Raphael Stevens

More stories

  • 100 Shares149 Views

    in Finance

    How to unleash more investment in intangible assets

    When russia invaded Ukraine, tangible things at first seemed all too important. Bombs and bullets were what mattered; commodity markets were roiled; supply chains were upturned. As the war has gone on, however, intangible factors have asserted their importance, too. The managerial and logistical know-how of the armed forces on either side, as well as technological advantages, like Ukraine’s deployment of Bayraktar drones, have altered the course of the war. So too has the goodwill that Ukraine has attracted from people around the world, which has in turn led foreign governments to lend the country more support. The idea that intangible assets, though hard to see and measure, are critically important to foster, is the main message of a new book by Jonathan Haskel, a Bank of England policymaker, and Stian Westlake of Britain’s Royal Statistical Society. “Restarting the Future” is their second book. The first, “Capitalism Without Capital”, published in 2017, argued that the economics of intangible assets helped explain stagnating economic growth and rising inequality. The new book goes a step further, asking how the bottlenecks holding investment in intangibles back might be loosened—thereby fostering a more efficient and faster-growing economy. Their work is part of a wave of writing on the future pace of growth, which includes Dietrich Vollrath’s “Fully Grown” and Robert Gordon’s “The Rise and Fall of American Growth”. Intangible investment includes the research and development conducted by firms, as well as things like marketing, design and branding. In the late 1990s, by some measures, spending on intangibles in America overtook investment in tangible plant and equipment. But the pace of spending has slowed since the financial crisis. The authors note that annual growth in intangible capital in rich countries tended to be around 3-7% between 1995 and 2008. Over the subsequent decade, however, it barely surpassed 3% in any single year. That did not just reflect slower economic growth. Intangible investment also stopped rising as a share of gdp, which poses something of a conundrum, considering that corporate profits were strong. Although the burst of overall investment in the past year or so has been impressive, cross-country data on intangibles are not yet available. Nor is it clear that the investment surge has done enough to alter the sluggish trend.The nub of the problem, say Messrs Haskel and Westlake, is that the economic and financial arrangements that exist to support investment are geared towards spending on capital goods, not intangibles. They point out that bursts of economic growth, such as those in medieval Italian city states and in China between the 10th and 13th centuries, have often faded precisely because institutions failed to generate the right incentives and activity. Part of the solution this time, say the authors, is to encourage the financing of investment in intangibles. A study by the oecd, which looks at 29 developed economies from 1995 to 2015, suggests that intangible-heavy sectors are more productive in places with more developed financial systems, where they can access finance more easily. Differences in financial development, as measured by a combination of equity-market capitalisation and total credit to gdp, can explain why annual labour-productivity growth in a sector like computer equipment (where two-thirds of assets are intangible) has been a percentage point higher in more financially developed countries like Japan than in places like Portugal.Venture capital (vc) has been a preferred source of equity funding for firms conducting the most intangible activity, such as biotechnology and consumer-tech. But that has been disproportionately available to American companies with a plan for extremely rapid growth. In many parts of the world, a lot of business investment is still debt-financed, and more dependent on the use of physical assets as collateral. America’s vc industry took off after pension funds were allowed to invest in less liquid investments in 1979. That may help explain why business investment in America has held up better than in many other places. The authors therefore advocate for larger investment vehicles that pool risk for individual lenders elsewhere in the world, like the Long-Term Asset Fund launched in Britain last year, which helps pension funds gain exposure to long-term illiquid assets. Ending the tax advantages of debt financing by removing the tax deductibility of interest payments, say, would help level the playing-field between tangible and intangible investment. Other prescriptions relate to how and where investment occurs. Patent law, for instance, should not prevent the combination of existing ideas. More important still is the role of cities, which, the authors note, are cauldrons of intangible investment: they make it easier to form the relationships that make intangibles happen, encourage new ideas and create a larger pool of beneficiaries when investments spill over. Making cities work, therefore, with better land-use and zoning policies, is vital.Can’t touch this “Restarting the Future” may be emblematic of a shift in economists’ thinking on growth. In the 2010s debates raged over how best to address persistent shortfalls in demand. In the inflationary-looking 2020s, the emphasis is on unleashing the economy’s supply potential. But where researchers such as Mr Gordon and Mr Vollrath regarded the bursts of rapid growth in the 20th century as the exception, not the rule, Messrs Haskel and Westlake are more hopeful of a return to headier rates of growth. Mr Gordon argued that the digital economy was a busted flush when it came to growth; Mr Vollrath saw slower growth as a symptom of economic success, a larger services sector and reduced geographic mobility. By presenting solutions, “Restarting the Future” offers a more optimistic vision—as long, that is, as governments follow its advice. ■Read more from Free Exchange, our column on economics:The world needs a new economic motor. Could India fit the bill? (May 14th)Why long-term economic growth often disappoints (May 7th)How would an energy embargo affect Germany’s economy? (Apr 30th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

