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S&P Global — 24 September 2024
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
In recognition of New York Climate Week, S&P Global Sustainable1 has published a special edition of the S&P Global Sustainability Quarterly. This week, the Daily Update will review issues raised in the publication.
The energy transition is not going according to plan. National commitments to emissions reductions are sliding further out of reach with every passing year. The changes needed to safeguard energy, public health, economic wellbeing and climate security are simply not being undertaken. Under these circumstances, it is prudent to evaluate different scenarios for the energy transition. A group of researchers at S&P Global Commodity Insights recently published a study, “The New Pragmatism – Scenarios to understand a volatile energy transition,” that lays out different scenarios and their implications.
Geopolitics and the slow breakdown of the global order that has governed international relationships, trade and economic development for the past 80 years are affecting the pace of the energy transition. To reflect the role of international institutions and norms in driving the energy transition, S&P Global Commodity Insights created the Green Rules scenario as the fastest transition and the Discord scenario as the slowest transition. Under the Green Rules scenario, governments, industries and institutions undergo massive efforts to reduce emissions, but no country reaches net-zero emissions by 2050 despite this commitment. Under the Discord scenario, geopolitical tensions damage international relations, leading to a much slower global energy transition. In the Green Rules scenario, global temperatures rise by 1.8 degrees C. In the Discord scenario, temperatures rise closer to 3.1 degrees.
Between these two scenarios is a base case that the researchers called Inflections. Under this scenario, institutions function well enough to drive meaningful transition that will significantly lower fossil fuel emissions by 2050, although slower than anticipated. This scenario is considered more pragmatic, despite leading to a global temperature rise of 2.5 degrees, because the resurgence of fossil fuel usage in recent years renders more optimistic transition timelines unlikely.
Under all three scenarios, greenhouse gas emissions will be lower by 2050 compared with 2023 levels, fossil fuel usage will plateau and decline, and the percentage of energy provided by renewables will greatly increase. But these scenarios assume that the net-zero pledges made by countries of the Organisation for Economic Co-operation and Development and emission reduction pledges of China, India and Saudi Arabia will not be reached by 2050.
Which of these scenarios comes closest to matching reality will depend on a variety of macro- and socioeconomic factors, including political landscapes, economic landscapes, policy landscapes and energy markets. In each case, the Discord scenario is a product of a fractured world, prone to crisis and conflict. Green Rules depends on a stable political environment and cooperation within and between countries. While it is still possible that some technological innovation in energy generation might put the world on track for net-zero emissions, pragmatism demands that we analyze other, less optimistic outcomes.
Today is Tuesday, September 24, 2024, and here is today’s essential intelligence.
The impact of a megatrend such as climate change could be material to the creditworthiness of issuers and debt instruments. Looking at different scenarios can be particularly useful when we have limited visibility of how risks may develop. Scenario analysis can help provide insights on how transition and physical climate risks could develop by examining how key transmission channels such as investment, losses or business disruption may be affected in different plausible futures.
—Read the article from S&P Global Ratings
Buoyed by the Federal Reserve's aggressive first rate cut since the early days of the pandemic and rising expectations that the central bank may keep the economy from tumbling into a long-feared recession, stock indexes closed at new record highs this week, sparking hopes of the start of next major rally in equities. Both the S&P 500 and the Dow Jones Industrial Average closed at all-time highs on Sept. 19, with the indexes up 10.2% and 8.6%, respectively, from their troughs in early August following a weaker-than-expected jobs report.
—Read the article from S&P Global Market Intelligence
Private equity and venture capital deal volume in Brazil is expected to decline further in 2024 due to the exodus of foreign investors and the shift into special situations investing. From Jan. 1 to Sept. 12, 112 private equity and venture capital-backed deals were announced, roughly 56% of the 199 deals recorded in all of 2023, according to S&P Global Market Intelligence data. The number of private equity deals in the country has declined annually since peaking at 370 in 2021.
—Read the article from S&P Global Market Intelligence
The US Gulf Coast is experiencing record diesel flows to Northwest Europe as favorable freight rates and strong refinery production boost the Transatlantic trade. As summer ends, diesel flows from the USGC to NWE and the Mediterranean are reaching unprecedented levels. In July, the USGC-NWE/Med diesel trade hit a record with 10.6 million barrels transported across the Atlantic and August surpassed that figure with 12.5 million barrels
—Read the article from S&P Global Commodity Insights
Brazil's recycling industry faces a significant challenge as demand for recycled polymers outpaces supply, widening the price gap between recycled and virgin resins. A study released on Sept. 18 revealed that over 90% of waste on Brazilian beaches is plastic, yet recyclers are struggling to secure enough feedstock to meet market needs. This disparity highlights a critical issue: Brazil's inefficient scrap collection system is leaving valuable resources literally on the beach.
—Read the article from S&P Global Commodity Insights
Itselectric, a Brooklyn-based electric vehicle (EV) curbside charging company, partners with municipalities and property owners to install, operate and maintain public chargers on sidewalk curbs. The Level-2 charging ports use spare electrical supply from nearby buildings via a revenue share with property owners and allow EV drivers to recharge their vehicles without the hassles of locating off-street parking, garages or out-of-the way charging stations.
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This in-person event will feature critical discussions on credit and market trends, with thematic panels that bring together senior analysts and external market participants.
—Register for the in-person event from S&P Global Ratings