Aurelia Butler

Wind turbine makers expect their fortunes to remain challenging this year, but are hoping for a turnround in 2024 as US legislation fuels investment there and European policymakers speed up the years-long permitting process. Manufacturers including Vestas and Siemens Gamesa warned in January that the wind industry would continue to suffer in 2023, due to high materials costs and slow approvals for new wind power projects in Europe. Siemens Gamesa’s chair, Christian Bruch, said the industry was “facing serious financial challenges”. Executives and analysts remain hopeful about the longer term outlook, though. They point to the US Inflation Reduction Act (IRA), which has earmarked $369bn for clean energy and climate-related projects — and has pushed European policymakers to step up their support for green industries.“I think there is some good news on the horizon,” including the falling prices of raw materials including steel, says Elena Pravettoni, clean power lead at the Energy Transitions Commission think-tank.These last 12 months, however, have been a rocky time for the windpower industry, despite a growing demand for renewable sources amid the European energy crisis, Inflation and supply chain delays have squeezed margins and contributed to job cuts. At the same time, the slow approvals process in Europe has held back growth in the sector, which faces aggressive competition from China. But, now, the passing of the IRA has injected new excitement into the US and EU renewables industry. “We think this is really a turnround year,” says Ben Backwell, chief executive of the Global Wind Energy Council. In Europe, he says, orders for wind turbines are expected to increase. In the US, the IRA will give onshore wind “a massive boost”. Although the US and Europe are both growth markets, leading turbine makers’ requirements differ in the two regions. In Europe, they are pushing for faster planning and permitting processes for new projects. The think-tank Ember has found that obtaining permits for new onshore schemes could take up to 10 years. EU legislation says it should take no more than two. Siemens Gamesa has highlighted uncertainty around eligibility for IRA incentives, which is limiting companies’ investment decisions © Paul Ellis/AFP via Getty ImagesAlessandro Boschi, head of the European Investment Bank (EIB) renewable energy division, says the slow permitting process is “one of the main reasons for investments not picking up at the pace needed”.Back in 2019, Fachagentur Windenergie an Land, a Berlin-based industry association, found that about a fifth of permitted projects in Germany faced legal challenges — including from environmental groups and individuals on wildlife protection grounds. This level of opposition remains about the same today, it notes. Industry body WindEurope welcomes EU moves to accelerate the renewables rollout but notes many proposals have yet to be implemented. “We will probably only see the effects of this on average permitting times in some months from now,” WindEurope says.In the US, turbine manufacturers also need clarity on how they will be able to take advantage of IRA incentives. Siemens Gamesa noted in January that uncertainty over the rules and eligibility was “limiting the ability for industry players to make significant investment decisions in the near term”.Vestas’s group senior vice-president of marketing and public affairs, Morten Dyrholm, says the IRA is “a good example of what we think policymakers should be focusing on” — but adds that the company is awaiting official guidance from the US tax authorities on how they can use the act. Vestas, which has a presence in the US, is “not making any premature investment decisions”.Even so, Dyrholm expects the IRA to drive a significant rise in renewables investment. The “risk” for Europe is that future investments move to other growth markets, including the US and Asia, he says. For many European companies, the biggest issue is how to compete with Chinese turbine manufacturers. The EIB has stressed the importance of competing on technology and quality grounds, rather than on price, and the industry has called for policymakers to develop a domestic supply chain for the raw materials needed for turbines, to reduce reliance on China.“As China and now the US pursue strong industrial policies to promote clean energy manufacturing, the EU needs policies to maintain and expand its manufacturing base,” says Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air. Backwell says most countries have under invested in the wind supply chain, apart from China. “You can see certain markets becoming very tight in the coming years,” he predicts, given the fact that supply chains will struggle to keep up with rising demand. More investment and co-ordination between industry and governments will be needed to meet increasing demand, he believes.While some of Europe’s green industries have sounded the alarm over the IRA, fearing it could lure domestic supply chains to the US, analysts expect the act to benefit leading European turbine makers that operate in both markets. The US legislation should support demand for wind turbines, according to analysts at Fitch Ratings, but they do not expect European manufacturers and suppliers to see its benefits before 2024. While “profitability is under pressure” for European manufacturers, they say, “long-term demand for renewable energy equipment remains strong”. In the UK, policymakers must step up efforts to ensure the market remains competitive, warns Claire Mack, chief executive of industry group Scottish Renewables. But anything driving an increase of operations “is a good thing” for economies of scale and innovation in the industry, she adds.

