US Business

Climate change risks undermining global energy security unless the use of renewables is dramatically scaled up, the UN warned Tuesday, suggesting the Ukraine conflict’s ripple effects could speed up the green transition.

Not only is the energy sector a major source of the carbon emissions that drive climate change, it is also increasingly vulnerable to the shifts that come with a heating planet, the UN’s World Meteorological Organization stressed.

In its State of Climate Services annual report, the WMO warned that increasingly intense extreme weather events, droughts, floods and sea-level rise — all linked to climate change — were already making energy supply less reliable.

It pointed, for instance, to a historic heatwave that sparked massive power outages in Buenos Aires in January, while experts mentioned recently disrupted electricity production amid heatwaves and shrinking reservoirs in Europe and China.

WMO Secretary-General Petteri Taalas warned that “in the future these kinds of events will become more and more frequent”, pointing out that much of the world’s energy infrastructure is today in areas vulnerable to climate change.

In 2020, a massive 87 percent of global electricity generated by thermal, nuclear and hydroelectric power plants directly depended on having freshwater for cooling, the WMO said.

– ‘Changing before our eyes’ –

But a third of power plants running on fossil fuels are in areas of high water stress, as are 15 percent of existing nuclear power plants — a share expected to swell to 25 percent in the next 20 years.

Eleven percent of hydroelectric dams are also located in highly water-stressed areas, while more than a quarter of hydropower plants are in river basins struggling with water scarcity, the WMO said. 

“Time is not on our side and our climate is changing before our eyes,” Taalas said.

“We need a complete transformation of the global energy system.” 

Taalas pointed out that the energy sector is itself a part of the problem since it is the source of around three quarters of global greenhouse gas emissions that are changing the climate.

“Switching to clean forms of energy generation… and improving energy efficiency is vital,” he said.

But he cautioned that reaching net-zero emissions by 2050 would only be possible “if we double the supply of low-emissions electricity within the next eight years”.

– ‘A blessing’ –

The report, which WMO drafts with input from more than two dozen organisations, said shifting to renewable energy would help alleviate growing global water stress, pointing out that the amount of water used by solar and wind is much lower than for traditional power plants.

The energy security crisis caused by the war in Ukraine and disrupted access to Russian gas has sparked fears that countries will fall back on dirty fuel sources like coal.

Taalas acknowledged this could be the case in the short term, but said the war was demonstrating the dangers of dependence on unreliable energy sources, and would surely speed up the green transition.

“From a climate perspective, the war in Ukraine may be seen as a blessing,” he said. 

– Invest in Africa –

WMO warned that the current pledges by countries to cut carbon emissions “fall well short” of what is needed to meet the objectives set by the 2015 Paris Agreement on climate change.

The report said global investments in renewable energy “need to triple by 2050 to put the world on a net-zero trajectory”.

It called in particular for more clean energy investments in Africa.

The continent, which is already facing massive droughts and other severe effects from climate change, has seen only two percent of clean energy investment in the past two decades.

And yet with 60 percent of the best solar resources on the planet, it has the potential to become a major player in solar energy production, the report said.

However, significant investments are required.

“Bringing access to modern energy for all Africans calls for an investment of $25 billion annually,” the report said.

That is the equivalent of around one percent of global energy investment today.

Stock markets and oil prices slumped Tuesday as investors grow increasingly fearful that more big interest rate hikes will tip economies into deep recessions.

The mood darkened also on the worsening Ukraine war and weaker demand expectations in China.

With the focus on inflation, analysts said US consumer price index data released later this week will be crucial to the direction of risk assets. 

Another big reading could spark a fresh equity selloff and a surge in the dollar.

“There is growing pessimism in the markets now and with some big data points to come from the US this week, not to mention the start of earnings season,” noted Craig Erlam, analyst at OANDA trading group.

“Investors should probably brace for more volatility.”

Traders had hoped that bumper rate increases by the US Federal Reserve this year would begin to drag on the economy and slow runaway prices, allowing policymakers to reduce the pace of monetary tightening.

