Green-flation 🌍

Green-flation

The Russian invasion of Ukraine has added fuel to the debate regarding the switch to renewable energy from fossil fuels. With its massive oil and natural gas reserves, Russia provides energy to many parts of the globe, particularly the continent of Europe. Now that what looks like the entire world has sanctioned Russia, the price of oil has skyrocketed and Russia isn’t supplying these countries anymore, leading them to look for alternatives. The alternative, obviously, is renewable energy like wind and solar, but inflation has affected this industry due to rising material costs. Unfortunately, the Russian invasion has boosted this, and not in the right way.

Although renewable energy generation costs have decreased massively in the last decade, supply chain bottlenecks and the invasion have slightly reversed the trend, with high oil prices also playing a factor in the transportation process. Data from LevelTen Energy shows that prices for renewable energy projects have risen by more than 10 percent, and the US specifically have shot themselves in the foot. Tariffs stemming from the US-China trade war have stunted the number of components the US can get from the renewable-rich China. This poses problems that go past the simple issue of inflation. Further price increases could stunt the progress towards making the earth greener, which increases the risk of climate change. In the short-term, this could put the energy sector as a whole in very volatile times, especially if the conflict continues to brew.

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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