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Crackdown on ambiguous claims: the UN now says any business with a 2050 net zero emissions pledge ought to have a transition plan with “credible and ambitious targets for 2025 and 2030” © Florian Gaertner/Photothek via Getty ImagesBarring surprise developments, 2023 will be the first year of the 21st century when no G7 country has a general or presidential election.With luck, this period of relative political calm will also help to make 2023 a turning point in efforts to tackle one of the great dilemmas of our age: climate change. There are gathering signs that the meaningful government climate action that has long been missing from the drive for net zero emissions will start to take shape this year.It is not before time. Nearly five years have passed since a groundbreaking UN report showed carbon dioxide emissions must nearly halve by 2030, and reach net zero by around 2050, to meet the Paris agreement goal of limiting global warming to 1.5C.This was always going to be monumentally difficult. Nearly 90 per cent of CO₂ emissions come from fossil fuels that supply close to 80 per cent of the world’s energy.Still, the report triggered an outpouring of net zero commitments that today have been made by at least 132 countries and by more than 820 of the 2,000 largest listed companies.Alas, there have been virtually no rules to govern this eruption of pledges. A company could promise to become net zero by 2050 without saying what it would do in any year before then. Or it could have a plan to offset its emissions with carbon credits based on saving a patch of forest on the other side of the world. Or it could devise a net zero target for the speck of emissions it produced at its own offices or factories, but not for the far larger share of pollution driven by its products and suppliers.

Proof required: of 24 companies assessed for their climate strategies, only one (Maersk) showed ‘reasonable integrity’ © Mario Tama/Getty Images

The result of this unruly situation was spelt out in February in a stinging assessment of the climate strategies of 24 global companies, carried out by environmental groups. It found that just one — Denmark’s Maersk container shipping group — had “reasonable integrity”.Most companies had vague, “highly ambiguous” net zero targets that did not represent “a commitment to deep decarbonisation”. And the same could be said for many national governments. But change is afoot, not least in the world’s largest economy. Last year’s US Inflation Reduction Act is the most important climate action in American history. It contains billions of dollars of tax credits for clean energy and low-carbon technologies over the next decade and — crucially — it is spurring action elsewhere.The European Union this year unveiled a “green deal industrial plan” that includes a “net zero industry act” and other measures aimed at incentivising and fast-tracking clean energy projects across the bloc.This wave of green industrial policy has also sparked transatlantic trade tensions. However, assuming these can be managed, efforts to bring net zero plans to life could be transformed. For example, a steelmaker or an airline has a far better chance of meeting its climate goals in a country boosting the development of green steel or sustainable aviation fuel.This net zero push should also be bolstered by reporting and regulatory measures due to be launched or implemented this year.New EU directives — one that entered into force in January and another being finalised — are set to tighten the way companies operating in the region adopt and report on climate transition plans.In the US, the Securities and Exchange Commission is due to finalise separate climate disclosure rules in coming months.Also, the first set of global climate reporting standards is due to be published in June by a board established by the International Financial Reporting Standards Foundation.Meanwhile, financial regulators around the world are cracking down on corporate greenwashing with growing vigour. Expect to see more of the same as investors and green campaigners alike press for such action.“Regulators are stepping up because there is demand on the ground,” says Christina Ng of the Institute for Energy Economics and Financial Analysis.The UN has added its weight too. Earlier this month, its secretary-general, António Guterres, said that any business with a 2050 net zero pledge ought to have a transition plan in place by September, containing “credible and ambitious targets for 2025 and 2030”.Those targets should, he added, meet standards devised by a UN expert group which has specified that companies should, for example, cut their own emissions, rather than offset them with “cheap credits that often lack integrity”.Separately, the International Organization for Standardisation has issued guidelines for organisations setting net zero targets that should help stamp out misleading claims about supposedly green products.Researchers who monitor net zero pledges caution that more action is needed. As Oxford university’s Professor Tom Hale says, “We’ve made good progress in defining what good looks like. Now we need to do it.” Still, 2023 is set to be a year remembered for progress in climate action that will end up being impossible to ignore.