  • 125 Shares199 Views

    in Finance

    Offset markets struggle in the face of surging commodity prices

    The loamy soil and dense jungle of the Sumatran rainforest in Indonesia can store an average of 282 tonnes of carbon dioxide per hectare. If a group of climate-conscious airline passengers were to find a hectare of such forest at risk of being cut down for palm oil and were able to stop that happening, they would offset the amount of greenhouse gases emitted by 175 passengers flying, economy class, from London to New York and back.Demand for such carbon offsets is forecast to rocket over the next couple of decades, as businesses attempt to make good on their promises to reach net zero carbon emissions. Last year an estimated $1bn was spent on offsets. McKinsey, a consultancy, predicts that the size of the market could expand by a factor of 15 by 2030 and 100 by 2050. Although a few projects use novel technology to suck carbon dioxide out of the air altogether and store it underground, most offsets promise to subsidise renewables or pay for carbon sinks, such as forests, to be restored or preserved. Such “nature-based” offsets can include protecting wetlands in Colombia, or restoring peatland in Scotland.But the market is not working. The price of a carbon offset is far too low. The opportunity cost of leaving land uncultivated is rising. A hectare of Sumatran rainforest, for instance, could produce around 2.5 tonnes of palm oil a year, and palm-oil prices have risen to $1,520 a tonne, from around $1,000 a year ago. But the price of nature-based offsets has fallen this year, to $10 per tonne of carbon dioxide, according to contracts traded on the Chicago Mercantile Exchange. Deforestation remains economically rational. Because a palm-oil plantation still captures around 170 tonnes of carbon dioxide per hectare, leaving the land uncultivated offsets only 112 tonnes. An offset price of $10 means that, if the accounting is done properly, selling offsets yields revenue of only $1,120—not enough to compensate for the potential loss of about $3,800 in annual sales of palm oil. At current prices, says Ariel Perez of Hartree Partners, a trading firm, the only agricultural activity that is less profitable than preserving forests is harvesting rubber in West Africa. For as long as the price of an offset remains below $20, cattle farming in the Amazon will remain attractive. Why has the price of offsets fallen? Some cap-and-trade schemes, in which companies must buy permits for their emissions, allow for a certain amount of emissions to be offset. By and large, however, offsets are not required by regulation. Firms and individuals seeking to reduce their carbon footprints choose to buy them, meaning that the demand for offsets is largely driven by ethical or public-relations imperatives. As the war in Ukraine began and attention turned away from climate change, offset prices declined. Another problem is that there are few internationally agreed rules for offsets. A report published earlier this month by Carbon Direct, a consultancy, said that “the voluntary carbon market largely consists of projects of questionable quality.” A surplus of older and less reliable offsets hangs over the market, depressing prices. It is not possible to truly know what would have happened had an offset not been paid for. “Most projects over-report and some don’t reduce emissions at all,” says Barbara Haya of the University of California, Berkeley. “It’s really hard for people to know what is real and what isn’t.”Some attempts are being made to bring clarity. Proposals from the Integrity Council for Voluntary Carbon Markets, an independent committee, are expected later this year. They are likely to emphasise the need for “additionality”, meaning that the reduction in emissions claimed must be a direct result of the offset. Paying for green-energy installation, for instance, would not count as a genuine offset if the project were viable without the offset payment. Nor would a forest that was never going to be cut down in the first place. Checking that offsets meet the criterion, though, will remain a daunting task. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

