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Power squeeze curbs Chinese growth, leaves Europe in a gas bind

China’s power shortages hit growth in the world’s second-biggest economy, threatening more pain for global supply chains, while Europe’s gas squeeze looked set to continue as Russia’s Gazprom showed no sign of hiking exports to the region in October.

Coal, oil and gas prices have all rocketed higher in recent weeks hammering utilities and consumers from Beijing to Brussels, raising inflationary pressures and putting at risk a global recovery from the COVID-19 pandemic.

The red-hot market underscores the scale of the task facing world leaders, who are under pressure to map out plans to wean their economies off fossil fuels in preparation for COP26 summit climate talks that start on Oct. 31.

Europe, which relies on Russia for 35% of its gas supplies, has seen its benchmark gas price rise more than 350% this year. As a result, a slew of European firms that supply gas or power to households and companies have folded.

The Czech Republic’s energy regulator took the exceptional step of asking suppliers to provide reassurances that they could supply energy to homes and companies, after another of the country’s electricity and gas groups halted supply.

A dozen or so suppliers have already gone bust in Britain.

In Asia, power provider Ohm Energy said it had exited the retail electricity market in Singapore, the third company to do so in recent weeks.

Russia says it is ready to provide more gas to Europe. Yet Russian gas pipeline export monopoly Gazprom has shown no sign of racing to book extra capacity.

Auction results on Monday showed Gazprom had booked about a third of the additional gas transit capacity on offer for the Yamal-Europe pipeline via Poland for November and had not booked any volumes via Ukraine.

European politicians accuse Russia of using the squeeze as leverage to secure approval to start up the newly built Nord Stream 2 gas pipeline to Germany, whose permits may still be months away. Gazprom and the Kremlin say contracted commitments are being met and they have not received requests to pump more.

DISRUPTIONS
China, which needs coal to fire up about 60% of its power plants, has been grappling with a shortfall in supplies and surging prices for the most polluting of fossil fuels, leading to disruption in electricity supplies for factories and homes.

The constraints meant the economy grew in the third quarter, its slowest pace since the third quarter of 2020 and down from 7.9% in the second quarter.

A raft of measures to boost coal supplies has yet to feed through. A Reuters calculation, based on official data, showed China’s average daily coal output in September was 11.14 million tonnes. China released figures for last week showing output was 11.2 million tonnes, meaning it had barely budged.

“The Chinese government is losing the battle to control soaring coal prices,” said Alex Whitworth, head of Asia Pacific power and renewables research at Wood Mackenzie.

A global rebound from the depths of the pandemic-induced slump has left all fossil fuel suppliers struggling to keep pace.

Crude prices have shot up more than 60% this year, trading around $85 a barrel on Monday, as members of the OPEC+ oil producing alliance have struggled to pump as much as their latest production deal allows.

European companies are among those feeling the pinch from the energy price surge, adding to other challenges that include a shortage of memory chips and a lack of shipping containers.

“Supply chain volatility has intensified globally,” said Frans van Houten, the chief executive of Dutch health technology firm Philips, which trimmed its 2021 outlook. “We expect this headwind to continue in the fourth quarter.”

Germany would have missed 2020 climate goal without Covid-19 emissions drop

BRUSSELS: Germany could meet its climate target for 2020 but would have missed the goal if the economic havoc wrought by the coronavirus pandemic had not caused a large drop in greenhouse gas emissions, the country‘s environment ministry said.

Germany, Europe’s largest-emitting country, had hoped to cut emissions to 40% below 1990 levels this year and introduced new climate policies in 2019.

However, policy efforts would have delivered only a 37.5% emissions cut, the ministry said on Wednesday.

“We have learned the right lessons from past failures,” German environment minister Svenja Schulze said. “Every year we will check whether we are on the path we have agreed, and take further action if necessary.”

The full impact of the pandemic on Germany’s emissions is still uncertain, but actual emissions are likely to be “significantly lower” than expected, meaning the 2020 target could be achieved, the ministry said.

Europe’s emissions are expected to plummet to levels not seen since the 1950s this year, as lockdowns temporarily shuttered polluting industries and slashed the use of energy and transportation.

The European Union wants countries to commit to bigger CO2 cuts over the next decade – a move which has faced opposition from some eastern European countries concerned about the economic cost.

The European Commission will next month propose a new 2030 climate target for a 50% or 55% emissions reduction against 1990 levels, compared with an existing goal for a 40% cut.

Germany will steer talks between member states to attempt to strike a deal on the EU goal this year.

The goal will also need the approval of the European Parliament, where some lawmakers are pushing for a tougher 65% cut, which they say is the minimum effort needed to avert the climate crisis.

EU says it will act ‘firmly’ if UK doesn’t honour Brexit deal

The European Union’s chief Brexit negotiator says the bloc is ready to act “firmly and resolutely” if the UK fails to honour its commitments under the porce deal that was supposed to keep trade flowing after Britain left the EU.

Maros Sefcovic’s comments, published Tuesday in the Daily Telegraph newspaper, came a day before he holds talks with his U.K. counterpart on implementing the deal.

The relationship between the two sides has grown tense amid concerns over the so-called Northern Ireland protocol, which was designed to protect the peace process in Northern Ireland while preserving economic links with the Republic of Ireland, an EU member state.

The protocol has sparked anger in Northern Ireland because it creates a customs border between the region and the rest of the UK, but the EU says the provisions are needed to protect the bloc’s single market.

The UK angered Brussels earlier this year when it unilaterally extended a grace period delaying the inspection of many supermarket items shipped to Northern Ireland from England, Scotland and Wales. The Telegraph reported that the UK may extend this action to include chilled meats such as sausages and ground beef.

Sefcovic cautioned against such action, saying negotiators should strive to achieve “mutually agreed compliance paths.”

“If this does not happen, and if the UK takes further unilateral action over the coming weeks, the EU will not be shy in reacting swiftly, firmly and resolutely to ensure that the UK abides by its international law obligations.”

While Sefcovic didn’t specify what those actions might be, the Times of London quoted an unidentified EU official as saying the bloc was ready to impose trade sanctions and retaliatory tariffs.