But a forecast-beating US jobs report on Friday highlighted the tough work the country’s central bank has slowing inflation from four-decade highs, and many observers warn recession is virtually inevitable.

– ‘Real danger’ –

World Bank chief David Malpass said there was a “real danger” of a global contraction next year, adding that the surge in the dollar was weakening the developing nations’ currencies and pushing their debt to “burdensome” levels.

And JP Morgan boss Jamie Dimon told CNBC that while the US economy was holding up, it faced several headwinds including rising rates, surging inflation, Fed tightening and the Ukraine war.

He added that he saw a US recession in six to nine months, and that the S&P 500 could fall another 20 percent.

Barings strategist Christopher Smart said: “It’s little wonder investors enter the week in a dreary mood, especially with headlines from Ukraine signalling a further escalation in geopolitical tensions.”

Chip manufacturers globally took a pounding from new US export controls aimed at restricting China’s ability to buy and make high-end chips with military applications.

The Philadelphia Stock Exchange Semiconductor Index saw its lowest close since late 2020, while Bloomberg News reported that $240 billion had been slashed from companies’ market values worldwide.

– Dollar dips –

Taipei led the losses in Asia — diving more than four percent — as chip giant TSMC plunged 8.3 percent, while a hefty selloff in Samsung Electronics dragged Seoul down 1.6 percent. Tokyo was also sharply lower owing to a hit to tech firms.

All three markets had been closed Monday and were reacting to Friday’s US announcement for the first time.

On currency markets, the dollar dipped after recent strong gains as the United States heads the monetary tightening drive.

The pound nevertheless remained under pressure despite the Bank of England unveiling further measures to calm markets rocked by a UK budget, saying it would increase purchases of government bonds.

“Investors fear that the UK government is borrowing too much and that it won’t be able to balance its books,” said City Index and FOREX.com analyst Fawad Razaqzada.

Oil prices fell sharply, with concerns about Chinese demand front and centre.

“Covid cases are picking up in the country, and the Chinese Communist Party’s newspaper, the People’s Daily, ran a commentary saying the Covid Zero policy is ‘sustainable’, indicating that the country is likely to keep following it if not double down,” said Stephen Innes at SPI Asset Management. 

– Key figures around 1330 GMT –

London – FTSE 100: DOWN 0.8 percent at 6,903.83 points

Frankfurt – DAX: DOWN 0.6 percent at 12,198.54

Paris – CAC 40: DOWN 0.4 percent at 5,815.38

EURO STOXX 50: DOWN 0.6 percent at 3,336.12

New York – Dow: DOWN 0.3 percent at 29,114.89

Tokyo – Nikkei 225: DOWN 2.6 percent at 26,401.25 (close)

Hong Kong – Hang Seng Index: DOWN 2.2 percent at 16,832.36 (close)

Shanghai – Composite: UP 0.2 percent at 2,979.79 (close)

Euro/dollar: UP at $0.9716 from $0.9708 on Monday

Pound/dollar: UP at $1.1085 from $1.1059

Euro/pound: DOWN at 87.74 pence from 87.76 pence

Dollar/yen: DOWN at 145.68 yen from 145.72 yen

West Texas Intermediate: DOWN 2.0 percent at $89.03 per barrel

Brent North Sea crude: DOWN 1.8 percent at $94.45 per barrel

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The French government on Tuesday threatened to forcibly break blockades of refineries and oil depots, which have been paralysed by strike action, and said it would force some workers to return to their jobs.

Motorists continued to besiege petrol stations many of which were low on, or out of, petrol, as strike action at energy giant TotalEnergies and other oil majors entered its third week and wage talks stalled.

Government ministers and President Emmanuel Macron have urged a negotiated resolution to the crisis, but on Tuesday government spokesman Olivier Veran threatened force to end the blockades which have paralysed several of France’s refineries and oil depots.

If blockades were not ended “immediately”, Veran told the RTL broadcaster, “we could intervene to lift them”.

He said ongoing action by the hard-left CGT union at TotalEnergies installations was “excessive and out of line”.

Also on Tuesday, Finance Minister Bruno Le Maire called breaking up the blockades “the only solution”.

