Freeland tries to calm 'anxious' Canadians after fresh rate hike

Brian Platt, Bloomberg News

Finance Minister Chrystia Freeland tried to reassure Canadians that the economy is still headed for calmer times after the central bank unexpectedly resumed raising interest rates.

“There are a lot of Canadians who are anxious right now and who will be concerned when they see this step taken by the Bank of Canada,” Freeland told reporters outside the Ottawa legislature.

But she said the robust labor market and the “core strength and the resilience of the Canadian economy” mean people still have steady paychecks despite rising mortgage payments and annual inflation still hovering above 4 per cent.

“Having a good job is the key to the wellbeing of every single Canadian and their family. It’s the key to being able to pay your rent or your mortgage,” Freeland said.

After pausing its rate-hiking cycle in January, policymakers led by Governor Tiff Macklem raised the overnight lending rate on Wednesday by 25 basis points to 4.75 per cent — the highest since 2001.

The move was expected by only about one in five analysts in a Bloomberg survey. It was prompted by evidence of an overheating economy, including stronger-than-expected first quarter output growth, an uptick in inflation and a rebound in housing-market activity.

Freeland pointed to the fact the Bank of Canada still sees inflation coming down to 3 per cent this summer. “We are coming to the end of this difficult path out of the Covid economy,” she said. “The destination is stable, low inflation and steady, strong growth. And that is the direction that we are heading.”

However, the opposition Conservative Party quickly declared it will be going on the attack against Freeland and Prime Minister Justin Trudeau. “Trudeau must get his spending under control before it’s too late,” Conservative Leader Pierre Poilievre said in a statement, calling the rate hike “a disaster for the many Canadians barely hanging on.”

Poilievre’s finance critic, Jasraj Singh Hallan, also published a letter requesting an emergency debate on the topic in parliament. 

In a surprise move, Bank of Canada hikes key interest rate to 4.75%

Erik Hertzberg and Randy Thanthong-Knight, Bloomberg News

The Bank of Canada defied expectations by restarting its interest-rate tightening campaign, saying the economy is running too hot.

Policymakers led by Governor Tiff Macklem raised the overnight lending rate to 4.75 per cent on Wednesday, the highest since 2001. The move was expected by only about one in five economists in a Bloomberg survey, and markets had put the odds at about a coin flip.

“Overall, excess demand in the economy looks to be more persistent than anticipated,” the bank said in its rate statement, which wasn’t accompanied by a new set of forecasts. Bonds plunged, sending the Canada two-year yield to 4.571 per cent at 10:23 a.m. — the highest since August 2007. The loonie jumped to $1.3347 per US dollar.

Since declaring a conditional pause in January, policymakers have warned that further rate increases may be necessary. And while some Canadians are feeling the pinch of steeper borrowing costs, the bank’s move from the sidelines suggests officials are worried that economic momentum won’t slow enough without another hike.

“Monetary policy was not sufficiently restrictive to bring supply and demand into balance and return inflation sustainably to the 2 per cent target,” the bank said, citing an “accumulation of evidence” that includes stronger-than-expected first quarter output growth, an uptick in inflation and a rebound in housing-market activity.

The move follows a surprise 25 basis-point boost Tuesday by the Reserve Bank of Australia. The Bank of Canada was the first and only Group of Seven central bank to pause its hiking cycle. Now it’s changed its mind, conceding that higher borrowing costs are still required to bring inflation to heel in an economy that’s proving more resilient than anticipated.

Macklem and his officials pointed to elevated three-month moving measures of underlying price pressures as a key reason for their move. “Concerns have increased that CPI inflation could get stuck materially above the 2 per cent target,” they said.

The statement was light on forward-looking commentary, suggesting policymakers aren’t yet sure whether the move will end up as a fine tuning or the start of another series of increases. Officials said they plan to examine how excess demand, inflation expectations, wage growth and corporate pricing behavior evolve.

Although specific guidance around being prepared to increase borrowing costs again wasn’t in the statement, it’s “possible that we could see a follow up hike if signs of economic slack opening up aren’t clear in forthcoming data,” Katherine Judge, an economist at Canadian Imperial Bank of Commerce, said in a report to investors. 

