Economics

In late 2022 the world passed 1 TW of installed solar capacity. Just 3.5 years later we've already reached 3 TW. ➡️ The first terawatt took 68 years. ➡️ The second took 2 years. ➡️ The third took just 18 months. According to the latest Global Solar Market Outlook from SolarPower Europe, three factors have driven this acceleration: ✅ Global manufacturing capacity has expanded dramatically, ensuring supply has kept pace with soaring demand. ✅ Solar module prices have fallen around 99% since 2000, making solar the cheapest source of new electricity in much of the world. ✅ More countries are now deploying solar at scale, with annual installations measured in hundreds of gigawatts rather than tens. The result is that global solar installations have reached a scale that would have seemed unimaginable just a decade ago. The exponential growth won't continue forever and several key markets are now entering a new phase. Rapid capacity growth has started to expose system-level constraints that were largely invisible before. It is increasingly transmission bottlenecks, grid constraints, storage and system flexibility that will determine how quickly solar can continue expanding. That is increasingly where governments, utilities and developers are focusing their attention. The challenge is no longer building panels – it's building everything else around them.

Working from home reduces the motherhood penalty by 77%. Seventy. Seven. Percent. A new study from Italy found that when mothers can work from home, they're less likely to reduce their hours and more likely to continue progressing in their careers. Which, when you think about it, is hardly shocking. It's much easier to stay on track at work when you're not spending two hours a day commuting, frantically trying to get to nursery before it closes and operating with the logistical complexity of a mid-sized military operation. But there's more.. Fathers' flexibility matters too. Some people insist on calling it the "parenthood penalty", but mothers and fathers do not experience parenthood in the labour market in the same way. Mothers take the financial hit. Fathers generally don't. However, when fathers have access to remote work, mothers' financial losses after childbirth are significantly smaller. Why? Because childcare, school pickups, sick days and life admin stop being Mum's problem by default and start becoming a shared responsibility. The researchers found that a father's ability to work remotely has almost as much impact on a mother's earnings as her own ability to do so. The report goes even further. It estimates that if all jobs that could be done remotely actually allowed people to work remotely, the lifetime gender earnings gap would shrink by 30%. Thirty percent. Just by letting people work from the place where they also happen to keep the tiny humans alive. Imagine that. https://lnkd.in/eBjMe3NM

The latest reporting from the Financial Times highlights a point that energy analysts have been making for years: geopolitical shocks consistently strengthen the case for renewables, electrification and storage. Microsoft’s global vice-president for energy notes that oil and gas price spikes linked to the Middle East conflict reinforce the value of wind, solar and batteries in providing price stability. Once installed, renewables offer predictable cost profiles and reduce exposure to volatile global fuel markets. We saw this dynamic after Russia’s invasion of Ukraine. Europe accelerated solar deployment, heat pump uptake increased in several countries, and governments revisited questions of energy security through the lens of diversification and electrification. The underlying issue remains unchanged. Fossil fuels must continuously flow through complex global supply chains. When those flows are disrupted, prices spike and economies are exposed. Renewables, by contrast, are capital intensive upfront but deliver long term domestic supply and insulation from commodity shocks. There are short term risks. Inflation, higher interest rates and supply chain constraints can slow clean energy investment. Some governments may also respond by doubling down on gas infrastructure. The policy challenge is to avoid locking in further structural vulnerability. Energy security and climate policy are not competing objectives. In a world of recurrent geopolitical instability, they are increasingly aligned.

This visual helps explain 3 concepts that A LOT of people forget about solar☀️   Solar energy’s fuel (sunshine) is free and delivered daily.   Therefore, electricity from solar does not include the cost of each marginal unit of fuel. That makes sense to people.   But the full implications of an energy system built upon a zero-cost, abundant fuel source are often still dramatically underestimated.   There are three other kinds of savings that solar provides:    Infrastructure Savings – As shown in the graphic, the world spends billions of dollars every year extracting oil, gas, and coal and transporting to the places it will be burned. The infrastructure to mine, refine, and move these fuels from point A to point B, whether by boat, rail, or pipeline, requires regular maintenance and TONS of investment. With solar, the sun does it all for us, delivering usable photons every morning.   Predictability Savings – When you’re relying on a globally traded commodity to produce electricity, the final cost of each gigawatt can fluctuate with the current price of oil and coal. Market uncertainty can send the price of these commodities (and the final price for electricity) soaring on a whim. But it doesn’t need to be this way. Once a solar farm is installed, the cost of each unit of electricity is basically fixed. This helps utilities better predict their costs and that’s a huge benefit to consumers.   Energy Independence Savings – Because oil, gas, and coal rely on complex international supply chains and lots of global infrastructure, there is a lot more that can go wrong. Geopolitical shocks, natural disasters, port congestion, and accidents (remember the Suez Canal blockage?) can all impact the predictability and reliability of coal and gas generation. No one can embargo the sun or interrupt its delivery to us, so solar energy is fundamentally more local and more independent.   I think it’s important to explain these hidden savings when talking to naysayers because, while they may understand that free sunshine = free fuel, they may not understand just how much they’re paying for the infrastructure, uncertainty, and volatility of fossil fuels.