– ‘They don’t respect us’ –

But stoppages continued at several refineries, including at France’s biggest near Le Havre in the north of the country, after strikers at TotalEnergies Tuesday voted to extend their action.

“We are still waiting for details from management on what they want to negotiate on,” Eric Sellini, coordinator for the CGT union at the oil major, told AFP.

The CGT at the French branch of Esso-ExxonMobil on Tuesday also renewed its strike call, even though it was outvoted on Monday by a majority of other union representatives who signed a pay deal.

The government said it would not tolerate continued stoppages at the company, and Prime Minister Elisabeth Borne said she would order the striking Esso-ExxonMobil workers to return to their posts or face prison or fines.

“Some unions, despite an agreement, want to continue the blockages,” she told parliament. “This, we cannot accept.”

She said “essential personnel” would be “requisitioned” to ensure the functioning of the oil depots. 

At Fos-sur-Mer, in southern France, home to refineries run by TotalEnergies and Esso, strikers said their working conditions had been getting worse for years.

“For the past 10 years we have not been getting the slightest recognition for our work,” said one worker who joined Esso 24 years ago.

“Not only don’t they pay us enough, they also don’t respect us,” agreed CGT spokesman Fabien Cros at the neighbouring TotalEnergies installation.

– ‘What a mess’ –

Motorists formed long queues outside petrol stations from dawn on Tuesday. In central Paris, traffic slowed as waiting cars blocked roads, cycle paths and pedestrian crossings, hoping to be served before the pumps went dry.

Many used social media to exchange tips. One post in a Facebook group Monday said that a local BP service station would be resupplied “at 2:30 pm”. Another replied: “It’s now 2:37 pm and they’re out of diesel.” 

Another user reacted: “What a mess.”

Jefferson Saint-Louis, a taxi driver, said that “without fuel we can’t work. I’m just going to go home”.

The petrol crisis comes at a time of high energy prices and inflation that are sapping French households’ purchasing power.

The left-wing opposition coalition Nupes has called for a “March against the high cost of living” in Paris and elsewhere on Sunday.

At the weekend, several prominent French people came out in support of the initiative, including this year’s winner of the Nobel Prize for Literature, Annie Ernaux.

– ‘An entire country hostage’-

Opposition politicians on the left were quick to criticise the government’s hardening stance Tuesday.

“With this government, when dialogue stalls, it’s threats for the wage earners and caresses for the bosses,” tweeted Manuel Bompard, a deputy for the leftwing LFI party.

Jordan Bardella, president of the far-right RN party, said that “super profits at Total and the salary of the chairman” made worker demands “not unreasonable”.

But Gilles Platret, vice president of the conservative LR party, backed the government’s tougher stance, saying strikers were “taking an entire country hostage”.

TotalEnergies posted a profit of $5.7 billion in the second quarter of the year, more than double the year-earlier figure.

CEO Patrick Pouyanne’s total compensation package was worth 5.9 million euros ($5.7 million) in 2021, up 52 percent from the previous year’s, according to the group’s annual report.

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While people across Europe are being urged to save energy this coming winter to avert power shortages, Switzerland’s Bavona Valley is unfazed, having never been plugged into the power network.

Located in the Italian-speaking Ticino region of southern Switzerland, the remote, glacially-carved valley following the Bavona river is one of the steepest in the Alps.

But there are 12 hamlets made up of stone dwellings scattered along the rugged valley which are home to a few dozen inhabitants for most of the year, except in winter when fewer than 10 stay on.

Eleven of the hamlets are not connected to the power grid, despite the area producing lots of electricity thanks to dams located high up near the mountain tops.

They were built after World War II to provide electricity for the German-speaking region of Switzerland over on the northern side of the Alps, said Romano Dado, a former local councillor in Cevio, the village at the lower end of the valley on which the hamlets depend.

Bringing power down into the valley would have required transformers, but “the people here didn’t have the money for that,” he told AFP. Only the last hamlet at the very top of the valley could afford this luxury.

As the decades passed, the valley’s population shrank from around 500 to fewer than 50 now, according to Dado, and the inhabitants learned to get by without being on the electricity grid, making do with their fireplaces and installing solar panels on the roofs from as early as the 1980s.

