The argument that more sustainable outcomes will carry higher costs across large swaths of the economy seems straightforward, at least for the initial phase of the transition to a more sustainable, net-zero future.
Indeed, in recent months, industry commentators have argued that surging clean energy demand is fuelling a commodities boom for minerals used in renewable energy generation and storage. But will higher demand lead to sustained price rises? Intuitively, this seems possible. Green technologies like wind turbines and electric vehicle batteries, for instance, require higher concentrations of certain materials (copper, aluminium, lithium), increasing demand when investments in traditional mining could be limited (due partly to the globalisation of ESG policy).
Any inflationary impact of the shift to a more sustainable society could have critical implications for central banks, themselves key drivers of the sustainability agenda, and the complexity of monetary policy. As government policy is geared increasingly towards promoting sustainability, some of their constraints (labour, technological) and potential implications for other priorities (equity, public finances) will become more prevalent. Balancing these considerations against the broader impact of higher emissions will pose yet more challenges for public policy. For businesses, it could make balancing the needs of employers, customers, and society more difficult, too.