World

The world needs “early, aggressive and sustained” government intervention to cut aviation emissions if Paris Agreement temperature goals are to be met, a think tank said Thursday.

Airlines must start to slash emissions before the end of the decade and by 2025 if possible, said the International Council on Clean Transportation (ICCT) in a new report.

The 2015 Paris climate treaty enjoins nations to cap global warming at “well below” two degrees Celsius, and 1.5C if possible.

Earth’s average surface temperature has already risen 1.2C above preindustrial levels.

To project aviation sector emissions, the ICCT ran three models assuming different levels of traffic, fuel efficiency and other factors.

All of them improved on a baseline “business-as-usual” scenario, which would emit nearly 50 billion tonnes of CO2 by mid-century — more than annual emissions from all sources today.

The most optimistic model — which assumes “widespread investments in zero-carbon aircraft and fuels, peaking fossil fuel use in 2025, and zeroing it out by 2050” — would see a reduction of 22.5 billion tonnes of emissions by 2050. 

That would put aviation on course to cut greenhouse gas emissions by “an amount consistent with a 1.75C warming”, said the ICCT.

“But it would require aggressive policies to peak emissions by 2030 at the very latest.”

These findings were more positive than anticipated but remain very ambitious, commented lead author Brandon Graver.

“The all-in strategy to deploy clean planes and fuels cuts emissions even deeper than we expected,” he said.

“But public policies will be needed to peak emissions as early as 2025 to put aviation on a 1.75°C pathway.”

IATA, which represents 290 airlines accounting for 83 percent of global air traffic, pledged last October to achieve net-zero carbon emissions by 2050.

The aviation industry is among the fastest-growing sources of greenhouse gases, and one of the most difficult sectors to decarbonise. 

Many experts are counting on innovations in hydrogen fuels or so-called sustainable air fuels (SAF) made from non-fossil fuel renewable source to meet industry targets.

Improvements in operational efficiency also hold potential for reducing the sector’s carbon pollution.

The International Air Transport Association (IATA) has put the cost of such improvements at $1.55 trillion over 30 years.

IATA projects continued growth in air travel.

The industry expects to carry 10 billion passengers by the middle of the century, more than double the 4.5 billion in 2019, the most recent full year unaffected by the Covid pandemic.

Australia’s prime minister joked he would huddle with top officials Thursday to discuss the soaring cost of lettuce and local KFCs’ decision to replace the verdant leaf with a cabbage mix on their Zinger Burgers.

Dubbing the fast-food chain’s decision “crazy”, centre-left leader Anthony Albanese quipped the situation had become a national “crisis”.

Lettuce prices have soared by as much as 300 percent in Australian cities thanks to recent flooding and high global fuel prices.

A single head of iceberg lettuce that once sold for about $2 now goes for close to $8 in Sydney and Melbourne.

As a result, KFC told Australian customers it would reduce the lettuce in its products in favour of a 50-50 lettuce-cabbage mix.

“Cabbage isn’t the same as lettuce. That’s just wrong,” Albanese told Sydney’s KIIS FM radio.

“I’ll put it on the list for the Cabinet meeting today. Cabbage-gate.”

Asian markets fell Thursday as a rally in oil ramped up inflation fears, with top officials warning of more pain to come as the Ukraine war continues to push prices up and put further pressure on the global economy.

Buyers on Wall Street were in retreat again after data showed US crude and gasoline stockpiles sank, just as the summer driving season begins and leading OPEC member demand would surge further as China reopens.

Adding to the gloom was the OECD’s sharp downward revision of its global growth outlook and doubling of its inflation forecast.

The glum mood was only slightly offset by ongoing optimism that Beijing’s tech crackdown was close to an end.

Both main crude contracts jumped more than two percent Wednesday to three month highs after figures showed the biggest US storage depot had seen a big fall in reserves last week, suggesting elevated prices were not deterring people from driving.

Meanwhile, White House Press Secretary Karine Jean-Pierre said officials expect Friday’s keenly awaited consumer price index will be “elevated”.

The comment lifted expectations that the Federal Reserve will stick to its hawkish path and hike interest rates by half a point for at least three more meetings this year as it tries to bring down inflation from four-decade highs.

Analysts said investors were unlikely to get any reprieve until crude — a key driver of inflation since Russia’s invasion of Ukraine — was brought under control.

“A pullback in crude would be crucial for any prolonged risk rally, given implications for inflation expectations,” said SPI Asset Management’s Stephen Innes. 

“And for the central bank fraternity intent on frontloading rates, chapter two of the current playbook reads that aggressive tightening risks a material decline in housing, consumer confidence, and consumption that will eventually drive their respective economies into recession and send stocks tumbling.

“So until we reach peak inflation, which will trigger a less hawkish Fed and lower recession odds, it could be a gloomy summer for global stock pickers.”

