Saving the planet will cost you your wallet — and that's not a metaphor but a new economic reality that central banks are desperately trying to ignore, clinging to their outdated inflation target like a drowning man to a straw.
While politicians deliver inspiring speeches about carbon neutrality by 2050, economists quietly calculate the price of this noble impulse. And the numbers are, to put it mildly, disheartening. We are entering an era where inflation ceases to be a temporary phenomenon and becomes a permanent companion of the green transformation. Welcome to the world of greenflation — inflation embedded in the very DNA of climate policy.
The Anatomy of Green Inflation
Greenflation is not an invention of conservative economists nor a horror story from the oil lobby. It is a mathematically inevitable consequence of humanity's decision to simultaneously reduce carbon emissions and maintain economic growth. You know what these goals have in common? They are in fundamental conflict, and this conflict is monetized through rising prices.
The mechanism is embarrassingly simple: green technologies are still more expensive than dirty ones. An electric car costs more than its gasoline equivalent. A solar panel requires rare earth metals whose extraction is itself an ecological disaster. Recycling waste costs more than landfilling. And someone has to pay the difference. Guess who?
The irony is that renewable energy sources themselves are getting cheaper. The cost of solar generation has dropped by 90% over the past decade — an impressive result! But here's the catch: integrating this energy into existing infrastructure, building storage facilities, upgrading grids — all this requires trillions in investment. And trillions, as we know, don't grow on trees. They are printed by central banks or extracted from taxpayers' pockets.
Carbon Tax as the New Reality
The European Union has already shown the world what the future looks like. The EU Emissions Trading System (EU ETS) has turned carbon into a commodity, and the price of this commodity is rising like wildfire. From a measly five euros per ton of CO2 in 2017 to one hundred euros in 2023 — a twentyfold increase in six years. And this is just the beginning: analysts forecast 150-200 euros per ton by 2030.
What does this mean for ordinary people? Simple: every product whose manufacture involves fossil fuels will become more expensive. And since fossil fuels remain the foundation of the global economy, literally everything will become more expensive. Steel, cement, plastics, fertilizers, transport — the entire production chain is saturated with carbon, and every molecule will have to be paid for.
Politicians love talking about "just transition" and compensation for low-income groups. But let's be honest: compensation is funded from the same taxes collected from the same economy that pays for carbon quotas. It's a snake eating its own tail, except the tail is your bank account.
Energy Transition and Its Price
The International Energy Agency estimates the cost of the global energy transition at 4-5 trillion dollars annually until 2050. For comparison: that's roughly 5% of global GDP every year for a quarter of a century. Humanity hasn't seen investments on this scale since post-war reconstruction of Europe, and even then it was about a few countries, not the entire planet.
Where will this money come from? Partly from government budgets, which means either tax increases or growing public debt. Partly from private investments that will require returns, thus increasing the cost of capital. And in any case — through inflation, because creating new capacity requires resources that are simultaneously needed to maintain the existing economy.
The situation gains particular piquancy from the fact that the transition period is the most expensive. We pay simultaneously for maintaining old infrastructure and building new. It's like renovating a house while continuing to live in it: inconvenient, expensive, and something always goes wrong.
The Mathematics of Climate Adaptation
But wait, we haven't gotten to the most interesting part yet. Even if humanity completely stops greenhouse gas emissions tomorrow — which won't happen — we will still have to adapt to already-triggered climate changes. Sea levels will continue rising for decades. Extreme weather events will become the norm. Agricultural zones will shift.
How much does it cost to build dikes around coastal cities? Relocate millions of people from areas that will become uninhabitable? Restructure agriculture for new climate conditions? According to UN estimates, developing countries alone will need 300-500 billion dollars annually for adaptation. And rich countries aren't immune to floods, droughts, and wildfires either.
These expenses won't go away. They're not temporary, not cyclical — they're structural. They're built into the new reality of a planet we ourselves created. And they will press on prices year after year, decade after decade.
The Sacred Cow of 2%
Against this backdrop, central banks' stubborn adherence to the 2% target looks at best naive, at worst dangerous. This figure, by the way, has no scientific basis whatsoever. It appeared in New Zealand in 1989 almost by accident and has since become something of a religious dogma of monetary policy.
Trying to keep inflation at 2% amid the green transformation means one of two things: either endless interest rate hikes that will strangle economic growth and make the energy transition impossible, or failure and admission that the target is unattainable. Both options are losing ones.
Some economists — few for now, but their numbers are growing — propose a radical solution: raise the target inflation level to 3-4%. This would allow absorbing greenflation without destructive monetary tightening. Yes, savings will depreciate faster. Yes, planning will become more difficult. But the alternative — economic stagnation or climate catastrophe — looks even less attractive.
The problem is that central banks have built their entire reputation on fighting inflation. Admitting that this fight no longer makes sense means undermining their own authority. And without authority, a central bank is just a group of people with a printing press.
What Should Investors Do in a World of Permanent Inflation
If greenflation is the new normal, traditional capital preservation strategies require revision. Bank deposits at 3-4% inflation become a guaranteed loss. Fixed-income bonds depreciate even faster. Even gold, the eternal safe haven, shows questionable effectiveness as a hedge against this new type of inflation.
Under these conditions, deflationary assets become particularly interesting — instruments whose supply is limited or decreasing by definition. Classic Bitcoin, despite its popularity, suffers from high volatility and correlation with risk assets. It falls precisely when protection is needed most.
An alternative approach is offered by DeflationCoin — the first cryptocurrency with algorithmic reverse inflation. Unlike Bitcoin, where emission only slows down, DeflationCoin uses a deflationary halving mechanism: coins not placed in staking are burned, creating real supply reduction. This turns the token into a mirror image of inflationary fiat currencies.
The smart-staking system cultivates a long-term investment culture, while the gradual unlock mechanism eliminates the possibility of panic selling. As a result, DeflationCoin demonstrates no correlation with the falling market — exactly what's needed in an era of permanent greenflation. When central banks finally acknowledge the obvious and raise inflation targets, those who prepared in advance will thank their foresight.