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SYDNEY (Reuters) – Asian shares slipped on Monday as markets were forced to price in ever-loftier peaks for U.S. and European interest rates, slugging bonds globally and pushing the dollar to multi-week highs.Investors are braced for more challenging U.S. data including the closely-watched ISM measures of manufacturing and services, the latter being especially important following January’s unexpected spike in activity.There are also at least six Federal Reserve policy makers on the speaking diary this week to offer a running commentary on the likelihood of further rate hikes.China has manufacturing surveys and the National People’s Congress kicks off at the weekend and will see new economic policy targets and policies, as well as a reshuffling of government officials. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%, having shed 2.6% last week. Japan’s Nikkei eased 0.4% and South Korea 0.9%.S&P 500 futures were flat, while Nasdaq futures edged up 0.1%. Strong data on spending and core prices saw the S&P 500 crack support at 4,000 on Friday and retrace 61.2% of this year’s rally.Fed futures now have rates peaking around 5.42%, implying at least three more hikes from the current 4.50% to 4.75% band. Markets have also nudged up the likely rate tops for the European Central Bank and the Bank of England.Bruce Kasman, head of economic research at JPMorgan (NYSE:JPM), has added another quarter-point hike to the ECB outlook, taking it to 100 basis points. Germany’s 2-year bond yield broke above 3.0% on Friday for the first time since 2008.”The risk is clearly skewed toward greater action from the Fed,” says Kasman.”Demand is proving resilient in the face of tightening and lingering damage to supply from the pandemic is limiting the moderation in inflation,” he added. “The transmission of the rapid shift in policy still underway also raises the risk of a recession not intended by central banks.”The Atlanta Fed’s influential GDP Now tracker has the U.S economy growing an annualised 2.7% in the first quarter, showing no slowdown from the December quarter.Higher rates and yields stretch valuations for equities, especially those with high PE ratios and low dividend payouts, which includes much of the tech sector.Shares in the United States trade at a price to earnings multiples of around 17.5 times forward earnings, compared to 12 times for non-U.S. shares.Ten-year Treasury bonds also yield more than twice the estimated dividend yield of the S&P 500 Index, and with much less risk.With the earnings season almost over, around 69% of earnings have surprised on the upside, compared to a historical average of 76%, and annual earnings growth is running around -2%.The upward shift in Fed expectations has been a boon for the U.S. dollar, which climbed 1.3% on a basket of currencies last week to last stand at 105.220.The euro was pinned at $1.0548, after touching a seven-week low of $1.0536 on Friday. The dollar scaled a nine-week top on the yen to stand at 136.40, aided in part by dovish comments from top policy makers at the Bank of Japan.The rise in the dollar and yields has been a burden for gold, which shed 1.7% last week and was last lying at $1,812 an ounce. [GOL/]Oil prices edged higher as the prospect of lower Russian exports was balanced by rising inventories in the United States and concerns over global economic activity. [O/R]Brent gained 35 cents to $83.51 a barrel, while U.S. crude rose 34 cents to $76.66 per barrel. More

The UK economic outlook for this year has improved, with analysts predicting a smaller contraction in output than previously because of falling energy prices and better than anticipated business and consumer sentiment.In December and January, economists expected gross domestic product to drop by 1 per cent this year, according to data from Consensus Economics, which polls leading forecasters.However, the data for the week of February 20 shows that economists are upgrading their forecasts. The average forecast involves a 0.6 per cent fall in GDP in 2023.The UK recorded better economic news last week. The latest S&P Global/Cips flash composite purchasing managers’ index showed British business activity rebounded in February after six months of declining output.Consumer confidence in February reached its highest level in almost a year, according to research group GfK. And official data about the public finances showed chancellor Jeremy Hunt was on course to net a windfall of £30bn after the UK recorded a surprise surplus in January.While the cost of living crisis is far from over, and the Bank of England could raise interest rates further to curb inflation, there has been a sharp fall in wholesale energy prices, which soared after Russia’s invasion of Ukraine in February last year.The UK wholesale gas price is now below £1.30 a