During the U.S. regional bank crisis in March, it looked as though Macklem and his officials had hit pause at the right time — they had brought Canada’s economy to a terminal point without a hard landing scenario, and inflation was falling. 

The financial turmoil led many to expect that the Federal Reserve wouldn’t hike much further, reducing concerns about rate divergence and imported inflation, given the U.S. is by far the northern nation’s top trading partner.

Now the data suggest that pause was premature. Canada’s economy has proved to be surprisingly more immune to higher borrowing costs than most economists expected. Many saw massive debt loads and a bloated housing market as big reasons why Macklem could stop raising rates ahead of Fed Chair Jerome Powell and other peers.

The Bank of Canada flagged stronger-than-expected gross domestic product, including “broad-based” consumption gains even after accounting for record population growth. Policymakers also called Canada’s labour market “tight,” noting that while immigration and higher participation rates are expanding the supply of workers, new employees are being hired immediately, which reflects “continued strong demand for labour.”

On Thursday, Deputy Governor Paul Beaudry will provide a more thorough explanation of the bank’s decision in a speech in Victoria, followed by a news conference.

Rental market will suffer most amid Bank of Canada interest rate hike: Experts

Iva Poshnjari, BNN Bloomberg

The Bank of Canada’s decision to hike rates on Wednesday will put additional pressure on Canada’s already tight rental market, experts say.

The BoC’s surprise 25-basis-point hike has pushed the overnight lending rate to 4.75 per cent and will indirectly cause shelter costs, such as the price of rent, to rise as landlords look to pass off higher costs to tenants, housing experts warn.

“We’re going to see the biggest impact of today’s hike in the rental market,” John Pasalis, president of Realosophy Realty, told BNN Bloomberg in an interview on Wednesday.

Pasalis explained that people looking to rent a condo right now, or those who have been displaced by the sale of an investment property, are the most vulnerable in this environment as the space becomes more crowded. 

“Today’s rate hike is going have a psychological effect that will keep homebuyers on the sidelines as they wait for rates to come down – meaning more people will now compete for a rental unit,” he added.

While the BoC isn’t responsible for sky-high rents, these interest rate hikes will make any type of housing affordability more challenging, Pasalis said.  

In addition to putting more cost pressure on the rental market, the rate hikes also hinder housing supply, one realtor explained. 

“These rising rates are acting as a blockage for more properties to come online as people hold off on selling or buying homes in an uncertain interest rate environment,” Phil Soper, president and chief executive officer of Royal LePage, told BNN Bloomberg in an interview on Wednesday.

Soper explained that while the hike was necessary to keep home prices from accelerating further, there is a negative short-term impact people must deal with amid the transition.

“What policymakers can do right now to ease rental pressures is make existing properties easier to divide and create sub-suites,” he added.

Having these kinds of options is going to be critical for both landlords and renters, broker Frank Leo of Frank Leo & Associates, told BNN Bloomberg.  

“The speed at which interest rates have climbed has not allowed for landlords or renters to prepare for the heightened cost of housing,” Leo said.

In this scenario, he advises people to prepare as much as possible for what might lie ahead.

“A lot of people are scared right now because they know they’re going to have to renew their mortgage at significantly higher rates, or, sell their investment properties if they can’t find a way to keep up with the costs,” he added.  

“It takes time to get things in order and today’s interest rate decision tells us we still have an inflation problem and our troubles aren’t over yet,” Leo said.

Former Bank of Canada economist 

says communications likely played 

into rate hike decision

Holly McKenzie-Sutter, BNN Bloomberg

A former Bank of Canada economist said the central bank’s surprise decision to hike interest rates may have been a communications strategy as well as a response to strong recent economic data.

Canada’s central bank announced Wednesday that it was raising its key interest rate by a quarter of a percentage point to 4.75 per cent in its continued bid to bring down inflation, breaking from a pause on rates hikes it had held since January’s hike to 4.5 per cent.

The June rate increase went against most economists’ expectations, including those of Charles St-Arnaud, now chief economist at Alberta Central and a former economist at the Bank of Canada.

