It is possible that the information obtained from studying the effects on inflation of the climate measures introduced by various countries so far is not representative of developments going forward. For example, it is mainly relatively small countries that have introduced carbon taxes at levels that are likely to have a significant impact on emissions, and they have done so at different times. The continuing climate transition will lead to the burning of fossil fuels also becoming more expensive for larger countries that are of greater significance for the global economy and that, in many cases, are more dependent on fossil fuels. The transition in various countries will now also be more or less simultaneous, over a relatively short period of time. This could have a greater effect. For instance, price increases on energy and the negative supply shock when carbon-intensive technology is phased out could be more noticeable for the global economy as a whole.

At the same time, the speed of technological development is affected by how much profit can be made. As is noted above, the pace of energy-saving technological development increased markedly in conjunction with the oil price shocks of the 1970s. It is possible that rapidly rising costs for using fossil fuels may cause a corresponding increase the pace of innovation and stimulate the emergence of new technology. This would facilitate the transition process and have less dramatic effects on the economy and inflation.

However, the adjustment to a less fossil-based economy may also cause problems in the financial system if it is too fast and is not carried out in a sufficiently orderly manner.^[12] See, for example, Bolton et al. (2020). The risks associated with such a development are usually referred to as transition risks. The financial sector has an important role to play in that it prices risks and mediates capital to investments. This applies, among other things, to the risks associated with loans to companies in CO2-intensive industries. It is important that these transition risks are correctly taken into account in the risk premiums reflected in prices of assets and natural resources. Price changes can otherwise be significant when these risks need to be rapidly taken into account. This can ultimately affect financial stability and, via this route, also have effects on inflation. To highlight the risks, it is necessary to impose high demands regarding how companies report information related to transition risks.

Different countries are dependent on fossil fuels to a varying degree, in their capacity of both consumers and producers. As far as Sweden is concerned, dependence is not particularly significant in either of these respects. Figure 3 shows that the consumption of fossil fuels in Sweden, measured as consumption per capita, is low in an international perspective.

Figure 3. Consumption of fossil fuels 2019 KWh per capita

Sweden’s low dependence on fossil fuels, together with the fact that Swedish energy and climate taxes are already on a high level internationally speaking, suggests that the direct effects of the climate transition could be smaller in Sweden than in many other countries. Of course, this does not rule out the possibility of Sweden, in its capacity as a small, open economy, being affected by the possible impact on the real economy and inflation of the climate transition in the rest of the world.