NAVIGATINGTHEPATHTONETZEROTHEINTERPLAYOF CLIMATE,MONETARYANDFINANCIALPOLICIES
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Discussionforthepaper”CarbonPricesand InflationintheEuroArea” MaximilianKonradt,ThomasMcGregor,and FrederikToscani AlinaBobasu EuropeanCentralBank
AlinaBobasu Discussionforthepaper”CarbonPricesandInflationintheEuroArea”MaximilianKonradt,ThomasMcGregor,andFrederikToscani 19/04/2024 1/8
1 Whattheauthorsdo?
2 Whattheauthorsfind?
3 Comments
Outline
AlinaBobasu Discussionforthepaper”CarbonPricesandInflationintheEuroArea”MaximilianKonradt,ThomasMcGregor,andFrederikToscani 19/04/2024 2/8
KeyQuestion:Whatistheimpactofcarbonpricingpoliciesinmember countriesoninflation?
Estimatingtheimpactofcarbonpricingpoliciesinmembercountrieson inflation.
▶ First,theauthorsestimatetheimpactoninflationofchangestotheprice ofcarbonduetotheEmissionsTradingSystemandcarbontaxesinthe euroarea; Methodology:Localprojectionsover2000-2020.
▶ Second,theauthorsexploittwocasesinwhichcountriesexperienced significantincreasesintaxratesoverashortperiodoftime. Theyestimate eventstudiesbasedontheFinnishtaxrevisionin2011andtheFrench carbontaxenactmentin2014.
▶ Third, theysimulatetheconsumerpriceeffectsofaneffectivecarbonprice increaseconsistentwiththeEUˆasFit-for-55goal,basedondetailed input-outputtables(65sectorsand5energyinputs).
Whattheauthorsdo?
AlinaBobasu Discussionforthepaper”CarbonPricesandInflationintheEuroArea”MaximilianKonradt,ThomasMcGregor,andFrederikToscani 19/04/2024 3/8
Whattheauthorsfind?
Carbontaxeshavenotcontributedmeaningfullytoinflationintheeuro areaduringtheperiodofanalysis,andwheretheyhave,theimpactis likelytohavebeenshort-lived.
Theresultsinsteadsuggestthatcarbontaxeschangedrelativeprices, raisingthecostofenergy
Thebusinesscyclemattersforthetransmissionofthecarbontaxeffects onthepricelevel
Resultsarerobusttodifferentspecificationsandextensionswith additionalcontrolvariables(indicationsofpotentialnon-lineareffects)
Scenarioanalysisshowsthatlargerfuturecarbontaxincreaseswouldstill entailquitelimitedimpactoninflation
AlinaBobasu Discussionforthepaper”CarbonPricesandInflationintheEuroArea”MaximilianKonradt,ThomasMcGregor,andFrederikToscani 19/04/2024 4/8
Comments
Broadercommentsintheexplanationsandfurther considerations
Whynotalsodiscusstheimpactonactivity?
▶ Whatistheroleoffiscalintheframework?Theeffects(albeitmainlyon activity)canbemitigatedviatransfersandadditionalgreeninvestment
▶ Towhatextentcarbonpriceswillalsoincreaseintherestoftheworldwill affectcompetitiveness,importpricesandthedemandforexportgoods (whatistherestoftheworlddoinginthiscase?)Inflationeffectscouldbe amplifiedina”synchronised”scenario
Alsoacomparisonwithenergyshocksiswarrantedinthe paper:thecarbonpriceincreasesaregraduallyandleavetime fortheeconomytoadjust;implydifferenteffectsontermsof trade
▶ Non-lineareffects-thesearealsoinfluencedbythelimitedsampleand countrycoverage(whynotalsolookintonon-lineareffectsdependingon thestateofinflation?SeeDeSantis(2023))
Impactoninputprices(e.gconstructionsector)acrosssectors andsubstitutioneffects,andsecondroundeffects;whynot reproducetheLPanalysisforsectoralinput/outputprices?
AlinaBobasu Discussionforthepaper”CarbonPricesandInflationintheEuroArea”MaximilianKonradt,ThomasMcGregor,andFrederikToscani 19/04/2024 5/8
HowmuchreductioninC02wouldtheanalysisentailsespecially inthelastscenario?Isthecarbontaxeffectiveenough?
The46%CO2emissionsconsistentwiththeFit-for-55 objective(Coenenetal.(2023)showssomescenariospointing toonly11%reductionby2030
Combinedwithenergyefficiencygainsandtechnological improvementswillsupportanincreaseinthesupplyofgreen energyandlowertherelativepriceofrenewables(Blanchardet al.,2022,Coenenetal.)
▶ higherelasticityofsubstitutionbetweencarbon-intensiveandlowercarbon intensiveenergy
▶ environmentalpoliciessuchasregulatoryconstraintsonproduction, emissionpermitsortaxbreaks
Comments
AlinaBobasu Discussionforthepaper”CarbonPricesandInflationintheEuroArea”MaximilianKonradt,ThomasMcGregor,andFrederikToscani 19/04/2024 6/8
SmallerConsiderations
Instructuralmodels,theimpactoninflationdependscruciallyonthe forwardorbackwardlookingbehaviourandanticipations;households expectationsandthecredibilityofthecarbontransitionpath(seeFerrari andNispiLandi,2022)
AlinaBobasu Discussionforthepaper”CarbonPricesandInflationintheEuroArea”MaximilianKonradt,ThomasMcGregor,andFrederikToscani 19/04/2024 7/8
