Summary of Greenflation Issue Brief

In the process of transitioning to an eco-friendly economy, it is said to refer to a phenomenon in which prices rise due to an imbalance in the supply and demand of raw materials due to the strengthening of various environmental regulations. - Korea Development Bank Brief

In accordance with the implementation of carbon neutrality, raw material prices are rising due to various regulations and complex actions, and this is being deferred to consumer prices.

Investments in related areas to alleviate the burden of greenflation and supplementary control of power supply sources during the transition period seem necessary.

At the same time as the recent global economic recovery, an imbalance in supply and demand causes a rise in raw material prices
-Mineral price fluctuations Lithium 395.4%, Magnesium 290.5%, Manganese 102.6%
-(China) Decrease in supply due to supply disruption in magnesium producing areas, which account for 82% of world production, due to power shortage due to decarbonization
-(Europe) Imbalance in supply and demand of raw materials such as aluminum and magnesium, which are lightweight materials for the car body, and decrease in manufacturing production
-(U.S.) Reduced industrial production due to insufficient supply of eco-friendly raw materials for rare earth and lithium​

​Increase in operation rate of fossil fuel power plants to supplement eco-friendly energy sources such as solar and wind power, and soar in unit price
-Europe 21.1~May coal power supply increased by 22.2% year-on-year
-Resolving conflict factors in the decision to expand natural gas supply after October 21, Russia
- In Q21.3, prices of major energy resources rose 118% for natural gas, 72.7% for crude oil, and 45% for gasoline compared to the same period last year.

​Additional stimulus to producer and consumer prices due to raw material supply, production disruption, and shipping bottlenecks
-21.October Consumer price increase in major countries US 6.2 EU 4.1 China 1.5 (Korea International Trade Association)

Korea needs to supplement its current dependence on China
-Dependence on China (based on imports from January to September): magnesium ingot 100%, manganese 99%, aluminum cable 97.4%, tungsten oxide 94.7%, lithium hydroxide 83.5%, cobalt hydroxide 80.6%
-Need a strategic cooperation supply system with major producers of lithium (Bolivia), manganese (South Africa, Brazil), and graphite (South Africa, Brazil)