St-Arnaud told BNNBloomberg.ca that he thought the central bank would wait for more data before raising rates again, but he wasn’t necessarily surprised by Wednesday’s hike, given the recent data suggesting economic resilience to higher interest rates – particularly an uptick in inflation in Statistics Canada’s latest inflation reading.

The Bank of Canada’s reputation with Canadians may have also weighed on policymakers’ minds before deciding to hike, St-Arnaud said, and the June rate hike may have offered a way to “restore credibility” and signal its aggressiveness on inflation.

“It's as part economics, but part also expectations and communication,” St-Arnaud said in a telephone interview on Wednesday. “I think what pushed them is that (they’ve) had some reputational issues to solve.”

He noted that the Bank of Canada has taken criticism for leaving interest rates low while inflation was rising in 2021 and early 2022. Because of that, the central bank now likely wants to tell the public that it is taking the fight against inflation seriously.

“It’s probably a communication and reputational reason to do it, basically to signal to everyone and to also influence expectations that, ‘We will be aggressive. Inflation is going back to two per cent, so don't expect it to be sticky.’”

ECONOMIC DATA, INFLATION OUTLOOK

The Bank of Canada cited data showing a recent rise in inflation, stronger-than-expected economic growth, rebounds in consumer spending and housing and resilience in the labour market in a Wednesday statement explaining its policy decision.

“Overall, excess demand in the economy looks to be more persistent than anticipated,” the Bank of Canada’s statement read, noting that this has complicated its fight to get inflation down to two per cent.

“With three-month measures of core inflation running in the 3.5 to four per cent range for several months and excess demand persisting, concerns have increased that CPI inflation could get stuck materially above the two per cent target.”

St-Arnaud said the central bank’s next moves will depend on what future data show, but he noted that the Bank of Canada appears laser-focused on inflation, and more hikes may be in the cards without signs of that figure easing.

Further rate increases can’t be ruled out for the year ahead, he said, and “any talk of rate cuts in the near future should be completely erased.”

“They’re really telling us that it's inflation, front and foremost .. It’s really, ‘Our focus is only inflation. Any type of upside, surprise, you can expect that we will most likely react to it,’” he said.

READ: Full text of Bank of Canada's latest interest rate decision

The Canadian Press

The Bank of Canada raised its key interest rate target by a quarter of a percentage point to 4.75 per cent on Wednesday. Here is the text of the central bank's rate announcement:

The Bank of Canada today increased its target for the overnight rate to 4.75 per cent, with the Bank Rate at five per cent and the deposit rate at 4.75 per cent. The Bank is also continuing its policy of quantitative tightening.

Globally, consumer price inflation is coming down, largely reflecting lower energy prices compared to a year ago, but underlying inflation remains stubbornly high. While economic growth around the world is softening in the face of higher interest rates, major central banks are signalling that interest rates may have to rise further to restore price stability. In the United States, the economy is slowing, although consumer spending remains surprisingly resilient and the labour market is still tight. Economic growth has essentially stalled in Europe but upward pressure on core prices is persisting. Growth in China is expected to slow after surging in the first quarter. Financial conditions have tightened back to those seen before the bank failures in the United States and Switzerland.

Canada's economy was stronger than expected in the first quarter of 2023, with GDP growth of 3.1 per cent. Consumption growth was surprisingly strong and broad-based, even after accounting for the boost from population gains. Demand for services continued to rebound. In addition, spending on interest-sensitive goods increased and, more recently, housing market activity has picked up. The labour market remains tight: higher immigration and participation rates are expanding the supply of workers but new workers have been quickly hired, reflecting continued strong demand for labour. Overall, excess demand in the economy looks to be more persistent than anticipated.

CPI inflation ticked up in April to 4.4 per cent, the first increase in 10 months, with prices for a broad range of goods and services coming in higher than expected. Goods price inflation increased, despite lower energy costs. Services price inflation remained elevated, reflecting strong demand and a tight labour market. The Bank continues to expect CPI inflation to ease to around three per cent in the summer, as lower energy prices feed through and last year’s large price gains fall out of the yearly data. However, with three-month measures of core inflation running in the 3.5-4 per cent range for several months and excess demand persisting, concerns have increased that CPI inflation could get stuck materially above the two per cent target.

