The Global Shift: Dethroning the Dollar and Combating Climate Change

Feranmi Olaseinde

Hatched by Feranmi Olaseinde

Oct 20, 2023

3 min read


The Global Shift: Dethroning the Dollar and Combating Climate Change

Global average temperatures reached a record on Monday, serving as a stark reminder of the urgent need to address the escalating carbon emissions resulting from burning fossil fuels (Bloomberg on Twitter). Simultaneously, India and the United Arab Emirates (UAE) made noteworthy strides in reducing their reliance on the US dollar in global trade transactions (Foreign Affairs - Nigeria).

Last year, India's central bank introduced a new framework for settling global trade in rupees, which recently materialized through agreements with the UAE (Foreign Affairs - Nigeria). Not only did the two nations decide to trade in their local currencies, but they also established a real-time payment link to simplify cross-border money transfers. This move aims to minimize transaction costs and eliminate the need for dollar conversions (Foreign Affairs - Nigeria). The de-dollarization trend is not limited to India and the UAE; it is gaining momentum worldwide, driven primarily by China and Russia. These powerful nations are seeking to diminish the dominance of the dollar in response to aggressive US sanctions and foreign policy maneuvers.

While these two developments may appear unrelated at first glance, they share a common thread: a global shift towards reducing dependence on the US dollar and mitigating the adverse effects of climate change caused by carbon emissions.

The efforts of India and the UAE to trade in their local currencies align with the broader trend of countries seeking alternatives to the dollar. By doing so, they reduce their vulnerability to economic fluctuations associated with the dollar's strength or instability. This shift also challenges the long-standing perception of the dollar as the de facto global reserve currency.

Moreover, the move towards reducing reliance on the dollar has profound implications for US influence in global affairs. As more nations actively pursue alternatives, the US risks losing its leverage in imposing economic sanctions or shaping international policies through financial dominance. This diversification of currencies in global trade could lead to a more balanced and multipolar world order, where no single currency holds unrivaled power.

Simultaneously, the global community recognizes the pressing need to combat climate change. The record-breaking temperatures serve as a wake-up call, emphasizing the urgency of transitioning away from fossil fuels. While the shift to renewable energy sources plays a vital role, reducing carbon emissions requires a comprehensive approach that encompasses sustainable practices, technological advancements, and international cooperation.

To address these intertwined challenges, here are three actionable steps:

  • 1. Embrace Renewable Energy: Governments, businesses, and individuals should prioritize and invest in renewable energy sources such as solar, wind, and hydroelectric power. Transitioning away from fossil fuels not only reduces carbon emissions but also creates job opportunities and fosters sustainable economic growth.
  • 2. Foster International Collaboration: The global community must come together to share knowledge, resources, and best practices in combating climate change. Collaborative efforts can accelerate the development and implementation of innovative solutions, ensuring a more effective response to the climate crisis.
  • 3. Support Currency Diversification: Countries should explore alternatives to the US dollar in international trade transactions. By diversifying currencies, nations can promote financial stability and reduce their vulnerability to economic volatility, thereby fostering a more resilient global economy.

In conclusion, the simultaneous pursuit of reducing reliance on the US dollar and combating climate change highlights the interconnectedness of global challenges. The efforts of nations like India and the UAE to trade in their local currencies, coupled with the rising de-dollarization trend worldwide, signify a shift towards a more multipolar financial landscape. Simultaneously, the urgency of addressing climate change necessitates collective action and sustainable practices. By embracing renewable energy, fostering international collaboration, and supporting currency diversification, we can work towards a more sustainable and resilient future.

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