Many green industries not only in Romania, but also in other European countries turned out to be unprofitable. And this is because around them, or rather upstream, all kinds of related industries have developed from these green industries that produce very expensively, said BNR Chief Economist Valentyn Lazea on Thursday at the “Romania – Banks and Business” conference organized by Oxygen . Events

“For example, wind turbine blades are made of expensive materials – titanium alloys – instead of aluminum or cheaper materials. Or, for example, this vertical farming, also related to the green economy, uses robots that sprinkle dill and parsley. These expensive solutions, if there is no cost control, turn against the green industry, because no one will buy a kilowatt-hour if it costs twice as much because titanium was used, or no one will buy their asparagus if it costs 5 lei link and amd,” Valentyn Lazeya also said.

In his opinion, Romanian banks should change their approach to lending to green industries.

Banks should look not only at the financial side but also at the long-term viability, how much profit they can make throughout the life cycle of the product

“Is it the job of banks to control costs? I believe that yes, this is clearly the business of the banks, it is even in the interests of the banks, which should not only be interested in turnover, but rather they should be concerned that the loans they give do not become non-performing precisely because there is no proper cost control”, – believes the Chief Economist of the BNR.

In his opinion, banks, when analyzing a green project, should look not only at the financial side, but also at long-term viability, at how much profit it can bring during the entire life cycle of the product. And also to see if there are other less expensive technical solutions, that is, to achieve the same effect, but with cheaper technical solutions.

“Of course, this will mean that banks have a specialized department of engineers, chemists, specialized people who can talk to the beneficiary of the loan and offer cheaper solutions that guarantee the profit of the beneficiary, and for me, the bank, this is a guarantee. the loan will be repaid. This requires banks to take a completely different approach, that is, to change the focus from turnover and profit to the sustainability of the client’s business and, as a result, their own sustainability,” Valentyn Lazeya concluded.

“Green” inflation (greenflation) is one of the topics that has been actively discussed recently, along with inflation due to climate change.

The “green” transition will not be free, warns the European Central Bank. But this price is worth paying, ECB representatives believe.

As we build a more resilient economy, we face a new era of energy inflation with different but interrelated shocks that could lead to a prolonged period of upward pressure on inflation.

One of the shocks is related to the cost of climate change, or “climate inflation.”

As the number of natural disasters and severe weather events increases, so does their impact on economic activity and prices. For example, waves of drought in many parts of the world have caused recent increases in food prices.

The consequences of another category of shocks, “green inflation”, are more subtle

Many companies are adapting their production processes to reduce carbon emissions. But most green technologies require significant amounts of metals and minerals such as copper, lithium and cobalt.

Electric cars, for example, use more than six times more minerals than their conventional counterparts. An offshore wind farm requires seven times more copper than a gas-fired power plant.

Regardless of the decarbonization path we ultimately choose, green technologies will account for most of the growth in demand for most metals and minerals for the foreseeable future.

And while demand will grow, supply is limited in the short to medium term. Usually, the development of new mines takes five to ten years.

Because of this imbalance between growing demand and limited supply, the prices of many essential commodities have risen sharply in recent months. The price of lithium, for example, has increased by more than 1,000% since January 2020. Export restrictions on Russian goods may increase price pressure in the short term.

These developments illustrate an important paradox in the fight against climate change: the faster and more urgent the transition to a greener economy, the more expensive it may become in the short term.

As more industries transition to low-emission technologies, green inflation can be expected to drive up prices for a wide range of products during the transition period.