Is the Sword of Damocles hanging over economies after the G20, COP26 summits?

As the world continues to reel from ominous crises such as Covid-19 and high inflation, the spheres of the global economy and foreign policy are experiencing congested traffic these days. Meanwhile, there are other long-term issues at stake here such as climate change and food security. As things stand, both the G20 meetings and the COP26 Climate Change Summit emerged as platforms where all these vital issues were brought to the fore.

Italy hosted the G20 summit this year. The meetings, which have been ongoing all year, ended with the leaders' summit held in Rome last weekend. 

The final communique of the summit consists of 61 articles. The consequential issues that marked the document were the fight against Covid-19, increasing cooperation to alleviate the effects of the pandemic on the global economy, and combating climate change. 

In this context, the need to rally efforts to limit the global temperature increase to 1.5 degrees Celsius was once again emphasized.

Another of the important issues discussed at the G20 Summit concerns the topic of inequality that Turkey’s President Erdoğan drew attention to at almost all international meetings. In this context, the declaration promised to "increase financing" in order to help both underdeveloped and developing economies adapt to climate change.

Following the G20 meeting in Rome, the Climate Change Summit immediately kicked off in Glasgow. 

Although the issue of global warming has only recently become a hot-button topic, climate change meetings have been held regularly since 1994 within the scope of the United Nations Framework Convention on Climate Change. 

Of course, one has to expect more tangible results to manifest from meetings that have been ongoing since yore, yet it seems these sort of events accomplish very little.

That said, it is still extremely important for world leaders to come together and take part in negotiations on such a crucial issue as climate change.

Climate change will cause macro-economic problems in myriad fields. Of course, this should not necessarily mean that the fight against climate change must be halted. Nonetheless, it is clear that proactive measures must be taken when it comes to certain issues. So what dangers await us?

It is quite possible that the steps to be taken within the scope of combating climate change will increase input costs in the long run. Particularly, additional green energy investments will be needed to meet energy demands. This will translate into long-term financing costs. Meanwhile, we are already seeing a short-term decrease in hydrocarbon investments.

However, estimates show that by 2050, a significant portion of the total energy demand will continue to be met by hydrocarbons. Therefore, a persistent impact on global inflation may stem from energy.

Additionally, when it comes to the issue of electric cars, which is also on the agenda at COP26, there are certain pernicious problems that must be ironed out. For example, we know that the electricity transmission infrastructure of so many cities is not sufficiently strong to charge a large number of cars simultaneously. 

This situation requires large investments in infrastructure. Of course, all these will transpire in due time, but it is better to be always prepared than to suffer once.