ECB warns of energy transition inflation risk

Gas supply imbalances and rising carbon prices could cause persistent pressure on consumer prices, ECB executive board member warns

The energy transition could drive up inflation over a prolonged period, forcing governments to protect consumers from soaring bills and challenging the fiscal policy of central banks, says Isabel Schnabel, executive board member of the European Central Bank. “As the shift in the energy mix towards cheaper and less carbon-intensive fuels will take time, a rising carbon price, higher tax rates across a range of fossil fuels and relatively inelastic energy demand may lead to continuous upward pressure on consumer prices in the transition period,” she told the 2022 annual meeting of US academic organisation the American Finance Association. Schnabel’s comments come as natural gas prices in Europ