S&P Global —22 August 2024
Daily Update: August 22, 2024
Green Shoots in Emerging Markets
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
The road to net-zero emissions runs through emerging markets. China, the EU and the US have well-developed renewables sectors that are cost-competitive with fossil fuels. Funding in developed markets is abundant, and government incentives are generous. But emerging markets will struggle to parallel-path energy security and energy transition. Defaults have burned credit markets in emerging economies, and tax incentives have little value to people at the poverty line. Despite these challenges, several emerging market economies, including India, Vietnam and Mexico, are gaining traction with renewable energy projects and carbon removal projects.
With its fast-growing economy and the world’s largest population, India is indispensable in the energy transition. If India powers its economic rise exclusively with coal and oil, then the goals of the Paris Agreement on climate change are unachievable. However, the government of Prime Minister Narendra Modi is seeking to achieve renewables growth without driving up energy prices. In practical terms, that means balancing a renewables push with the continued expansion of natural gas.
As of 2023, India was among the top five importers of LNG, which produces considerably fewer emissions than coal. India has also targeted 500 GW of fossil fuel-free power generation capacity by 2030. For India to achieve this goal, it will look to newer nuclear technologies, such as small modular reactors, as well as rooftop solar projects. Installing rooftop solar panels would likely add 30 GW of solar capacity and cut emissions by as much as 720 million metric tons of CO2 equivalent. In a country where many citizens still live without electricity for all or most of the day, current rooftop solar projects could enable 10 million households to obtain some free electricity.
However, investors and project developers in India are moving away from renewables projects amid concerns over demand weakness and financing. Premium pricing has moved to projects focused on afforestation/reforestation, cookstoves and biochar segments. But some investors believe that renewable energy projects have an advantage over carbon capture and reduction projects because renewable energy provides ongoing cash flow with relatively low maintenance costs.
Vietnam has taken a government-led approach to renewable energy demand generation by introducing a Direct Power Purchase Mechanism (DPPA), which allows large energy customers to stipulate renewable energy as their preferred source. Vietnam has set a net-zero emission goal of 2050. The DPPA will help renewable energy generators acquire and serve a customer base, but questions remain about the capacity of the energy grid to reach customers with this service across municipalities.
Mexico’s renewables push is centered on its fast-growing automobile sector. As near-shoring transforms Mexico into a manufacturing powerhouse, many customers are starting to ask questions about the emissions profile of Mexican manufacturing. Mexico is one of the top five countries in the world in terms of solar potential, but much more investment and infrastructure will be necessary to actualize that potential.
Today is Thursday, August 22, 2024, and here is today’s essential intelligence.
LanzaTech, LanzaJet Partner With Australia's Wagner To Convert Waste To SAF
LanzaTech Global and LanzaJet have announced a partnership with Wagner Sustainable Fuels to support the latter's Brisbane-based sustainable aviation fuel refinery with technology to transform waste-based feedstocks into SAF, the companies said in a statement on Aug. 19. This technology, called CirculAir, is designed to convert waste-based carbon from local waste streams, such as industrial emissions and municipal solid waste, and renewable power into SAF.
—Read the article from S&P Global Commodity Insights
Flash PMI Insights Awaited Amid Mixed Views On UK Economic Outlook
Upcoming flash PMI survey data for August will provide important insights into economy growth and inflation trends in the UK, coming at a time of mixed views on the future policy path at the Bank of England. Official data have confirmed recent upbeat survey evidence, indicating that the UK economy is faring well in 2024. Gross domestic product rose 0.6% in the second quarter, according to initial estimates from the Office for National Statistics, building on a solid 0.7% gain in the first three months of the year.
—Read the article from S&P Global Market Intelligence
Japan Banks Primed For Market Turbulence
Japan's banks are able to withstand recent market volatility. The Nikkei average stock price dropped by more than 12% on Aug. 5 amid concern over the U.S. economy and monetary policy changes in Japan. Yen interest rates are changing after the Bank of Japan (BOJ) increased its policy rate for the first time in 17 years. But the commercial banking groups rated by S&P Global Ratings are resilient to fluctuations in stock prices, interest rates, and exchange rates.
—Read the article from S&P Global Ratings
Iraq Agrees To Supply More Heavy Fuel Oil To Lebanon In Aug
Iraq agreed to supply more heavy fuel oil to Lebanon this month, with the first shipment set to be loaded in Iraq on Aug. 26, state-run Iraqi News Agency reported, citing Lebanon's caretaker Energy Minister Walid Fayad. The shipment will be increased to 125,000 metric tons from 100,000 metric tons previously, according to the Aug. 19 INA report. "We are also implementing an agreement for 'crude oil' exchange with Iraq to increase quantities, and Iraq has confirmed its commitment," Fayad said, according to INA.
—Read the article from S&P Global Commodity Insights
Interview: Brazil's Aluminum Can Industry Targets 5% Growth For 2024, Says Abralatas
The first half of the year has been a cause for celebration among aluminum can manufacturers in Brazil, as the extended hot season and favorable macroeconomic conditions have driven beverage consumption and can sales. This trend is anticipated to lead sales to a 5% growth by year-end, according to Cátilo Cândido, president of the Brazilian Association of Aluminum Can Manufacturers (Abralatas).
—Read the article from S&P Global Commodity Insights
The Shift In Automotive Loyalty: Tracking Hybrid And BEV Buyers' Next Moves
Sales of hybrid and battery electric vehicles (BEVs) have grown exponentially over the last few years; however, a larger question faces the industry: where do these buyers go next when returning to market? Through S&P Global Mobility's automotive loyalty data, which analyzes new vehicle registrations and return-to-market activity, we can track exactly how these buyers behave when choosing their next vehicle.
—Read the article from S&P Global Mobility
Daring a New Era of Uncertainty and Risks — Johannesburg (Sept. 3, 2024)
Africa's strong economic performance and remarkable resilience present significant growth opportunities. However, the continent's structural transformation has been slow and uneven, highlighting the need for bold reforms to meet Africa's development financing needs. This in-person event will explore the theme "Daring a New Era of Uncertainty and Risks" through key topics.
—Register for the in-person event from S&P Global Market Intelligence