From energy inequality to wealth inequality as a result of the energy transition

The energy transition will have two important macroeconomic effects: a sharp increase in investment needs and a significant rise in energy prices. Rising energy prices increase inequality, as low-income households spend a larger share of their income on energy than high-income households. Since a lot of investment is needed for the energy transition, central banks will be tempted to keep long-term interest rates low to facilitate these investments. But this will lead to a further rise in asset prices (equities, real estate), and therefore to wealth inequality. We can therefore see that the energy transition can add wealth inequality to energy inequality through this mechanism.