Net zero risks fuelling inflation, warns Bank official

Core Viewpoint - The push for net zero policies in the UK is expected to increase inflation over the next two to three years, according to Megan Greene, a member of the Bank of England's Monetary Policy Committee [1][2]. Group 1: Inflation and Economic Impact - Carbon pricing is anticipated to raise energy costs for households and businesses, contributing to higher inflation [2]. - The Bank of England's research indicates that the UK's net zero policy on carbon pricing will lead to reduced output and increased energy and non-energy inflation for up to two to three years, potentially keeping inflation elevated until the end of 2028 [2]. - Inflation in the UK reached 3.8% in August, significantly above the Bank's target of 2%, with forecasts suggesting it may rise to 4% in September [3]. Group 2: Policy Conflicts and Economic Transition - There is a conflict in mandates as net zero policies may drive prices higher, while the primary goal of the Monetary Policy Committee is to maintain inflation at 2% [4]. - Despite the potential for increased inflation, Greene argues that transitioning to a greener economy is less costly than delaying or inadequately implementing the transition [5]. - The Bank's deputy governor previously noted that climate transition policies have been significant contributors to recent inflation trends [6]. Group 3: Energy Costs - British companies face the highest electricity prices among developed nations, with UK electricity prices approximately 50% higher than in Germany or France and four times higher than in the US [7][8].