Currency Power Dynamics during the Green Transition

• In Event: Geopolitical Risks and Supply Chain Challenges

Abstract

Will the balance of international currency power shift as states rely less on fossil fuels (priced in US dollars) and transition to clean energy sources? We provide a framework for thinking about international currency power during the Green Transition. We build a simple theoretical model where changes in commodity demand impact the usage of international currencies conditional on (1) the availability of the currency for exchange and (2) the relationship between the commodity supplier and the issuer of the international currency. We use the case of the electric vehicle sector to illustrate how geopolitics could influence shifts in currency power during the Green Transition, showing a slight increase in currency power for China and the Eurozone relative to the United States.

Authors

• Ryan M. Weldzius, Villanova University

• Joshua Zion Buckson