New on FinoLib · Volume I: Global Economy
I have added a new article to FinoLib, my finance education website: Climate Economics and Economic Sanctions Explained, part of Volume I: Global Economy. This page gives you the core of the topic in expert but plain language; the full article goes much deeper.
1.17 Climate Economics — Repricing the Entire Planet
The idea in plain words
Emissions are a market failure because their costs fall on people outside the transaction. Carbon taxes and cap-and-trade put a price on them. Stranded assets and green finance are the two main consequences for finance.
Key points
■Since January 1, 2026, the EU’s Carbon Border Adjustment Mechanism has required importers of cement, iron and steel, aluminum, fertilizers, electricity and hydrogen to report embedded emissions, with certificates bought and surrendered from 2027.
■India targets 500 GW of non-fossil capacity by 2030 and net zero by 2070.
■By August 31, 2026, India had 304.3 GW of non-fossil capacity, 54.9% of its installed power capacity.
A closer look
Economists describe emissions as history’s greatest market failure: burning carbon imposes costs — heatwaves, floods, crop failures — on people who were never part of the transaction. The textbook remedy is carbon pricing: make emitters pay, via either a carbon tax or a cap-and-trade market like the EU’s Emissions Trading System. The EU has gone furthest, adding a Carbon Border Adjustment Mechanism (CBAM): since January 1, 2026, importers of cement, iron and steel, aluminum, fertilizers, electricity and hydrogen must be authorized and report the emissions embedded in those goods, then buy and surrender certificates priced off the EU carbon market from 2027 for 2026 imports. That effectively exports the EU’s carbon price to trading partners, a serious matter for Indian steel and aluminum exporters.
The Simple Version
Climate change forces the largest repricing exercise in economic history: carbon gets a cost, fossil-fuel assets risk becoming worthless before they wear out, and trillions must flow into clean energy. The fight over who pays — rich vs. developing countries, present vs. future generations — is as much an economic negotiation as an environmental one.
Recap
Emissions are a market failure because their costs fall on people outside the transaction; carbon taxes and cap-and-trade put a price on them, and since January 2026 the EU’s CBAM requires importers of steel, aluminum, cement, fertilizers, electricity and hydrogen to report embedded carbon, with certificates bought and surrendered from 2027. Stranded assets and green finance are the two finance consequences.
1.18 Sanctions — Finance as a Weapon
The idea in plain words
Sanctions turn access to the dollar, Western banks and SWIFT into a weapon of financial exclusion, used as a substitute for military force. After 2022 the lesson central banks drew was that reserves held in someone else’s system can be frozen.
Key points
■In February 2022 Western allies immobilized hundreds of billions of dollars of Russia’s central bank reserves, about €210 billion of them in the EU alone.
■Selected Russian banks were cut off from SWIFT, and in July 2025 the EU extended a full transaction ban to dozens more Russian banks.
■Since 2024 the windfall profits on the frozen assets have been channeled to Ukraine, including to service about €45 billion of EU and G7 loans.
A closer look
Three chapters of this guide converge here: foreign exchange reserves (1.7) and — ahead of you — the dollar’s reserve-currency role (2.5) and SWIFT messaging (3.5). Sanctions weaponize all three. In February 2022, after Russia invaded Ukraine, Western allies executed the most sweeping financial sanctions ever applied to a major economy: selected Russian banks were cut off from SWIFT (a list the EU widened step by step, and in July 2025 the EU extended a full transaction ban to dozens more Russian banks), and — most consequentially — hundreds of billions of dollars of Russia’s own central bank reserves, held in Western financial institutions, were immobilized; about €210 billion of them sit in the EU alone. A war chest built over decades became unusable overnight.
The Simple Version
Because global finance runs through the dollar, US-influenced banks, and shared plumbing like SWIFT, access to that plumbing can be switched off. Sanctions are exactly that: exclusion from the financial system used as a substitute for military force. Russia in 2022 became the largest live experiment — and every country watching drew lessons about depending on someone else’s currency.
Recap
Sanctions turn access to the dollar, Western banks and SWIFT into a weapon: asset freezes, trade bans, exclusion from payment systems, secondary sanctions on third-country banks and the oil price cap. After 2022 Russia’s central bank reserves were immobilized, about €210 billion of them in the EU, and selected Russian banks were cut off from SWIFT, widened by the EU in 2025 to a full transaction ban on dozens more…
What the full article covers
In the full article I take you through these sections:
■1.17 Climate Economics — Repricing the Entire Planet
■1.18 Sanctions — Finance as a Weapon
It includes a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume I: Global Economy
Read the full article on FinoLib
The complete article, Climate Economics and Economic Sanctions Explained, with every worked example, diagram, quiz and source, is free to read in Volume I, Global Economy on finolib.com.
Explore the Finance Education Series: Vol. II — Capital Markets · Vol. I — Global Economy · Vol. III — Finance Encyclopedia · Vol. IV — Finance Careers · Vol. V — Personal Finance