Can the market fix climate change?

Today’s top stories

• US President Joe Biden is facing renewed pressure to end his re-election bid, after a Democratic lawmaker called on him to drop out of the presidential race, joined by state governors and some business leaders.

• French leftist and centrist parties have pulled candidates from more than two-thirds of the three-way races in Sunday’s run-off general election to form united fronts to keep the far-right RN out of power.

• The EU is drawing up plans to impose customs duties on cheap goods bought from Chinese online retailers including Temu and Shein in an effort to combat substandard items. Brussels will suggest scrapping the current €150 threshold under which items can be bought duty free.

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Good evening.

“At the heart of attempts to halt damaging climate change is a pair of ideas: decarbonise electricity and electrify the economy. So, how is it going? Badly, is the answer.”

That’s the nub of the latest column from FT chief economics commentator Martin Wolf, who argues that market forces are not enough to slow down global warming as evidence grows that people do not want to pay the price of the green transition.

Some business trends are actually making the situation worse. Google revealed yesterday that its greenhouse gas emissions had jumped almost 50 per cent in the past five years because of the power demands from the data centres that underpin AI systems, casting doubt over its commitment to get to net zero by 2030.

The shift to greener energy sources is also experiencing teething troubles.  

Shell yesterday announced a pause in construction at one of its biggest transition projects, a huge plant in Rotterdam that was intended to convert waste into jet fuel and biodiesel. Europe’s biofuels markets have been hit by oversupply, as companies rush to produce the building blocks of the energy transition, even though demand has yet to grow significantly. 

Alternative energy sources such as offshore wind farms, meanwhile, are facing delays because of the lack of new infrastructure at ports, while Northvolt, Europe’s leading battery maker, is considering reducing its expansion plans. The Swedish start-up has warned it will face large losses while it invests heavily and fails to produce at scale.

Geopolitical tensions are an extra complication. Should we celebrate the fact that China, the world’s second-largest economy and manufacturing powerhouse is ramping up output of clean technology? Or agree with the EU that the unfair use of subsidies, whether in wind, solar or electric vehicles, should be met with crackdowns?

In the meantime, climate change is having a profound impact on the global economy. Today’s Big Read highlights how it is fuelling food price inflation, as shifting weather patterns reduce crop yields and squeeze supplies, from coffee in Vietnam to oranges in Brazil and cocoa in west Africa. In Europe, droughts and heatwaves have severely dented output of the “liquid gold” of olive oil, creating a global shortfall and a surge in prices.

The impact on agriculture is also reigniting the debate over whether central banks should respond to food price shocks as they do generalised price increases — by raising interest rates. 

The insurance industry also faces escalating losses as global warming pushes disasters such as the current Hurricane Beryl to record-breaking new levels of destruction.

For Martin Wolf, optimism is hard to find. “The market will not fix this global market failure,” he concludes. “But today’s political fragmentation and domestic populism make it almost inconceivable that the needed courage will be forthcoming either.”

Need to know: UK and Europe economy

Britain goes to the polls tomorrow. Here’s our overview of the parties, players and policies and a guide to election night. And here’s our profile of Sir Keir Starmer, the man polls say will be prime minister by the next issue of Disrupted Times, and what might be his priorities for the first 100 days in government.

Got a question for the FT’s election experts? A panel of political journalists including Stephen Bush and George Parker will run through the night’s takeaways at 1pm BST on Friday. You can send your questions and sign up for the webinar here.

UK shop prices fell 0.2 per cent in June, according to industry data, suggesting the next government will benefit from an easing in the cost of living crisis. Eurozone inflation meanwhile slowed to 2.5 per cent, but high services prices remain a concern. Inflation is also finally cooling in Turkey for the first time in eight months (albeit still at 71.6 per cent).

A growing number of German businesses in its Mittelstand backbone are moving into the traditionally taboo area of arms production as Russia’s invasion of Ukraine shifts the aversion to military work stemming from Nazi stigma.

Need to know: Global economy

Federal Reserve chief Jay Powell warned that the US needed to cut its deficit “sooner rather than later” in the latest show of concern over the spending plans of President Joe Biden and his would-be successor Donald Trump. Former Merck boss Kenneth Frazier branded Trump an “existential threat” to the US economy and democracy.

China is demanding acts of loyalty from its young professionals living and working in the US, sometimes putting them at odds with local law and immigration requirements.

Chinese exporters raised concerns of a Christmas freight crisis because of the problems in the Red Sea. New PMI data today showed China’s services sector growing less than expected.

However bad the business environment for western retailers becomes, it’ll never be as bad as this: meet the small retailers trying to keep trading in the bombed-out wastelands of northern Gaza.

Need to know: Business

Germany invoked national security concerns to block MAN Energy’s sale of a gas turbine business to a Chinese company, in the latest western move to protect sensitive technologies from potential misuse.

Global investment banks are scaling back in China after a property market slowdown and geopolitical tensions dented ambitions and halted years of expansion in the country.

Wall Street bankers meanwhile fear that the US election and uncertainty over interest rate cuts could hurt the revival in corporate fundraising.

UK water companies could face challenges after a landmark judgment from the Supreme Court said private landowners and individuals were able to seek redress for sewage released into waterways.

An FT investigation highlights how Gemcorp, an emerging markets investment fund with past ties to Russia, now has a number of former UK politicians and officials on the payroll.

The World of Work

As the tech sector matures, Silicon Valley appears to have ditched talk of “leaning in” and “bringing your whole self to work” in favour of traditional HR philosophies and hierarchies.

The Working It podcast talks to psychologist (and former poker champion) Annie Duke about knowing when to quit.

Some good news

New RNA-based insecticides that can target genes in pests are said by proponents to be much safer for people and the environment than traditional crop protection methods.