therm, half the price of mid-December and down from a peak of £5.95 last August.Liz Martins, economist at HSBC, said that given the better economic news and falling energy prices “it is now plausible that there is no recession at all”. “That would be a remarkable result given the scale of the energy shock and monetary tightening that we have had,” she added.Allan Monks, economist at JPMorgan, estimates the economy will expand by 0.4 per cent this year, partly owing to lower energy prices.Ellie Henderson, economist at Investec, said “the fall in energy prices is the sunshine on a cloudy day” for the economy because it eased pressure on businesses and households.Lower wholesale gas prices mean the government’s cap on household energy bills has become less expensive for ministers.It has fuelled expectations that chancellor Jeremy Hunt may not proceed with plans to raise the cap from its current annual level of £2,500 to £3,000 in April.Susannah Streeter, analyst at Hargreaves Lansdown, said the fall in gas prices should for business “mean an easing off of punishing input prices, which should enable them to limit hikes passed on to customers”.More than three quarters of business leaders are confident about their companies’ prospects in 2023, according to a new survey published by the Boston Consulting Group. Some analysts, including Citigroup, expect inflation to return to the BoE target of 2 per cent in the second half of 2023. The central bank anticipates inflation of 4 per cent in the fourth quarter.Monks predicts the unemployment rate to stabilise at about 3.7 per cent, instead of rising as previously expected. This “would mean there is scope for aggregate household real incomes to do better this year”, he said.Victoria Clarke, economist at Santander CIB, expects “a return to positive real pay growth in the second half of the year, which should support household spending and economic momentum”.However, the economy still has plenty of headwinds, not least because higher interest rates have yet to impact fully on consumers and businesses.Streeter said demand in the economy could evaporate as more homeowners and businesses face up to sharply higher borrowing costs.“So, a milder recession still can’t be ruled out and at the very least we’ll be heading for an early noughties period of stagnation,’’ she added. Additional reporting by Daniel Thomas More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.A wave of selling is likely to crash over Asian markets on Monday following a sobering end to the week on Wall Street, as the reality of ‘higher for longer’ U.S. interest rates finally dawns on investors. Consumer spending, labor market and business activity data suggest the U.S. economy is in much better shape than many had thought, and the coup de grace last week came in the form of unexpectedly strong inflation figures. The implied peak Fed rate is approaching 5.50% – does anyone still think 6% is the stuff of fantasy? – U.S. and other bond yields are surging, and equities are feeling the heat.The MSCI World index fell 2.7% last week, its biggest weekly fall since September, while Asian stocks ex-Japan fell almost as much for a fourth straight weekly loss and the steepest since October.Tech stocks are in the firing line more than most. The Hang Seng tech index is down 17% in the past month, hit by higher rates and tighter financial conditions as well as profit-taking following an explosive 77% rebound from the low in October.One consequence of the market’s Fed rethink is the sharp rise in bond yields and the dollar. Many Asian currencies are being pushed back toward their recent lows, boosting inflationary pressures across the region and making dollar-denominated debt servicing more expensive. China’s yuan has 7.00/$ in its sights again, the yen and won are at their lowest this year – domestic Japanese and South Korean monetary policy factors are at play here too – and the Indian rupee is near its all-time low around 83.00 per dollar.Investors’ nerves are being frayed even more by the deepening tensions between the United States and China over, among other things, the Russia-Ukraine war. White House national security adviser Jake Sullivan said on Sunday that China has not moved toward providing lethal aid that would help Russia, a decision that Washington has warned would have serious consequences.Asian economic data this week include purchasing managers index reports from China and other countries, Q4 GDP data from Australia and India, inflation figures from Australia, Indonesia and the Japanese capital, and the latest retail sales snapshots from Japan, Australia, Singapore and New Zealand.Here are three key developments that could provide more direction to markets on Monday:- Hong Kong trade (January)- Thailand trade (January)- New Zealand retail sales (Q4) (By Jamie McGeever; Editing by Diane Craft) More