Daily update: September 27, 2021

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Start each business day with our analyzes of the most pressing developments affecting the markets today, as well as a curated selection of our most recent and important information on the global economy.

As the global race for net zero intensifies, all eyes are on Europe as a model for a sustainable future. The region is the world leader in adopting climate policies and regulations, issuing green bonds and integrating renewable energies.

The broad European Union climate roadmap “Fit for 55”, announced in July, introduced a dozen sweeping legislative proposals to help sectors of the economy reduce greenhouse gas emissions by 55% compared to the levels of the 90s and to use renewable energies for 40% of gross final energy consumption in 2030. Although the road to implementation is difficult, the package “is the most comprehensive policy suite announced by a government to date to achieve a broad decarbonization of an economy, “according to S&P Global Platts Analytics. The EU has since introduced new climate measures. regulatory proposals – targeting the climate risk of financial institutions and general information on sustainable finance – that no other economy has yet been able to match or emulate.

Aggressive climate action is needed to tackle the aggravating climate risk. In many parts of Europe, water stress will be the biggest climate-related risk in three decades, according to data from S&P Global Trucost.

“The fossil fuel economy has reached its limits,” said European Commission President Ursula von der Leyen when announcing the “Fit for 55” climate package. “Europe was the first continent to declare itself climate neutral in 2050, and now we are the very first to put a concrete roadmap on the table. Europe is talking about climate policies through innovation, investment and social compensation.

European green bond issuance is expected to catapult global green bond issuance to record levels this year, as new European green bond standards and international decarbonization efforts attract more investors to sustainable finance. European green bond issuance in the second quarter marked a 30% year-over-year increase, totaling $ 53.37 billion, and pushed global issuance to $ 202.09 billion in the first half of 2021, according to the British non-profit initiative Climate Bonds. Likewise, emissions linked to sustainable development in Europe continued the upward trajectory observed during the first half of the year.

In pursuit of the global energy transition from fossil fuel production to clean energy sources, European policymakers and oil and gas majors are world leaders in investments in offshore wind and hydrogen . The region’s largest coal-fired power plant is set to shut down permanently by 2036. Investors are expressing interest in Spain’s thriving renewable energy market, and Greece has made progress in reforming its electricity market in order to attracting the same frenzy of international attention.

“Europe has established itself as a seat of offshore technology thanks to advanced know-how, supportive policies and government goals,” S&P Global Ratings said in a recent report. “The continent’s pressure to reduce greenhouse gas emissions to 55% below 1990 levels by 2030 and become climate neutral by 2050, involves a huge increase in renewable energy sources.

Europe aims to install more than 100 gigawatts of offshore wind capacity by 2030, up from 25 gigawatts today, and may need to install at least 400 gigawatts of additional capacity in order to reach net zero by 2050, according to S&P Global Ratings. The UK has consolidated its position as a global technology leader with new offshore wind projects and investments, having long been the forerunner of offshore wind in the global economy.

S&P Global Platts Analytics predicts that the number of current proposals for European electrolyser projects is close to the EU’s capacity target of 6 gigawatts for 2024, which would produce up to 1 million metric tonnes per year renewable hydrogen. European government agencies have urged market players to dive deep into green hydrogen, and major natural gas companies in the region are moving forward with new hydrogen projects immediately, according to S&P Global Market Intelligence. These include the Italian natural gas company Snam, which devotes half of its investment budget of 7.4 billion euros over four years to preparing its infrastructure for hydrogen, and players manufacturers such as the Irish company Linde and the French company Air Liquide, which have rethought themselves as producers of low-carbon products. hydrogen.

“We could very comfortably wait another 10 years to see which direction the market is going, and then adapt… [But] I think there is a lot of value to be created by being a pioneer, ”Snam CEO Marco Alverà told S&P Global Market Intelligence. “I think we are doing the right things. We are not doing it defensively. We are building these [energy transition ventures] so that over time they can hopefully become as profitable as our core business, which means that the company will grow four, five times in size… We are much more part of the solution than of the problem… There is only a lot a business can do in 30 years.