The European Commission has introduced a new carbon tax on imported goods called the Carbon Border Adjustment Mechanism (CBAM). This is meant to make sure that European companies and companies from other parts of the world are on the same page when it comes to carbon pricing and environmental commitments. Here are the main changes: 🔴 Emissions Reporting: Starting in October this year, companies have to start keeping track of how much carbon is linked to the goods they import. They need to start reporting this data by January 2024. This reporting will continue until the end of 2025. 🔴 Carbon Leakage Prevention: CBAM is a way to prevent companies from moving their production to places with weaker environmental rules to avoid carbon costs. It makes sure that European products and products made outside of Europe have similar carbon costs. 🔴 CBAM Certificates: Importers have to get CBAM certificates to match the carbon pricing between EU and non-EU products. They need to provide details about the product's carbon footprint, where it's from, how it's made, and its emissions data. This includes emissions during production and indirect emissions, like electricity use. 🔴 Covered Sectors: CBAM applies to industries with high carbon emissions like iron and steel, cement, fertilisers, aluminium, electricity, hydrogen, and some downstream products like screws and bolts. It also covers certain indirect emissions under certain conditions. Importers mainly need to report emissions during the transition phase until 2026. To help importers and producers outside of the EU adapt, the EU Commission is providing guidelines and tools to calculate emissions. They're also offering training materials and webinars. Some important data points to consider: 🟢 Carbon Leakage: A study by the European Environmental Bureau warns that unchecked carbon leakage could cause a 15% increase in global emissions, undermining climate efforts. CBAM aims to prevent this. 🟢 Emissions Differences: The World Trade Organization says that different countries have different emissions rules, leading to different carbon costs. CBAM aims to make this fairer. 🟢 Economic Impact: The European Commission estimates that the global carbon allowance market could be worth €4.5 billion per year by 2030. CBAM will significantly affect international trade and revenues. 🟢 Industry Shift: A study by the European Parliament Research Service shows that without CBAM, high-emission industries might move to places with weaker rules, leading to job losses and less competitiveness in the EU. 🟢 Green Transition: The International Monetary Fund says that well-designed carbon pricing like CBAM can encourage industries to become more environmentally friendly, contributing to a greener global economy. 🟢 Regulatory Challenges: CBAM's reporting requirements might be tough for importers initially. However, the long-term benefits of fair carbon pricing are expected to outweigh the challenges.

It’s rare that an ad stops you on your commute, but something I saw at Bank station today did just that.  Greenly | Certified B Corp has taken over the London Underground and reframed The Economist as The Ecologist to say something I have spent over a decade advising on:  “Weather is small talk”   “Climate is strategy”   “Profit is the proof” I've spent years trying to bridge two worlds that should never have been separated: finance and ecology. The data always said they belonged together, but language kept pulling them apart. The numbers don't leave room for debate:  ⚠️ Climate policy uncertainty operates like a supply shock: a 50% rise cuts GDP by 0.5%, investment by nearly 2%  💶 Companies with credible net-zero plans trade at a 12% premium on average (MSCI, 2023)  🌡️ Physical climate risk is already priced into sovereign debt by the IMF The companies that built auditable carbon trajectories early aren't managing a cost. They're sitting on a competitive advantage. In financing conversations, procurement, and investor relations. This isn't a COP-side event. It's a financial capital and Greenly is saying loudly, without hedging that environmental intelligence and economic intelligence are the same thing. We just kept them in separate rooms for too long. Greenly didn't just launch a campaign. They closed a gap that's cost us years. #climatefinance #climaterisk #sustainablefinance #climatestrategy 

