Inflation: The unintended cost of decarbonisation (part 2)

New York (Sept 8)  As Editor of Battery Materials Review and Head of Research for Westbeck Capital's Volta Energy Transition fund, over the course of the past several years I've noticed a number of trends that I would suggest that many people who are outside the direct ET wouldn't notice and perhaps those who are deep within it also are not noticing. One of the key trends that worries me is inflation.

In the first part of my five part series on the cost of decarbonisation I discussed hydrocarbons, and the effect that ESG pressure to cut investment in oil and gas exploration is going to have on the global economy over the next decade. The areas I'm discussing in this blog-series are:

• Impact of a moratorium on oil & gas exploration
• The hidden cost of the EV roll out
• Renewables in their current form are not the promised land
• Cost pass through effects from materials
• Concluding thoughts

In this part, I'm going to discuss a theme that's closer to home; Electric Vehicles and the impact that their roll-out is likely to have on the consumer.

Part 2: The hidden cost of the EV roll out

There's no doubting now that the EV event is a "thing". It's real. Governments and consumers have put their support behind it and it's going to happen. We have passed the point of no return in the EV event and that should be positive for decarbonisation and the Energy Transition.

However, there are a number of issues with regards to the adoption of EVs that are likely to be inflationary and impactive to the consumer.

EVs cost more than ICEs

First of all, let's talk about vehicle prices. We've seen the impact that higher vehicle prices can have on inflation over the course of this year. The semiconductor shortage has led to production cuts for new cars and prices of used cars going through the roof.

If you look at the relationship between car prices and US CPI (Consumer Price Index; proxy for inflation) you can see that there is a correlation between the two and we would suggest that car prices are a component of CPI and hence of inflation.

Reuters