This policy brief is part of the UCL Institute for Innovation and Public Purpose’s (UCL IIPP) publication series.

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Environmental Breakdown and Inflation Management: Policy Alternatives | UCL Institute for Innovation and Public Purpose (IIPP), IIPP Policy Brief No. 37, published in 2026

Authors:

  • Josh Ryan-Collins |  University College London, and Founding Director of the UCL Institute for Innovation and Public Purpose
  • Damon Aitken | University College London, and Founding Director of the UCL Institute for Innovation and Public Purpose
  • Katie Kedward | University College London, and Founding Director of the UCL Institute for Innovation and Public Purpose
  • Carolin Carella | Worldwide Fund for Nature
  • Maud Abdelli | Worldwide Fund for Nature


Executive Summary:

  • The current inflation management framework used in high-income economies is focussed on the stabilization of demand-side pressures via adjustments to interest rates. However, climate change and nature loss, together with geopolitical disruptions, are generating more frequent, severe, and persistent negative supply-side price shocks to key commodities, including food and energy. Raising interest rates often entails output losses without alleviating the underlying supply constraints.
  • Maintaining price stability without impeding broader macroeconomic as well as social and environmental objectives thus requires a rethinking of how we conceptualise the drivers of ecologically-induced inflation and its
    management.
  • Central banks have recognised climate change as a driver of such supply- driven disturbances. However, they are only just beginning to explore how ecological degradation – encompassing not only climate change but broader nature loss – may also pose a structural threat to price stability.
  • This policy brief sets out evidence on how ecological degradation disrupts the supply side of the economy, and how it can trigger distributive conflict that can amplify the magnitude and persistence of inflationary shocks, drawing on the theory of conflict inflation.
  • It summarises the theoretical arguments made in a complementary working paper and proposes potential policy options for ecological supply-side inflation management coordinated across fiscal, monetary, and industrial policy spheres.


Reference:

Ryan-Collins, J., Aitken, D., Kedward, K., Carella, C. and Abdelli, M. (2026). Environmental Breakdown and Inflation Management: Policy Alternatives. UCL Institute for Innovation and Public Purpose, Policy Brief Series (IIPP Policy Brief 37). ISSN 2635-0122.

Available at:  https://www.ucl.ac.uk/bartlett/publications/2026/jul/environmental-breakdown-and-inflation-management-policy-alternatives

 

This policy brief is part of the UCL Institute for Innovation and Public Purpose’s (UCL IIPP) publication series.

Explore more working papers and policy reports here.