Green inflation? Between climate action and price stability

The influence of a rising carbon price on the inflation rate is crucially determined by the amount of avoidance responses in favour of less carbon-intensive goods. The stronger the (intended) avoidance response to fossil price increases, the lower the general inflationary pressure. How inflation will evolve in the course of the climate transition therefore crucially depends on its implementation. Policymakers can contribute significantly to making the transition to a climate neutral economy succeed while maintaining a steady price level overall in the medium to long term, particularly by designing economic and climate policies consistently, efficiently and for the long run.

Green inflation? Between climate action and price stability(PDF, 299 KB, accessible)