Climate Change is no Longer a Threat, It’s a Political Clash

Most investors wonder about the best investment decision amid the chaotic uncertain stance caused by the geopolitical circumstances which crystallized through the G20 summit. G20 summit or the G19+1 as the BBC preferred to describe it, held various topics on its agenda. Some of them were terrorism, Middle East tensions, North Korea threats, Ukraine, women entrepreneurship and globalization. Despite the importance of Trump-Putin first meeting and their discussions about the US election interference importance; globalization and the Paris Climate agreement  grasp the biggest attention.

The Profound Greenhouse Gases Dilemma

Decades ago scientists have predicted the global warming problem as unprecedented rise in temperature, ocean ice melting and rising in sea levels which will lead to disappearance of some cities.

According to NASA, a layer called Greenhouse around the earth consist carbon dioxide, methane and nitrous oxide gases that form a specific goal to protect the earth temperature. The greenhouse gases maintain the optimum amount of sun rays and reflect the rest in the space to keep the earth temperature around 15 Celsius.

The emissions of these gases have some natural factors as cultivation, decomposition of landfills, ruminant digestion and manure management associated with livestock. These natural factors have natural effects reflected on the greenhouse layer that does not disturb its nature.

On the other hand there is the human factor which is represented in burning fossil fuel caused by coal or oil.

These severe concerns of global warming pushed world leaders led by the former US president Barack Obama to put an end for the rising threat of massive greenhouse gases caused by fossil fuels.

The Paris Climate Agreement had 153 ratifying countries that agreed on mitigating the effect of the greenhouse gas emissions. This agreement was part of the United Nations convention on Climate Change (UNCCC) which is usually held on a yearly basis from the nineteenth. According to the statistics, China comes on the top of the list of greenhouse gases emitting countries with 29.4%, the US comes second with 14.3%. As a general idea, wealthier countries have double burden. On one side they have to reduce the emitted greenhouse gases from their factories, and on the other side they have to help (financially) the developing countries on damages that may occur due to the treaty.

Trump’s Electoral Pledges

Trump did keep his promises to withdraw the US from the Paris agreement, and he shocked the world on June 1st when he announced that the US will not be part of the Paris Climate agreement . The Republican senator, Rand Paul, explains that the agreement will make the US a total loss of 6.5 million jobs; moreover, the industry will lose billions. It does sound extreme; however, even if it is true the same effect is going to be applicable on every other country.

Regardless to the unethical withdrawal by Donald Trump which put his counter parties in a very embarrassing situation, the step considered entirely illegal. According to ‘article 28’ of the Paris agreement which is concerned with withdrawals, it requires a notification to the depository three years after the agreement became effective (effective in November 4^th, 2016 for the US), and the actual withdrawal came just one year after the depository of the notification. That’s is a breach of agreement…

Trump Face to Face with Merkel

Some difficult discussions that revolve around the Paris climate agreement were expected to be an issue during the G20 summit, especially when Trump stands alone to face the headwind from the other team led by Merkel. It wasn’t the first meeting between Trump and Merkel. Earlier this year, Trump gave a speech in the NATO meeting and accused Germany to be a very bad role inside the NATO, and said they should pay more for the coalition. The funny thing is that Trump refused to let it go, later he documented his words on twitter. Moreover, he added another conflict about the unfair trade balance between Germany and the US. Merkel respond was sharp and clear by saying that Europe has to defend itself in the security issues, ignoring the USA.

On the summit held in Hamburg 7-8 July, Merkel deplored trump’s stance on the Paris accord, and stated that the 19 nations renewed their pledge to implement the Paris deal on climate change, and she described that by “irreversible”.

Theresa May tried to build some kind of coat arm trying to defend Trump by saying that he has a belief that the US could rejoin the accord again, which provoked Merkel.

The new French president Emmanuel Macron had an effective role to announce that Paris will welcome another weather summit on December 12^th and he will never be despaired of convincing Trump to change his mind.

The joint summit statement ended the discussions with some nice words about the US stance from the climate agreement, however mini conflict between Trump-Merkel creates a separation in the G20 group.

Globalization and Trade

The G20 summit originally aims to achieve the purpose of a stronger and more balanced inclusive growth, through sharing benefits and trade. Every country expressed its willingness to cooperate on the international trade side including Russia which expressed its readiness to show more cooperation with the free markets system.

On the other hand Trump opposed the G20 ideology with a solely comment that the US is ready to make a new trading deal with the UK. Add to that, his prior actions towards NAFTA and TPP are well absorbed by the global leaders.

The G20 Shadows on the Markets

Trump announcement that the US will cease the Paris agreement caused all global major indices rise to new historical levels. Coal prices soared to 5 years high at $84, since his inauguration.

At the beginning of the year, many investors ware shocked by the advice that coal producing and mining companies’ stocks will soar after the withdrawal decision, which didn’t happen. The biggest two companies in the field, ARCH coal depreciated from $84 which was the peak before the elections and dropped to the $70, Peabody energy dropped to $25.

Oil prices completely ignored the decision and continued to depreciate, but it wasn’t only oil prices that ignored the controversial announcement. Saudi Arabia is the biggest oil exporter worldwide and the only Middle Eastern representing country that is not represented in the G20 by its ruler. The monarch decided to send the former treasury minister which puts a lot of question marks amid the crisis facing the Saudi Arabia with its neighbors and the recent political crisis occurred inside the ruling family itself.

The global warming issue is far from being solved, it is not only a natural threat that civilization will have to deal with but a political clash that world leaders must find a way out. It is a matter of opinion, however democracy will have to decide this conflict. Trump and Merkel, please speak for the people, don’t make global warming a political clash.