– Oil lamps and candles –

Residents also use gas canisters, candles and oil lamps. To wash their clothes, “we go to the river, as always”, said Tiziano Dado, Romano’s stonemason brother.

The narrow valley, around 10 kilometres long (six miles) and flanked by towering slopes reaching more than 2,500 metres in altitude, has seen sometimes-fatal avalanches, floods and landslides throughout the centuries.

Seasonal migration to the summer pastures persisted in the area until the 1970s. 

Families went up the valley with their animals from March until the end of December, coming back down for Christmas, said Sonia Fornera, from Orizzonti Alpini, a group of experts in Alpine history and culture.

“It was a hard life but a simple life,” said Bice Tonini, 88, warming herself by the fireplace in her house.

Despite her age, she continues to live there from spring to October thanks to her solar panels.

“There is so much wastage of electricity” in modern society, she lamented.

At night, there are no street lights to prevent her from admiring the stars — and she enjoys the nightly show far more than watching television, which is a rare sight in the valley.

– Museum or dream? –

“We are used to living in a very simple way and we’re not afraid of making savings” in terms of energy, said Ivo Dado, 81, who proudly had solar panels installed in 1987.

The former farmer — no immediate relation to the Dado brothers — is delighted that some cities are giving up on their traditional festive illuminations this December.

“This Christmas will be as before, with less light. It will be beautiful again!” he said.

This sparing attitude towards electricity is not to everyone’s taste.

“Solar panels are a partial solution,” Martino Giovanettina, a writer and owner of one of the few restaurants in the valley, told AFP.

He believes the lack of electricity, plus the stringent rules for renovating old buildings, are contributing to depopulating the valley, turning it into an open-air “museum” of the past, instead of orientating towards tourism, as neighbouring valleys have done.

The Bavona Valley has no set-up for tourists at all, apart from a cable car from the last hamlet up to the dams, and the parking of motorhomes is banned.

Doris Femminis, a 2020 Swiss Prize for Literature winner, grew up in the valley and raised goats there during her 20s. Now she recounts the story of the Bavona Valley in her books.

Now living in the Jura mountains in western Switzerland, she returns every two months to this “wonderful place of one’s childhood”.

“In Switzerland, we like the idea of still having a corner of wild nature,” she said, but acknowledged that such places are not suited to modern life.

“It’s a place of the past,” she told AFP.

“Nobody wants to live there anymore; it’s just a dream.”

Stock markets and oil prices slumped Tuesday as investors grow increasingly fearful that more big interest rate hikes will tip economies into deep recessions.

The mood darkened also on the worsening Ukraine war and weaker demand expectations in China.

With the focus on inflation, analysts said US consumer price index data released later this week will be crucial to the direction of risk assets. 

Another big reading could spark a fresh equity selloff and surge in the dollar.

“There is growing pessimism in the markets now and with some big data points to come from the US this week, not to mention the start of earnings season,” noted Craig Erlam, analyst at Oanda trading group.

“Investors should probably brace for more volatility.”

Traders had hoped that bumper rate increases by the US Federal Reserve this year would begin to drag on the economy and slow runaway prices, allowing policymakers to reduce the pace of monetary tightening.

But a forecast-beating US jobs report on Friday highlighted the tough work the country’s central bank has slowing inflation from four-decade highs, and many observers warn recession is virtually inevitable.

– ‘Real danger’ –

World Bank chief David Malpass said there was a “real danger” of a global contraction next year, adding that the surge in the dollar was weakening the developing nations’ currencies and pushing their debt to “burdensome” levels.

And JP Morgan boss Jamie Dimon told CNBC that while the US economy was holding up, it faced several headwinds including rising rates, surging inflation, Fed tightening and the Ukraine war.

He added that he saw a US recession in six to nine months, and that the S&P 500 could fall another 20 percent.

Barings strategist Christopher Smart said: “It’s little wonder investors enter the week in a dreary mood, especially with headlines from Ukraine signalling a further escalation in geopolitical tensions.

