The ecological transition has a price that is difficult to specify. It is a global challenge with an extraordinarily uncertain economic impact and that will affect the different sectors very unequally, with more effects on the most vulnerable households. With this starting approach, the Bank of Spain has analyzed the situation of the Spanish economy in the face of the climate challenge. A first conclusion is that the ecological transition will cause an increase in inflation and bottlenecks, at least in a first phase.

“In the short term, it is foreseeable that the ecological transition will have an inflationary effect,” says Ángel Gavilán, director general of Economy and Statistics of the Bank of Spain.

The report points out that part of the recent inflation may be due to the ongoing climate transition, given that it has been caused in part by supply shortages caused by the closure of some highly polluting factories in China, by increased demand for gas from the accelerate the abandonment of coal in the energy mix and by strong increases in the prices of raw materials, such as lithium, which are used in the manufacture of electric batteries. This is already happening, and in the immediate future, this inflationary effect may come from the extension and increase in the cost of the emission rights of the European Union (ETS), and also from the increase in the price of gas. On the other hand, the Bank of Spain does not comment on the possible inflationary impact in the medium and long term.

What it does indicate is that the transition process to a sustainable economy can generate very important bottlenecks in key sectors for the energy transition. “Some of these bottlenecks are already being observed in certain raw materials -such as copper, lithium, cobalt or nickel- that constitute a fundamental piece in the mitigation policies deployed at the international level”, indicates the report. report, which adds that these bottlenecks could increase in the framework of a carbon-neutral economy that many countries have committed to achieving by 2050. “If this were the case, this transition process could be slowed down and its economic cost”, adds the Bank of Spain.

The report also points out that in Spain the ecological transition will have a very diverse impact depending on the type of company. The smaller ones are the ones that seem less prepared to face the change, especially when many of them have not yet evaluated the impact that these changes may have on them. The companies themselves identify as the main risks of the ecological transition inflation and greater administrative burdens to provide information, as well as to adapt to changes in environmental regulation.

The impact will also be very diverse according to the layers of the population, and the consequences will especially affect the most vulnerable. The households that will suffer the most are those with a lower income level, those who reside in rural areas, with a lower educational level, those with a greater number of members or those whose head of household is a middle-aged person, between 35 and 45 years.

The Bank of Spain emphasizes that it is up to governments to lead the ecological transition process, and that one of the most efficient instruments available is environmental taxation, which, it points out, must be strengthened and improved in design. There is room to act, given that Spain is among the countries of the European Union with the lowest relative collection in environmental taxes.

However, the Bank of Spain does not want to enter into the calendar for the application of this environmental taxation, but rather limits itself to demanding a better design that allows for greater efficiency and greater collection, and that part of this income be used for compensatory measures for those harmed by the transition, basically the most vulnerable sectors.