This time Is different We don't often say that about the Fed, but after yesterday's FOMC meeting, we think it may actually be true. In fact, we believe yesterday's meeting ushered in a new era of monetary policy in the United States.    For the better part of two decades, monetary policy has followed a familiar playbook: extensive forward guidance, frequent communication, data dependence and the  Federal Funds rate as the primary policy tool. While leadership has changed, the broader framework has remained remarkably consistent.   What we heard yesterday suggests the possibility of a meaningful evolution.   We believe the Fed may be moving toward a framework that places less emphasis on signaling every move in advance and more emphasis on assessing where inflation, employment and broader economic conditions are heading. In a world of real-time data and increasingly sophisticated analytics, that could prove to be a healthier and more effective approach.   We also continue to hear indications that the policy toolkit could broaden beyond the overnight policy rate, with greater consideration of balance sheet policy, liquidity conditions, money supply dynamics and longer-term interest rates.   Importantly, change does not automatically mean more volatility. A broader set of tools and a more forward-looking approach could ultimately increase confidence in policy outcomes rather than diminish it.   For investors, the near-term message remains straightforward: inflation is still above target and remains the Fed's primary focus. While rate hikes are far from certain, they remain a possibility that markets need to respect.   That's one reason we continue to favor income-oriented fixed income opportunities over pure interest-rate expressions. And when markets overreact to uncertainty around policy change, we think there may be opportunities to sell volatility rather than buy it.   This time may indeed be different, and it will be fascinating to watch how this evolution in monetary policy unfolds. The real question is whether less signaling creates more uncertainty, or ultimately more confidence in the Fed's ability to achieve its objectives.

As expected, the Fed cut rates by 25 basis points and announced an end to quantitative tightening—both steps toward further easing. However, the meeting revealed some notable divisions within the Federal Open Market Committee. One member voted against the rate cut, while another favored a larger, 50 basis point cut. This dissent was a bit unexpected. Chair Powell also highlighted strong differences of opinion about a potential December rate cut and discussed the “neutral rate”—the level at which the Fed is neither stimulating nor restraining the economy. Powell suggested a range between 3 and 4%, higher than the 3% median estimate from FOMC members. These factors led markets to pause and reassess the likelihood and pace of future rate cuts. While markets still anticipate a December cut, the path ahead may be shallower than previously expected. Both stock and bond markets reacted with caution. For investors, this complexity is a sign that the Fed is weighing risks carefully—balancing the dangers of being too easy or too tough in today’s environment.  

Use this simple approach to master the Bond Market. Nominal bond yields can be thought of as the interaction between: 1️⃣ Growth expectations 2️⃣ Inflation expectations 3️⃣ Term premium 1. Growth expectations When it comes to economic growth we must consider two angles: structural and cyclical growth. Structural economic growth can be generated through more people joining the labor force (good demographics) and/or through a more productive use of labor and capital (strong productivity trends). The ability of an economy to generate structural growth is an important driver behind long-dated bond yields (strong structural growth = structurally higher long-dated yields and vice versa). Short-term economic cycles also matter for bond yields and particularly at the short-end. Cyclical growth trends are driven by the credit cycle, the fiscal stance, earnings growth, labor market trends and more - the healthier they are, the higher short-end bond yields can be pushed also as a result of a likely tightening from Central Banks that might grow worried about economic over-heating and inflationary pressures in such an environment. 2. Inflation expectations The second component driving nominal bond yields is inflation: but NOT TODAY'S inflation - instead we are referring to long-term inflation expectations. Central Banks might temporarily react to concentrated bursts of inflationary pressures by raising short-term interest rates but when it comes to long-dated bond yields investors will always pay close attention to inflation expectations. That's because consumers and borrowers will tend to make important decisions based on these rather than on volatile short-term trends in inflation. 3. Term premium An investor looking to get fixed income exposure can do that via buying 3-month T-Bills and rolling them each time they mature for the next 10 years. Alternatively, it can decide to purchase 10-year Treasuries today. What's the difference? Interest rate risk! Buying a 10-year bond today rather than rolling T-Bills for the next 10 years exposes investors to risks – term premium compensates for this risk. The lower the uncertainty about growth and inflation down the road, the lower the term premium and vice versa. 💡 The Main Takeaway 💡 If you want to make sense of bond yields, a useful approach to use is to think of them as the result of growth expectations, inflation expectations and term premium. P.S. If you liked this post you'll love my macro research. I share my macro analysis every day with the biggest institutional investors and hedge funds in the world. Get your FREE trial here👇🏼 https://lnkd.in/dyFFJp-z

The August U.S. jobs report is out, pointing to a weaker-than-expected labor market. Specifically: Job creation was 22,000, below the consensus forecast of 75,000. The three-month moving average for job creation is now just under 30,000. The unemployment rate ticked up to 4.3%. Monthly earnings growth was 0.3%. Revisions for the previous two months resulted in a net loss of 21,000 jobs, also turning July's payroll growth into a negative figure. This data essentially guarantees a 25 basis point Federal Reserve interest rate cut in 12-days time The weak report also reinforces the view that the Fed should have cut rates sooner, particularly last July. It may even prompt some discussions about the possibility of a more aggressive 50 bps cut at the upcoming meeting. #economy #markets #unemployment #jobs #employment