  • 88 Shares149 Views

    in Finance

    Even China’s official economic figures look bleak

    When china was locked down during the first wave of the pandemic in early 2020, economic forecasters had to make two predictions: how much would the economy suffer? And how much of this suffering would the official statistics be allowed to reflect? When China reported a historic 13.5% decline in industrial production in January and February 2020, compared with a year earlier, it surprised many forecasters not because it diverged from their bleak view of the economy, but because it challenged their cynical view of the statisticians.Now that China is squirming under its most stringent lockdowns since early 2020, the same conundrum has returned. How bad will the economy get? And how faithful will the data be? An early answer to both questions arrived this week. The data were worse than expected, and therefore worthier than feared. On May 16th China reported that industrial production fell by 2.9% in April compared with a year earlier. Compared with the previous month, it fell by over 7%, according to the National Bureau of Statistics. The number was the most consequential surprise since the spring of 2020, according to a measure by Goldman Sachs, which considers both the scale of the forecast error and the significance of the indicator. Retail sales fell by 14% compared with a year earlier, once adjusted for inflation. Catering fell by more than 22% and car sales by over 30% in nominal terms. In locked-down Shanghai, sales of cars were “about zero”, according to the Shanghai Automobile Sales Association.Some of the most spectacular declines were in the all-important property sector. Sales of new homes fell by 42% and housing starts by over 44%. Even China’s unemployment figures, long mocked for their uncanny stability, were morbidly interesting. In 2018 China rolled out a new unemployment survey in its cities. This superseded an older, spectacularly uninformative measure, which counted the number of people who qualified for, and were able to claim, unemployment benefits. The new survey showed unemployment rising to 6.1% in April, still a little below its peak of 6.2% in February 2020. But in 31 big cities, unemployment is now 6.7%, whereas it reached only 5.7% in 2020. This suggests that Omicron—or the policy response to it—has hurt China’s larger cities disproportionately. The pattern of economic pain is different this time. It remains to be seen whether these grimly realistic monthly indicators will translate into a similarly unflattering official gdp figure for the second quarter. When the pandemic first struck, China had yet to commit itself to an official growth target for the year. That perhaps gave it more leeway to report a big drop in first-quarter gdp. This year, by contrast, China’s leaders have already set a target of around 5.5%, and promised as recently as April 29th to try to meet their economic goals. It is just not clear how. On May 15th China’s authorities said the floor on mortgage rates would be cut for first-time buyers. But that will make little difference if people cannot go out to view properties. The government has also placed great emphasis on infrastructure investment. But this increased by only 4.3% in nominal terms in April, compared with a year earlier—far short of the 18% pace that Natixis, a bank, thinks it needs to reach if China is to grow anywhere near 5% this year.Until the authorities relax their covid controls, their efforts to revive growth are likely to be ineffective. They must therefore be hoping that Omicron recedes fast enough to allow growth to catch up later in the year. Alternatively, if China cannot bring itself to abandon its growth target, it may have to fiddle its gdp figures. That would be a pity. Many of China’s economic indicators may be shrinking dramatically. But their credibility edged up this week. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

  • 175 Shares199 Views

    in Business

    For the first time since the pandemic, leisure and business flights surpass 2019 levels

    For the first time since the start of the pandemic, global leisure and business flights have risen to levels not seen since 2019.
    That’s according to the Mastercard Economics Institute’s third annual travel report, titled “Travel 2022: Trends & Transitions,” published yesterday.

    After analyzing 37 global markets, the report found that cross-border travel reached pre-pandemic levels as of March — a significant milestone for a travel industry that has been dominated by domestic travel since 2020.

    Flights are back

    Global flight bookings for leisure travel soared 25% above pre-pandemic levels in April, according to the report. That was driven by the number of short-haul and medium-haul flights, which were higher in April than during the same time in 2019, according to the report.
    Long-haul leisure flights weren’t far behind. After starting the year at -75% of pre-pandemic levels, an “unprecedented surge” in international flight bookings brought these flights “just shy” of 2019 levels in less than three months, according to the report.  

    Like airlines, global spending for cruises, buses and passenger railways rose sharply earlier this year, with tourist car rentals in March surpassing 2019 levels, according to Mastercard Economics Institute’s 2022 travel report.
    3Alexd | E+ | Getty Images

    Business flyers, who have trailed leisure passengers for the entire pandemic, are returning to the skies as well.
    At the end of March, business flight bookings exceeded 2019 levels for the first time since the start of the pandemic, according to the report, marking a key milestone for airlines that rely on corporate “frequent flyer” passengers.