“Of course, markets are meant to look ahead, but it’s hard not to see the next few quarters bringing more of the same.”

Chip manufacturers globally took a pounding from new US export controls aimed at restricting China’s ability to buy and make high-end chips with military applications.

The Philadelphia Stock Exchange Semiconductor Index saw its lowest close since late 2020, while Bloomberg News reported that $240 billion had been slashed from companies’ market values worldwide.

– Dollar steady –

Taipei led the losses in Asia — diving more than four percent — as chip giant TSMC plunged 8.3 percent, while a hefty selloff in Samsung Electronics dragged Seoul down 1.6 percent. Tokyo was also sharply lower owing to a hit to tech firms.

All three markets had been closed Monday and were reacting to Friday’s US announcement for the first time.

On currency markets, the dollar steadied after recent strong gains as the US heads the monetary tightening drive.

The pound remained under pressure, despite the Bank of England unveiling further measures to calm markets rocked by a UK budget, saying it would extend purchases of government bonds.

– Key figures around 1045 GMT –

London – FTSE 100: DOWN 1.1 percent at 6,884.70 points

Frankfurt – DAX: DOWN 0.9 percent at 12,165.15

Paris – CAC 40: DOWN 0.7 percent at 5,801.48

EURO STOXX 50: DOWN 0.9 percent at 3,328.03

Tokyo – Nikkei 225: DOWN 2.6 percent at 26,401.25 (close)

Hong Kong – Hang Seng Index: DOWN 2.2 percent at 16,832.36 (close)

Shanghai – Composite: UP 0.2 percent at 2,979.79 (close)

New York – Dow: DOWN 0.3 percent at 29,202.88 (close)

Euro/dollar: UP at $0.9710 from $0.9708 on Monday

Pound/dollar: UP at $1.1060 from $1.1059 on Monday

Euro/pound: FLAT at 87.76 pence

Dollar/yen: DOWN at 145.68 yen from 145.72 yen

West Texas Intermediate: DOWN 2.4 percent at $88.98 per barrel

Brent North Sea crude: DOWN 2.2 percent at $94.10 per barrel

The Bank of England on Tuesday unveiled yet more measures aimed at calming markets rocked by a UK budget as it warned over risks to the nation’s financial stability.

The week had already seen action taken by the BoE and UK government aimed at bringing calm to bond markets in particular as state borrowing soars.

The moves are a response to soaring UK bond yields and after the pound tumbled to a record low against the dollar since the government of new Prime Minister Liz Truss unveiled debt-fuelled tax cuts in a budget last month.

A day after it launched a temporary facility aimed at easing liquidity pressures, the central bank Tuesday said it was widening the scope of daily purchases of UK government bonds, or gilts, until Friday.

In a statement, the BoE said the latest action would “act as a further backstop to restore orderly market conditions”. 

It noted that “the beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts”, which the central bank will now purchase under its wider operation of bond purchases.

“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” it added.

Tuesday’s intervention by the BoE resulted in a small drop in yields, while the pound steadied versus the dollar.

“The key sticking point is that the support measures are only scheduled to last until Friday,” noted AJ Bell investment director Russ Mould.

“Extending it could go one of two ways — the market either applauds the move and breathes a sigh of relief or it gets even more worried, thinking that the extra time suggests the crisis is more severe than originally thought.”

– Unemployment down –

In some positive news, official data Tuesday revealed British unemployment fell to a near 50-year low at 3.5 percent.

Wages, however, continue to be eroded by decades-high inflation that threatens to send Britain into recession.

The British government on Monday brought forward key growth and inflation forecasts to Halloween, hoping not to spook markets further.

Finance minister Kwasi Kwarteng will unveil debt-reduction plans and UK economic predictions on October 31 rather than in late November.

It comes after Kwarteng was already forced to axe a tax cut for the richest earners, in the face of outrage as millions of Britons face a cost-of-living crisis with UK inflation around 10 percent.

– ‘Painful cuts’ –

Britain meanwhile faces “big and painful” cuts in public spending to fix state finances should it decide against more U-turns over tax cuts, a leading think tank warned Tuesday.

