The Climate Bill’s “Greenflation” Will Be Worth It

This essay has been updated to reflect news developments.

Though the average price of gasoline in the United States has dropped to about $4 per gallon, down from a high of around $5 in mid-June, rapidly increasing energy prices are still driving inflation over the year. It’s what Isabel Schnabel, a member of the executive board of the European Central Bank, memorably termed “fossilflation.”

Fortunately, the United States has finally decided to address it head-on: The Inflation Reduction Act of 2022, easily the largest climate bill in U.S. history, has cleared both the Senate and the House. It invests $369 billion to help get the country off fossil fuels and gives the Department of Energy $250 billion to lend to companies shaping the clean energy future. Together, these measures will leverage many hundreds of billions of dollars spent by businesses and households alike, producing and purchasing things like electric vehicles, solar panels and heat pumps.

But the harsh truth is…

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This article was written by Gernot Wagner and originally published on