When climate change becomes one of the main problems facing the world, there are many terms that we need to understand. In the environmental sector, changes towards renewables will affect other sectors, such as the economy.
Therefore, when the vice presidential debate involves the term ‘Greenflation’, it may sound foreign to many people. Are you one of them? Come on, read more about greenflation from the following summary of various sources.
Get to know Greenflation
Green energy illustration/ Photo: Doc. British Embassy
Greenflation is related to changes towards new and renewable energy. For example, so far, Indonesia has relied on PLTU as a power plant that uses coal as raw material. Considered non-renewable and damaging to the environment, an environmentally friendly energy transition must be carried out.
During the transition process, impacts on the economic sector are very likely to occur because, however, there are large costs that must be incurred. Not limited to PLTUs, another example is changing to electric vehicles which also requires large costs. The transition to green energy will affect price increases or inflation due to increasingly expensive commodity prices, the implementation of a carbon tax, and an increase in electricity rates because the cost of generating renewable energy is relatively expensive.
So, greenflation can be defined as an increase in the prices of goods and services (inflation) as a consequence of the transition from destructive to environmentally friendly sectors, as summarized by Greenpeace.
Inflation Will Still Occur in the Future Due to the Climate Crisis
Illustration of the climate crisis/ Photo: Getty Images/China Photos
Even if the world does not switch to a more environmentally friendly and renewable sector, inflation will still occur as a result of the climate crisis. For example, from the food sector where the climate crisis could result in an increase in food ingredients. The environmental crisis will also have an impact on increases in other sectors, such as property and insurance.
That is the impact of the climate crisis on the global economy as reported by the Network for a Greener Financial System (NGFS), as reported by Forbes.
When two cases are presented, namely inflation due to the transition to environmental friendliness (greenflation) or inflation due to the climate crisis, which do you choose, Beauties? This case invites us to think that whatever steps are taken, there will definitely be risks involved. However, which choice is more ethical for a better future?
Alternative Greenflation Solution
Illustration/Photo: Freepik/Freepik
Even though it has the potential to cause inflation, that doesn’t mean we have to avoid it if there is a good reason. The government needs to take concrete strategies and mitigation steps. Greenpeace explains that one way to reduce greenflation is by implementing the Polluter Pays Principle, namely that funds from the carbon tax and coal tax are used to subsidize clean and renewable energy, especially for lower economic groups.
On the other hand, Bill Gates in his book How to Avoid a Climate Change Disaster and his blog, uses the term Green Premium (Greenium). Greenium identifies the price difference between products that produce carbon emissions and alternative products that do not, making them environmentally friendly. The larger the Greenium a product is, the more expensive and difficult it is to eliminate its carbon emissions. Therefore, Greenium’s goal is to make it as small as possible.
To handle this, Gates explained various solutions such as the need for a lot of innovation, cooperation between companies and the government to finance technology projects or safe green systems, as well as implementing a carbon tax.
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