The Economic Implications of Climate Action. Inflation[Les incidences économiques de l'action pour le climat. Inflation]

The direct effects of the climate transition on inflation stem first and foremost from the changes this transition will induce in the global equilibrium of energy markets. From this perspective, it seems certain that the coming years will be marked by increased volatility in global prices, a rise in the full cost of electricity, and a gradual decline in demand for fossil fuels in the countries most advanced in the transition. These developments would be reflected in inflation as measured by official statistics. Other changes may instead operate through quality effects rather than through an increase (or decrease) in prices. For example, in the price index, an electric vehicle is treated as a different product from an equivalent internal combustion engine vehicle: in other words, the replacement of internal combustion vehicles by more expensive electric vehicles does not raise the price index. On the contrary, the likely decline in the price of electric vehicles would contribute negatively to the price index.