Why you can't forecast inflation without considering climate change

Climate change matters for inflation. The combined effect of the ongoing transition to lower CO2/greenhouse gas emissions and the direct impact of climate change is one of several likely-to-linger upside pressures for inflation.

Recent European energy security issues, following the loss of Russian gas, have the potential to speed up the policy impetus behind transition to lower-emission sources of energy and potentially bringing forward some elements of transition cost. In the US, this year’s somewhat controversially named Inflation Reduction Act also took policy steps that can help incentivise spending related to transition (including through tax credits).

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This is a financial promotion and is not investment advice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.