    The return of business travel has been swift, as business flight bookings were only about half of pre-pandemic levels earlier this year, according to the report.

    A delay in Asia

    The global upward trajectory comes despite a sluggish return to air travel in Asia. Flights to Singapore, Malaysia and Indonesia increased among Asia-Pacific flyers this year, though most of the top international travel destinations were outside of the region.
    “Among the top destinations visited by Asia Pacific travelers in the first quarter of 2022, 50% were out of the region based on our data, with the United States being the number 1,” said David Mann, chief economist for Asia-Pacific, Middle East and Africa at the Mastercard Economics Institute.
    “Despite a delayed recovery compared to the West,” said Mann, “travelers in Asia Pacific have demonstrated a strong desire to return to travel where there have been liberalizations.”
    If flight bookings continue at their current pace, an estimated 1.5 billion more global passengers will fly this year than in 2021, according to the Mastercard Economics Institute, with more than one-third of those coming from Europe.

    Will this continue?

    Strong demand for air travel and an upswing in global hiring trends are just some of the reasons the global travel industry has “more reason to be optimistic than pessimistic,” according to the report.  
    People have paid off debt at “a record pace” over the past two years, while wealthier consumers — who are “likelier to be traveling for leisure” — have benefited from pandemic-related savings and increases in asset prices, according to the report.  
    Yet, rising inflation, market instability, geopolitical problems in Europe and Asia, and rising Covid-19 rates are threatening to derail a robust travel recovery in 2022.
    Incomes are expected to grow in response to inflation, but this will happen faster in developing economies, according to the report.
    “While we expect income growth to outpace consumer price growth in Germany and the United States by mid-2023, this likely won’t happen until 2024 and 2025 in Mexico and South Africa, respectively,” the report stated.

    Among the numerous risks that could derail travel recovery … we would put Covid as the biggest swing factor.

    David Mann
    chief economist, Mastercard Economics Institute

    Airfares are also up, with average ticket prices increasing about 18% from January to April of this year, according to the report.
    Air travel cost increases varied considerably by region, with fares up 27% in Singapore from April 2019 to April 2022. However, the report said flight prices in the United States have remained roughly unchanged during the same time frame.
    Though many countries have reopened to international travelers, the pandemic still looms over the industry.  
    “Among the numerous risks that could derail travel recovery … we would put Covid as the biggest swing factor,” said Mann.
    “Whilst treatments are better, and many markets have seen successful vaccine rollouts, a severe or contagious variant necessitating border closures could lead to a return of the non-linear, stop-start recovery patterns of the last two years,” he said.

    A last summer hurrah?

    Whether travel demand will remain robust throughout the year — or whether travelers will take a last summer hurrah before tightening their purse strings — is yet to be seen.
    The report noted that people have traditionally spent less on travel following rises in energy and food costs.
    “However, given massive levels of pent-up demand in a post-pandemic world, this time could be different,” stated the report. More

  • 188 Shares179 Views

    in Business

    An energy transition loophole is allowing Big Oil to offload high-polluting assets to private buyers

    Research published by the non-profit Environmental Defense Fund shows how oil and gas mergers and acquisitions, which may help energy giants execute their transition plans, do not help to cut global greenhouse gas emissions.
    An analysis of over 3,000 deals between 2017 and 2021 shows how flaring and emissions commitments disappear when tens of thousands of wells are passed from publicly traded companies to private firms that have no oversight or reporting requirements to shareholders.
    The data calls into question the integrity of Big Oil and Wall Street’s commitment to the energy transition, a shift that is vital to avoid a cataclysmic climate scenario.

    An oil flare burns at Repsol’s oil refining complex in Cartagena, Spain. Repsol was one of the top sellers of assets between 2017 and 2021 in EDF’s analysis.
    Bloomberg | Bloomberg | Getty Images

    Oil and gas giants are increasingly selling off dirty assets to private firms, amplifying concerns that the fossil fuel industry’s traditional dealmaking is not compatible with a net-zero world.
    It comes at a time when oil and gas majors are under immense pressure to set short and medium-term targets in line with the goals of the landmark Paris Agreement. It is widely recognized that this accord is critically important to avoid the worst of what the climate crisis has in store.

