IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v174y2025ics0014292125000339.html
   My bibliography  Save this article

Greenflation: Empirical evidence using macro, regional and sectoral data

Author

Listed:
  • Bettarelli, Luca
  • Furceri, Davide
  • Pisano, Loredana
  • Pizzuto, Pietro

Abstract

This paper investigates the impact of climate change policies on inflation, for a large sample of 177 developed and developing economies, 78 subnational territorial areas and 17 sectors, over the period 1989–2022. We show that carbon taxes lead to inflationary pressures. The effect is not negligible: a one standard deviation carbon tax shock—corresponding to a 5$/tCO2 increase in emissions-weighted carbon taxes—leads to an increase of the price level of about 0.7 percent one year after the implementation of the policy, and between 1.6 and 4 percent in the medium term. These results hold at the national, sub-national and sectoral level. The effect is larger when inflation is initially high, and in regions (sectors) characterized by high emissions and low innovation capacity. In contrast, we find that emissions trading systems as well as non-market-based climate change policies (such as R&D subsidies) do not have statistically significant effects on prices.

Suggested Citation

  • Bettarelli, Luca & Furceri, Davide & Pisano, Loredana & Pizzuto, Pietro, 2025. "Greenflation: Empirical evidence using macro, regional and sectoral data," European Economic Review, Elsevier, vol. 174(C).
  • Handle: RePEc:eee:eecrev:v:174:y:2025:i:c:s0014292125000339
    DOI: 10.1016/j.euroecorev.2025.104983
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292125000339
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.euroecorev.2025.104983?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Inflation; Greenflation; Climate change policy; Carbon tax; Local projections;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:174:y:2025:i:c:s0014292125000339. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.