COP summits and energy-dependent economies

While COP summits generally bring climate debates and global emission targets onto the agenda, a great many other headings—global finance, economic growth, energy supply security, green energy, employment, international trade—are also being redefined.

Because both the advanced economies that carry responsibility for global emissions and the developing countries that are forced to shoulder the financial burden of the transition—and especially energy-import-dependent countries—are present, the importance of COP summits, where all these matters are discussed, increases even further.

THE BILL FOR FOSSIL RESOURCES MAKES THE GREEN TRANSITION UNAVOIDABLE

The renewable energy investments that come to the fore at COP summits represent a strategic opportunity for countries dependent on fossil energy sources to reduce that dependence.

Because for developing countries that meet the bulk of their energy needs through imports, every geopolitical crisis or oil shock in global markets causes current account deficits, budget deficits and inflation in these countries.

This threatens macroeconomic stability.

Therefore, however costly it may be, the green transition becomes an unavoidable choice.

THE COST OF THE TRANSITION MUST BE SHARED FAIRLY

The green transition will be unavoidable, but it brings a serious cost with it.

The most fundamental problem for the developing countries that will carry out this transition is that the cost of accessing the capital needed for it is very high—in other words, that it is very difficult for them to finance these new transition investments with high-interest loans under market conditions.

Especially if countries also carry a high debt stock, there will be no possibility of realizing these investments either.

Unless the cost of this transition is shared fairly, serious steps cannot be expected from developing countries.

For this reason, what should now be the priority at COP summits is not pledges but facilitating access to appropriate resources.

THE CARBON BORDER THREAT AND A FAIR TRANSITION

On the other hand, instruments such as the carbon border adjustment mechanism, which the green transition has made unavoidable, will negatively affect the exports of countries that cannot access green technology and still meet their energy needs predominantly from fossil sources, and their competitiveness will decline as well.

This situation leads to trade deficits, losses in production and losses in employment.

Therefore, establishing mechanisms that will ensure a fair transition for the joint sharing of the green transition cost that developing countries will bear is now essential.