    Research published last week by the non-profit Environmental Defense Fund shows how oil and gas mergers and acquisitions, which may help energy giants execute their transition plans, do not help to cut global greenhouse gas emissions.
    To be sure, the burning of fossil fuels, such as coal, oil and gas, is the chief driver of the climate crisis and researchers have repeatedly stressed that limiting global heating to 1.5 degrees Celsius will soon be beyond reach without immediate and deep emissions reductions across all sectors.
    EDF’s analysis of over 3,000 deals between 2017 and 2021 shows how flaring and emissions commitments disappear when tens of thousands of wells are passed from publicly traded companies to private firms that have no oversight or reporting requirements to shareholders.

    These transactions can make it look as though sellers have cut emissions, when in fact pollution is simply being shifted to companies with lower standards.

    Andrew Baxter
    Director of energy transition at EDF

    These same often obscure private companies tend to disclose little about their operations and can be committed to ramping up fossil fuel production.
    Such deals are growing in both number and scale, EDF’s research says, climbing to $192 billion in 2021 alone.

    “These transactions can make it look as though sellers have cut emissions, when in fact pollution is simply being shifted to companies with lower standards,” said Andrew Baxter, director of energy transition at EDF.
    “Regardless of the sellers’ intent, the result is that millions of tons of emissions effectively disappear from the public eye, likely forever. And as these wells and other assets age under diminished oversight, the environmental challenges only get worse,” he added.

    The report says the surge in the number and scale of oil and gas dealmaking has coincided with growing fears among investors about losing the ability to assess company risk or hold operators accountable to their climate pledges.
    It also suggests implications for some of the world’s largest banks, many of which have set net-zero financed emission targets. Since 2017, five of the six largest U.S. banks have advised on billions of dollars worth of upstream deals.
    As a result, the analysis calls into question the integrity of Big Oil and Wall Street’s commitment to the planned energy transition, a shift that is vital to avoid a cataclysmic climate scenario.

    What energy transition?

    EDF’s analysis used industry and financial data on mergers and acquisitions to track changes in how emissions may have changed after a sale. It is thought to be the first time that comprehensive data on how oil and gas majors transfer emissions to private buyers have been collated.
    In one example, Britain’s Shell, France’s TotalEnergies and Italy’s Eni — all publicly held firms with net-zero targets — sold off their interests in an onshore oil mining field in Nigeria last year to a private-equity backed operator.

    EDF says top sellers like Shell, for example, are well positioned to pilot climate-aligned asset transfers.
    Ina Fassbender | Afp | Getty Images

    Between 2013 and the point of transfer, almost no routine flaring had occurred under the stewardship of TotalEnergies, Eni and Shell, the top seller of assets from 2017 through to 2021, according to the EDF’s analysis.
    Almost immediately thereafter, however, flaring dramatically increased. The case study was said to highlight the climate risks stemming from upstream oil and gas transactions.
    Gas flaring is the burning of natural gas during oil production. This releases pollutants into the atmosphere, such as carbon dioxide, black carbon and methane — a potent greenhouse gas.
    The World Bank has said ending this “wasteful and polluting” industry practice is central to the broader effort to decarbonize oil and gas production.
    A spokesperson at Eni said the company does not consider asset sales as a tool to reduce emissions and the firm’s strategy to reach carbon neutrality by the middle of the century is based on a set of measures that includes zero flaring by 2025.
    “Questions regarding specific asset sales should be directed to the operator,” they added. “In general terms, all asset sales contracts must comply with local regulations, they include clauses related to the respect of human rights, and they are subject to Government approval.”
    CNBC has contacted Shell and TotalEnergies to comment on EDF’s analysis.

    A ‘wink wink, nod nod approach’

    Andrew Logan, senior director of oil and gas at nonprofit Ceres, told CNBC that EDF’s research shows there has been something of a “wink wink, nod nod approach” to transferred emissions to date, whereby energy majors sell off high-polluting assets without worrying too much about whether the purchaser is going to do what they are supposed to.
    “But what’s interesting is that those private equity firms tend to be backed by public money. You know, it is public pensions funds that are the partners in those firms so there is leverage there,” he added.
    Larry Fink, CEO and Chair of BlackRock, the world’s largest asset manager, sharply criticized oil and gas giants for selling out to private firms during the COP26 climate conference in Glasgow, Scotland, last year.
    Fink said the practice of public disclosed companies selling high-polluting assets to opaque private enterprises “doesn’t change the world at all. It actually makes the world even worse.”

