The US dollar and decarbonization : exploring constraints

This research essay explores how US dollar centrality and strength may impede decarbonization. First, I suggest that because US dollar centrality enables higher US household consumption and imports, and US household consumption is comparatively carbon-intensive, centrality can increase per capita emissions and carbon-intensive consumption in the United States. Second, I explore how US dollar strength can compromise the monetary autonomy and capacity to finance decarbonization for dollar-exposed emerging market economies. They are negatively impacted most notably in the areas of trade, external debt, and investment. Finally, US dollar strength also has the potential to limit the competitiveness of US green manufacturing and exports. US currency overvaluation means that green technologies produced in the United States can be comparatively expensive in global markets. I conclude with a discussion of future research and policy implications.