels, most costs are commodities. It’s operating costs, it’s fuel,” says Gernot Wagner, a climate economist at Columbia Business School. “For renewable energy, it’s the exact opposite, in the sense that the solar panels are the first cost. Once installed, you’re basically printing money.”
What Happened to the White House Solar Panels? Carter won a landslide victory in his 1979 presidential election, and his successor, President Ronald Reagan, had them removed from office in his 1986. It is now preserved in the National Museum of American History.
risk of delay
The transition to cleaner energy will take time. The less time, the greater the risk of economic disruption.
For example, if countries cut back on fossil fuels before clean power sources such as wind and solar were fully developed, the imbalance could drive prices up. Similarly, consumers may want to purchase new products that are not yet available in large numbers, such as electric vehicles. Again, imbalances are very likely to lead to higher prices.
Eileen Heemskerk, who heads the European Central Bank’s Climate Change Center, said: “These are changes that governments will take to promote greener economies, such as carbon taxes, eco-friendly innovations and changing consumer preferences for eco-friendly products. It’s a risk that comes from the steps we take to transition to .”
But slowing down the energy transition is not the answer. Heemskerk said these risks mean countries need to act early and decisively for an orderly change that doesn’t lead to sharp price increases.
If devastating fires, floods and heatwaves force countries to desperately scramble to rebuild their energy markets, the ensuing economic turmoil will very likely involve high inflation and other economic problems. increase.
In other words, the sooner the better.
Increased costs due to extreme weather
Floods can disrupt crops and cause food prices to rise sharply. Hurricanes can damage power plants and cause energy shortages. Also, extreme heat can reduce worker productivity.
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Economists still don’t fully understand all the ways these disruptions could spill over into inflation across globalized economies. It said it was still studying the economic impact of various forms of extreme weather caused by variability.
But they know the effect is amazing.
For example, do you think the drought in Taiwan will affect the US auto industry? exactly what happened last yearComputer chip manufacturers require water in the manufacturing process. As Taiwan is a major supplier of chips, drought shortages there severely hit the auto industry.
For now, economists I’ve spoken to agree that climate change’s impact on inflation is usually regional. But the warmer the planet, the more risks the global economy faces.
By the way, the latest consumer price data will be released on Wednesday. New numbers tell us if the U.S.’s highest inflation in more than 40 years has started to recede.
As you read about the report, keep the climate connection in mind.
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How the measure has shrunk: President Biden’s first climate, health and tax package was much more ambitious than what the Senate passed. Here’s what changed.
“No Drama” Compost: New York City has a new plan to encourage more people to recycle organic waste.
The “chaos” of the native community: A tribal leader in California saw fire and flood debris fill up a river near his home, killing fish that play an important role in local culture.
out of the times
Before You Go: Admire the Trees of Paris
City trees can be overlooked, especially in Paris where famous landmarks draw attention. But urban trees have recently renewed awareness among the general public and politicians, not only as monuments in their own right, but as key assets in the fight against climate change.
thank you for reading. I will be back on Friday.
Claire O’Neill and Douglas Alteen contributed to Climate Forward.
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