He added that prices were expected to rise further for now as China emerges from months of lockdown, a sentiment that United Arab Emirates Energy Minister Suhail Al-Mazrouei agreed with.

“With the pace of consumption we have, we are nowhere near the peak because China is not back yet,” he told a conference Wednesday. “China will come with more consumption.”

The unease about rising prices and rates saw all three main indexes on Wall Street drop along with European markets, with focus on the European Central Bank’s policy meeting later Thursday.

The ECB is expected to begin winding down its massive bond-buying programme and signal a rate hike was in the pipeline.

Asian traders followed suit Thursday.

Hong Kong dropped, even as tech firms continued to benefit from hopes that China’s crackdown was almost over, while Shanghai, Sydney, Seoul, Singapore, Taipei, Manila and Wellington were also in the red.

Tokyo, however, edged up as the yen sat at two-decade lows owing to widening the monetary policies of the hawkish United States and Japan, which shows no signs of lifting rates.

Investors were jarred by a report from the Organisation for Economic Co-operation and Development, which said it had cut its 2022 growth outlook to three percent — from 4.5 percent predicted in December — owing to the Ukraine war.

It also doubled its inflation estimate to 8.5 percent, a 34-year high. 

“The world is set to pay a hefty price for Russia’s war against Ukraine,” wrote the OECD’s chief economist and deputy secretary-general, Laurence Boone.

And Anna Han, at Wells Fargo Securities, told Bloomberg Television: “Our view is that the chance of recession by the end of 2023 is 40 percent or so.” 

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: UP 0.2 percent at 28,278.45 (break)

Hong Kong – Hang Seng Index: DOWN 0.7 percent at 21,851.49

Shanghai – Composite: DOWN 0.6 percent at 3,245.66

Brent North Sea crude: UP 0.1 percent at $123.72 per barrel

West Texas Intermediate: UP 0.1 percent at $122.20 per barrel

Dollar/yen: UP at 134.36 yen from 134.29 yen late Tuesday

Euro/dollar: DOWN at $1.0717 from $1.0720 

Pound/dollar: DOWN at $1.2524 from $1.2535

Euro/pound: UP at 85.57 pence from 85.54 pence

New York – Dow: DOWN 0.8 percent to 32,910.90 (close)

London – FTSE 100: DOWN 0.1 percent at 7,593.00 (close)

US President Joe Biden on Wednesday urged leaders of the Americas to prove that democracy works as he laid out plans to boost economic cooperation and improve health and food access in a region where China has been making growing inroads.

Welcoming leaders to Los Angeles to the Summit of the Americas, Biden acknowledged differences — with Mexico’s leader refusing to come — but made an impassioned plea for democracy as the best way forward.

“When democracy is under assault around the world, let us unite again and renew our conviction that democracy is not only the defining feature,” Biden said, “but the essential ingredient to the Americas’ future.”

“At this summit, we have an opportunity for us to come together around some bold ideas, ambitious actions, and to demonstrate to our people the incredible power of democracy,” Biden said.

In a theater that plays host to the Emmys, delegations snacking on popcorn watched a choreographed dance routine by Emilio Estefan and a rendition of The Beatles’ “Come Together” by Sheila E.

Biden laid out a new regionwide economic plan that was large on ideas but short on commitments, with no promises of further market access or funding.

In an echo of US political debates, Biden said that the United States was looking for economic growth “from the bottom up and the middle out and not the top down.”

“What was true in the United States is true in every country — ‘trickle-down economics’ does not work,” he said to applause.

In an implicit contrast to Beijing, Biden’s national security advisor, Jake Sullivan, said the United States was worried less about flashy announcements than about supporting more inclusive growth.

“The United States has never seen its comparative advantages in the world as just leveraging huge numbers of state dollars, but rather leveraging all of the tools available to us,” he told reporters on Air Force One.

Biden announced $300 million in assistance to address the region’s food insecurity, which has been on the rise as Russia’s invasion of Ukraine disrupts grain exports.

The White House also announced a new Americas Health Corps that aims to improve the skills of 500,000 health workers across the region, building on the lessons from Covid-19, which hit the Western Hemisphere especially hard.

The health training will cost $100 million, although the United States will not contribute it all and will seek to raise funds, including through the Pan American Health Organization, an administration official said.

China has stepped up its role in Latin America during the pandemic, moving early to supply vaccines, and US nemesis Cuba has long exported its state-employed doctors. 

The announcement comes a day after Vice President Kamala Harris detailed $1.9 billion in private sector investment in impoverished and violence-ravaged El Salvador, Guatemala and Honduras.

The troubles in the so-called Northern Triangle, as well as Haiti, have generated a soaring number of migrants to the United States, setting off a domestic furor as Donald Trump’s Republican Party demands efforts to stop them.