    In July 2021, some of the world’s largest oil and gas majors were ordered to pay hundreds of millions of dollars as part of a $7.2 billion environmental liabilities bill to retire aging oil and gas wells in the Gulf of Mexico that they used to own.
    Bloomberg | Bloomberg | Getty Images

    Ceres’ Logan said that an important part of responsible asset transfer must be reckoning with the costs of shutting down wells at the end of their lives. In North America, for example, he highlighted the “huge problem” with so-called “orphan wells.”
    These are oil and gas wells abandoned by fossil fuel extraction industries which can end up in the hands of companies with no ability or intention of cleaning them up.
    “It is interesting to look at how different the asset sale process is in most of North America compared to the assets in the Gulf of Mexico because, in the Gulf of Mexico, there are federal rules that basically say if you sell an asset and the next company — or the next, next, next company doesn’t clean it up — that liability comes back to you,” Logan said. “So, you have a very strong interest in picking your partners wisely and making sure they have the money to clean the well.”

    In July last year, some of the world’s largest corporate emitters were ordered to pay hundreds of millions of dollars as part of a $7.2 billion environmental liabilities bill to retire aging oil and gas wells in the Gulf of Mexico that they used to own. The case was thought to be a watershed moment for future legal battles over cleanup costs.
    “I think we need something like that in the rest of the world where there’s an acknowledgment that that liability has to travel. It has to be paid for and we have to be aware of that at every stage of the process,” Logan said.

    What can be done to tackle the problem?

    The EDF report says coordinated action from asset managers, companies, banks, private equity firms and civil society groups can help to reduce risks from oil and gas mergers and acquisitions.
    “It’s important to have this research because when we engage with companies in the sector, it is definitely a topic on the agenda,” said Dror Elkayam, ESG analyst at Legal & General Investment Management, a major global investor and one of Europe’s largest asset managers.
    When asked whether there is a recognition among oil and gas majors that they should be at least partly responsible when transferring assets, Elkayam said: “So, that’s the point of debate, right?”
    “I think we will definitely benefit from a greater level of disclosure on these assets,” he told CNBC via video call. This might include the emissions associated with these assets or the extent to which the firm’s climate targets will be met by asset disposal when compared to organic decline. “This is an important area to scope out, I would say,” Elkayam said. More

  • 175 Shares169 Views

    in Business

    Keeping Illinois nuclear plants open is saving some customers $237 a year on average

    In September, Illinois lawmakers passed a watershed clean energy law, The Climate & Equitable Jobs Act, which established the state as a leader for its efforts to decarbonize.
    One of the key provisions in the bill was a commitment to keep its existing nuclear power fleet online, even if that means paying to keep a unprofitable nuclear fleet online.
    Now, because energy prices are high, some customers in Illinois are saving money on their energy bills.

    Byron, UNITED STATES: The Exelon Byron Nuclear Generating Stations running at full capacity 14 May, 2007, in Byron, Illinois. (Photo credit should read JEFF HAYNES/AFP via Getty Images)
    JEFF HAYNES | AFP | Getty Images

    Nuclear energy pays in times of energy price fluctuations.
    In September, Illinois lawmakers passed a watershed clean energy law which established the state as a leader for its efforts to decarbonize. One of the key provisions in the law was a commitment to keep its existing nuclear power fleet online, even if the plants were not profitable.

    Nuclear reactors generate power without emitting greenhouse gasses but they often can’t compete when other forms of energy such as natural gas and renewables become really cheap. But Illinois needed to keep its nuclear fleet online to meet its clean energy goals.
    Now, less than a year later, utility customers in the northern part of the state and around Chicago are saving an average of $237 a year on their energy bills because of that legislation, according to state regulators.
    At the end of April, the Illinois utility Commonwealth Edison filed documentation with the Illinois Commerce Commission, a local regulatory agency, stating it would provide a credit of 3.087 cents per kilowatt hour starting on June 1, through May 31, 2023.
    The exact amount of the credit varies depending on how much energy a customer uses, but on average, the credit translates to a savings of $19.71 per month, or an average of $237 a year, according to the Illinois Commerce Commission.
    The Illinois clean energy law agreed to keep nuclear plants open if they were losing money, but it also capped the amount of money the nuclear plants’ owner, Constellation Energy, can earn if energy prices rise. (In February, Exelon spun out a part of its business to Constellation Energy.)

