According to research brought by the International Monetary Fund (IMF), the year 2023 was the warmest on record. Compared to pre-industrial times, the average temperature on Earth has risen by 1.2 degrees Celsius. Due to globalization and tight connections between various branches, every investor should keep tabs on the influence of climate change on trading.
Climate Change: Need To Know
Climate change has become one of the world’s most essential aspects for several reasons. Everyone can look at melting icebergs and low air quality on social media platforms. Why does it happen?
To briefly remind you what’s going on, the main issue is the emission of greenhouse gasses into the atmosphere. Since the Industrial Revolution, people have used timber, wood, coal, and other natural resources to improve manufacturing worldwide. As a result, damaging substances get released into the atmosphere, which inevitably leads to damage to the ozone layer and the rise of temperature.
How Does Climate Change Affect Trading?
Every market has two options for development. Theoretically, renewable energy may not be as profitable as the usage of natural resources in the short term. But when it comes to the bigger picture, reducing energy consumption will be incredibly beneficial in the future. Traders can see that even in the cryptocurrency market.
Bitcoin mining necessitates enormous amounts of energy for proof-of-work, which is compulsory for the whole process. Some companies, such as First Solar, provide photovoltaic solutions for mining to somehow compensate for the impact of climate change on trading. On the other hand, some cryptocurrencies use proof-of-stake, which can use much less electricity than proof-of-work. The most popular example is Ethereum.
Climate Change: Transition Risks For Trading
The economic world stands astride when it comes to climate change in trading. Everyone knows that there would be no need to use natural resources in a perfect world. However, we are still dependable on oil, gas, coal, and other resources, even though renewable energy brings more daily attention. When it comes to trading, there are several petroleum and metals conglomerates in the market, not to mention oil and natural gas itself.
The IMF reports that if countries launched a zero carbon emission policy by 2050, the potential world net GDP benefit could reach up to 9 percent in 25 years. It includes not only avoiding damages but also mitigation policy costs. It shows why multiple companies decide to turn to renewable energy sources or even start their operation from scratch.
Tesla is the obvious first pick, showing the revolutionary concept of entire dependence on electric vehicles in the automotive industry. Some global manufacturers try to take step by step with their hydrogen or single electric models, while Elon Musk’s company doesn’t intend to use natural resources to fuel their cars. Even if there are some obstacles – such as issues during cold and snowy weather – the popularity of Tesla is growing. As a result, the discussion about renewables gets more attention every day.
Even though traders can notice several oil and gas powerhouses in the market, these companies are also turning their eyes to renewable energy. How? The most common example is investing in wind farms not only on land but also on seas. Conglomerates such as BP or Petrobras constantly look for ways to balance their most substantial assets with alternative energy sources. The limitation of carbon emissions and transition to renewable energy shows the influence of climate change on trading.
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