“With a weaker economy, getting government finances on a sustainable path without cancelling tax cuts could force… big and painful spending cuts,” the Institute for Fiscal Studies said in a study.

Reducing debt “through spending cuts alone, without actually specifying which budgets would be cut, risks stretching credulity to breaking point”, it added.

The budget was widely criticised, including by the International Monetary Fund, over fears that government debt would balloon to pay for the tax cuts, including on salaries of all UK workers.

Fitch last week lowered the outlook on its credit rating for British government debt to negative from stable.

The BoE has piled on further pressure by hiking its main interest rate to a 14-year high of 2.25 percent in a bid to cool inflation — and is expected to go even stronger on tightening next month.

This in turn has seen retail banks ramp up interest rates on mortgages, with analysts predicting heavy price falls for property.

The French government on Tuesday threatened to forcibly break blockades of refineries and oil depots, which have been paralysed by striking workers, as motorists continued to besiege petrol stations in the hope of filling their tanks.

Around a third of France’s service stations were still low on, or out of, petrol as strike action at energy giant TotalEnergies and other oil majors entered its third week and wage talks stalled.

Government ministers and President Emmanuel Macron have urged a negotiated resolution to the crisis, but on Tuesday government spokesman Olivier Veran threatened force to end the blockades which have paralysed several of France’s refineries and oil depots.

If blockades were not ended “immediately”, Veran told the RTL broadcaster, “we will step in, which means we could intervene to lift them”.

The government could then “requisition qualified personnel” to ensure that the situation can go “back to normal”, he said.

He said ongoing action by the hard-left CGT union at TotalEnergies installations was “excessive and out of line”.

The oil giant’s management “is right to demand that blockades be lifted before there can be negotiations”, Veran said.

Also on Tuesday, Finance Minister Bruno Le Maire called breaking up the blockades “the only solution”.

Once access to refineries and depots was free, it would take around two weeks for the fuel situation to return to normal, Veran said.

But stoppages continued at several refineries, including at France’s biggest near Le Havre in the north of the country, after strikers at TotalEnergies Tuesday voted to extend their action.

“We are still waiting for details from management on what they want to negotiate on,” Eric Sellini, coordinator for the CGT union at the oil major, told AFP.

– ‘What a mess’ –

Unions at the French branch of Esso-ExxonMobil on Tuesday also renewed their strike call, rejecting a pay offer by management.

Motorists formed long queues outside petrol stations from early Tuesday. In central Paris, traffic slowed as waiting cars blocked roads, cycle paths and pedestrian crossings, hoping to be served before the pumps went dry.

Many used social media to exchange tips. One post in a Facebook group Monday said that a local BP service station would be resupplied “at 2:30 pm”. Another replied: “It’s now 2:37 pm and they’re out of diesel.” 

Another user reacted: “What a mess.”

The petrol crisis comes at a time of high energy prices and inflation that are sapping French households’ purchasing power.

The left-wing opposition coalition Nupes has called for a “March against a high cost of living” in Paris and elsewhere on Sunday.

At the weekend, several prominent French people came out in support of the initiative, including this year’s winner of the Nobel Prize for Literature, Annie Ernaux.

Opposition politicians on the left were quick to criticise the government’s hardening stance Tuesday.

“With this government, when dialogue stalls, it’s threats for the wage earners and caresses for the bosses. And yet, it’s management that let the situation deteriorate,” tweeted Manuel Bompard, a deputy for the leftwing LFI party.

“They act as if ordinary people don’t matter,” said fellow LFI member Francois Ruffin.

Jordan Bardella, president of the farright RN party, said the government had failed to anticipate the crisis, adding that “super profits at Total and the salary of the chairman” made worker demands “not unreasonable”.

But Gilles Platret, vice president of the conservative LR party, backed the government’s tougher stance, saying strikers were “taking an entire country hostage”.

TotalEnergies posted a profit of $5.7 billion in the second quarter of the year, more than double the year-earlier figure.

CEO Patrick Pouyanne’s total compensation package was 5.9 million euros ($5.7 million) in 2021, up 52 percent from the previous year’s, according to the group’s annual report.

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