Today it’s Monday September 27, 2021, and here is today’s essential intelligence.

Uncertainty in the global economy


Economic outlook United States Q4 2021: the rocket is leveling off

While still warm, the US economy cooled in late summer. Supply disruptions remain the prime suspect in slowing the world’s largest economy, and the delta variant is now a further drag.

—Read the full report of S&P Global Ratings

Greater claims severity and driving activity can create a bumpy road for auto insurers

The higher severity of private auto insurance claims in the United States could begin to seriously weigh on business lines’ results as loss frequency rebounds to pre-pandemic levels.

—Read the full report of S&P Global Market Intelligence

The credit cycle


Default, Transition and Recovery: Array Canada Becomes First Default in September

The global corporate defaults tally for 2021 remained at 59 this week after Toronto-based marketing services provider Array Canada Inc. defaulted this week and a confidential issuer was removed from the tally due a monthly reconciliation process.

—Read the full report of S&P Global Ratings

U.S. Housing Finance Agency Ratings Remain Strong Despite Pandemic Pressure

US Housing Finance Agency (HFA) issuer credit ratings have generally remained high from 2020 to the first nine months of 2021. Of 23 rated state HFAs, all but one are rated “AA-” or more.

—Read the full report of S&P Global Ratings

ESG in the time of COVID-19


2025 could mark a turning point for the low-carbon energy transition

Even though most national net zero targets are decades away, the world is expected to make significant progress in decarbonizing energy-related emissions over the next four years to achieve net zero emissions by 2050.

—Read the full report of S&P Global Sustainable1

High metal prices could slow the race to zero carbon

Rising metal prices could slow the global transition to clean energy by delaying efforts to lower the price of electric vehicles and battery storage systems.

—Read the full report of S&P Global Market Intelligence

Hydrogen threatens to drive wedge between Democrats and climate activists

After U.S. Energy Secretary Jennifer Granholm met with local organizers in Brooklyn in June, the head of the Latino community organization UPROSE was optimistic about the Biden administration’s outreach to citizens on climate policy. However, the head of the community expressed concerns about one of the administration’s energy policy priorities: harnessing the potential of hydrogen coupled with carbon capture and sequestration.

—Read the full report of S&P Global Market Intelligence

The future of energy and raw materials


Cheniere feed gas demand peaks 4 months amid Sabine Pass T6 entry into service

Feed gas deliveries to Cheniere Energy’s Sabine Pass liquefaction facility in Louisiana reached their highest level since May after the terminal was given the green light to begin flows to its sixth train as part of the commissioning.

—Read the full report of S&P Global Platts

Feature: Singapore bunker market set to consolidate further amid fierce competition

Intense competition in the Singapore-delivered bunkers market which has reduced margins, especially for low sulfur bunker fuel complying with IMO complaint, limits the ability of some players to operate profitably, Industry sources told S&P Global Platts in the week to September 24.

—Read the full report of S&P Global Platts

Analysis: China increases its natural gas supply for the 2021-2022 winter-spring season

China, the world’s largest consumer of natural gas, has stepped up its gas supply for the upcoming winter-spring heating season 2021-2022, in an effort to avoid a supply shortage similar to the one it has. known the previous winter.

—Read the full report of S&P Global Platts

Liberty plans to restructure Belgian steelworks; Closure of the galvanizing line expected

Liberty Steel Group is considering a possible restructuring of its Belgian steel plants, Liberty Liège Flemalle and Tilleur, to ensure their long-term sustainable future, a spokesperson for the group said on September 23.

—Read the full report of S&P Global Platts

Ukrainian steelmakers suffer from soaring natural gas prices, but Russian metal companies are unscathed

Ukrainian metallurgical companies have started to feel the effects of rising natural gas prices on their production costs, but their Russian counterparts are relatively protected due to state regulation of the natural gas market and the large number of gas suppliers. , according to several industry sources. .

—Read the full report of S&P Global Platts

Written and compiled by Molly Mintz.

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