    Energy prices have been increasing in part because of the Russian invasion of Ukraine and the subsequent global efforts to wean off of Russian pipelines of energy.
    “The Climate & Equitable Jobs Act passed last year is working exactly as intended by keeping these critical zero-carbon energy facilities in operation during periods of historically low prices, while protecting consumers when energy prices spike, as they have recently given unfortunate world events,” Constellation Energy told CNBC in a written statement on Wednesday.
    “To date, Illinois consumers have not paid a penny to nuclear plants under the law, and instead will be receiving a substantial credit,” Constellation Energy said.

    “I’m proud that our commitment to hit carbon-free power by 2045 is already bringing consumers savings just months after becoming law,” said Governor J.B. Pritzker in a written statement at the time.
    The flip side of the Illinois legislation is that if energy prices fall again, and the existing nuclear fleet in Illinois become uneconomic, Illinois will pay for the plants to remain open so that the state can continue meeting its decarbonization goals.
    But right now, while energy prices are high, Illinois ComEd energy customers are getting money back.
    The timing is poignant because high inflation in the United States has been pinching consumers.
    “For families struggling with the high cost of inflation, this is welcome relief. What could have been a nuclear subsidy was smartly negotiated into a billion-dollar bonanza for Illinois consumers,” the Illinois Clean Jobs Coalition (ICJC), a collaborative group of Illinois organizations, said in a written statement. “The deal shows the wisdom of Illinois’ approach to combat the climate crisis and create good-paying, equitable clean energy jobs, while saving money for consumers.”
    The credit will not affect all utility customers in Illinois. Customers served by the utility Ameren, primarily in Central and Southern regions of Illinois, will not receive the energy credit because Ameren was exempted from the law, as it serves less than 3 million customers.

    WATCH LIVEWATCH IN THE APP More

  • 125 Shares199 Views

    in Business

    Wingstop is seeing 'meaningful deflation' in chicken wings, CEO says

    Monday – Friday, 6:00 – 7:00 PM ET

    Chicken wings have come down in price since soaring last year, Wingstop chief executive Michael Skipworth told CNBC’s Jim Cramer on Wednesday.
    “The price of wings last year .. hit $3.22 a pound, and we fast forward to today, and it’s $1.63 a pound,” Skipworth said in an interview on “Mad Money.”
    Skipworth, who became CEO of Wingstop in March, also credited high demand for chicken breasts as helping tamp down wing costs. 

    Chicken wings prices have come down in price since soaring last year, Wingstop chief executive Michael Skipworth told CNBC’s Jim Cramer on Wednesday.
    “Other brands are … going to have to look at pricing in order to manage their margins, and Wingstop is in a very different position in that we’ve seen meaningful deflation in our business. The price of wings last year .. hit $3.22 a pound, and we fast forward to today, and it’s $1.63 a pound,” Skipworth said in an interview on “Mad Money.”

    “We’ve seen this in years before where a lot of businesses jump into wings [and] it drives the demand up. But as we sit here today, their businesses weren’t built to manage that volatility in the commodity, and so we’ve been able to weather that like we have in the past, and they’ve moved away,” he added.
    Skyrocketing prices of ingredients and supply have put pressure on restaurants’ operations during the pandemic, forcing many to raise menu prices to offset the higher costs.
    Skipworth, who became CEO of Wingstop in March, also credited high demand for chicken breasts as helping tamp down wing costs. 
    “There’s a lot of demand for breast meat, and breast meat is where these poultry companies make their profit, and so they’re growing as many birds as they can right now, which means a lot of supply for wings out there,” he said.
    Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

    Disclaimer

    Questions for Cramer?Call Cramer: 1-800-743-CNBC
    Want to take a deep dive into Cramer’s world? Hit him up!Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram
    Questions, comments, suggestions for the “Mad Money” website? [email protected]

    WATCH LIVEWATCH IN THE APP More

  • 100 Shares179 Views

    in Business

    Cramer's lightning round: Vertex Energy is going higher

    Monday – Friday, 6:00 – 7:00 PM ET

    It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

    Loading chart…

    Veru Inc: “The stock is up a great deal. … We caught it much lower.”

    Loading chart…

    Loading chart…

    Loading chart…

    WATCH LIVEWATCH IN THE APP More