– Meeting with ‘Tropical Trump’ –

Draining US diplomatic energy ahead of the summit, Mexican President Andres Manuel Lopez Obrador refused to attend as he insisted that Biden invite the leftist leaders of Cuba, Nicaragua and Venezuela, shunned on the grounds that they are autocrats.

Biden will have a potentially awkward first meeting Thursday with President Jair Bolsonaro of Brazil, Latin America’s most populous nation. 

A Trump supporter, Bolsonaro has raised doubts about the legitimacy both of upcoming voting in Brazil and, on the eve of his trip, of Biden’s own election.

Sullivan said that Biden would not shy away from the topic and would discuss the importance of “open, free, fair, transparent democratic elections.”

– Trade deals lite –

Biden has stood firm on democracy at the summit even as he considers going next month to Saudi Arabia, a critical oil supplier. But Biden has moved away from another past goal — free trade.

The Summit of the Americas is the first in the United States since the inaugural edition in 1994 was held in Miami under Bill Clinton, who proposed a free-trade zone that would span the hemisphere — but exclude communist-ruled Cuba.

The White House billed Biden’s summit as an update to Clinton’s vision. But the US political mood has since dramatically soured on free trade, with Trump rising to power denouncing liberalization as harmful to US workers. 

The Americas Partnership for Economic Prosperity announced by Biden will look at coordinating on standards and supply chains but will not offer new market access — a key incentive offered to the region by China, with its billion-plus consumer market.

Biden last month similarly unveiled an Asian partnership on setting economic standards as he visited Tokyo.

But unlike in Asia, the United States already has free trade deals with a number of major Latin American nations including Mexico, Chile, Colombia and Peru.

The European Central Bank is set to announce the end date to its bond-buying stimulus on Thursday, as concerns over the accelerating pace of inflation in the eurozone grip policymakers.

The stop is a prelude to the ECB hiking rates for the first time in over a decade in the weeks that follow, turning the page on an era of ultra-loose monetary policy.

Inflation in the eurozone rose to 8.1 percent in May, the highest level in the history of the currency club and well above the ECB’s own two-percent target.

The surge has largely been driven by the war in Ukraine, which has decisively pushed up the cost of energy, food and raw materials. 

Persistent price pressures have forced the ECB into an “enormous U-turn” since December, said Carsten Brzeski, head of macro at ING bank.

From saying inflation would be “temporary” and warding off interest rate hikes in 2022, the ECB is now racing to catch up with other major central banks in the United States and Britain.

With inflation picking up, “the only really interesting question is why they don’t start hiking rates immediately instead of waiting until July”, Brzeski said.

– ‘Lift off’ –

Under pressure to show the ECB was responding to inflation, President Christine Lagarde set out the likely next steps for the central bank in a blog post in late May.

The unusually clear statement foresaw an end to the ECB’s crisis-era stimulus programme “very early in the third quarter”.

The so-called asset purchase programme, or APP, is the last in a series of debt-purchasing measures worth a total of around five trillion euros ($5.4 trillion) deployed by the ECB since 2014.

Lagarde then went on to reveal ECB policy through the second half of the year, predicting a “lift off” in rates at the governing council’s next meeting in July, with the central bank bringing an end to negative interest rates by the end of September.

Of the ECB’s three main interest rates, the so-called deposit rate — which is normally the interest commercial banks would receive for parking their cash with the ECB overnight — has been negative since 2014.

– ‘Benchmark pace’ –

Still up for discussion in Amsterdam, where the governing council is meeting instead of at its usual venue in Frankfurt, is the size of the first step.

Some members have called on the ECB to follow the US Federal Reserve and bring the curtain down on negative interest rates with a single half-point hike.

The head of the Dutch central bank, Klaas Knot, said in May that such a move was “clearly not off the table”.

But the ECB’s chief economist, Philip Lane, pushed back against suggestions of a big hike, calling 25 basis points — or a quarter of a percentage point — the “benchmark pace”.

ECB followers will be listening carefully to Lagarde’s press conference at 2:30 pm (1230 GMT) for some indication of the prevailing thinking among policymakers.

Lagarde could “give a nod to the hardliners” by leaving the door open to a steeper rise, said Franck Dixmier, head of fixed income at Allianz Global Investors.

The decision will depend to a large extent on how the outlook for the economy changes.

The ECB is scheduled to publish new economic forecasts alongside its policy decisions on Thursday.

Its previous estimates — published in the immediate aftermath of Russia’s invasion of Ukraine — cut projected growth in the eurozone in 2022 to 3.7 percent and saw inflation rising to 5.1 percent.

Looking ahead, the ECB will be keeping a particularly close eye on any serious divergence in borrowing costs across the eurozone, as measured by the difference between yields on individual countries’ bonds and those of Germany — seen as a benchmark of stability.

Currently, the spread between Italian and German 10-year bonds is at its widest since the early stages of the coronavirus pandemic.

Lagarde has previously vowed to act “promptly” if needed, raising the possibility of designing a new instrument “in short order”.