Based on the accumulation of evidence, Governing Council decided to increase the policy interest rate, reflecting our view that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the two per cent target. Quantitative tightening is complementing the restrictive stance of monetary policy and normalizing the Bank's balance sheet. Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation. In particular, we will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving the inflation target. The Bank remains resolute in its commitment to restoring price stability for Canadians.

This report by The Canadian Press was first published June 7, 2023.

FEARMONGERING

Governments should be bracing for a recession with interest rates elevated: John Manley

BUSINESS LOBBYIST FOR BILLIONAIRES

Holly McKenzie-Sutter, BNN Bloomberg

As the Bank of Canada resumed its cycle of interest rate hikes, a former federal finance minister said governments should be looking for policy options to help guide Canada to a “soft landing” with the possibility of a downturn ahead.

After holding rates steady for five months, the central bank went against economists’ expectations and raised interest rates a quarter of a percentage point to 4.75 per cent on Wednesday in response to strong economic data, including a recent uptick in inflation.

John Manley, a former federal finance minister and now senior advisor at Bennett Jones, told BNN Bloomberg that as the Bank of Canada’s battle to bring inflation back to two per cent continues, governments should keep in mind that “every time there has been a sharp decrease in inflation engineered by monetary policy, there has been a recession.”

“In the minds of the politicians, they‘ve got to start thinking now, ‘How do we make sure if there’s a recession coming that it’s a relatively soft landing,” Manley said in a television interview on Wednesday.

“The (Bank of Canada) will be concerned with that as well.”

Manley said he anticipates some economic pain such as job losses ahead. If the predicted recession materializes, he said governments will first need to support people who are in the most in need when it comes to essentials like affordability, food and housing – and they should offer supports “in a non-inflationary way,” he added.

“In other words, not just by pumping a lot of money out into the economy,” he said.

After that, he made the case that economic data aside, the Bank of Canada is also fighting against “inflationary psychology” among consumers and businesses as it tries to bring inflation back down to two per cent.

“This is partly a numbers game. It's partly data driven, but it's also a big psychological game,” he said.

“What the Bank of Canada and the other central banks are trying to do is break that inflationary psychology and to convince businesses and consumers that they're going to be living with a slower economy and a higher interest rate environment for the time to come, so that they adjust their expectations,” he said. “We’re seeing today how serious the Bank of Canada is in that respect.”

CAPITALI$M;APOLOGIST REVEALS PUBLIC SECRET

Opinion: The world will not hit its climate targets. Let's prepare for that inconvenient truth

Opinion by Special to Financial Post • 

Emissions in less developed countries continue to grow rapidly.© Kevin Frayer/Getty Images

By George Fallis

More than 30 years after the countries of the world first came together to fight climate change it is time for a clear-eyed look at where we stand and what lies ahead.

Fully 154 countries signed 1992’s UN Framework Convention on Climate Change and then committed to reduce greenhouse gas emissions under the Kyoto Protocol of 1997, followed by the Paris Accord of 2015, which was updated at Glasgow in 2021. At each stage, countries promised deeper cuts. The agreements recognized that countries should not all have to make the same cuts, however. There would be climate justice. The developed countries would make large cuts in their emissions; the less developed could continue to increase their emissions, allowing them to raise living standards.

Over the past 30 years, developed countries have closed coal-fired electricity plants, levied carbon taxes , established cap-and-trade systems, heavily subsidized alternative sources of electricity and taken many other steps to cut emissions. They have also funded impressive amounts of research into solar and wind as alternative sources of energy . In some regions, wind and solar have become the least expensive source of electricity. The world’s big car companies are making billion-dollar investments to produce batteries and manufacture electric cars , which are now commonplace on the roads.

Why emissions are still rising

After all this political effort and technological innovation, how has the world done in cutting emissions? The inconvenient truth is: not very well at all. Global emissions have continued to rise.

Some developed countries have achieved modest emissions reductions, it’s true, but emissions from the less developed countries continue to grow rapidly. According to the best estimates, Earth’s temperature is now 1.1 degrees C above its average in the late 19th century and looks to be rising.

Today, the goal is to limit global warming to 1.5 degrees C. Climate models indicate this will require global emissions — by both developed and less developed countries — to be 50 per cent less than 2020 levels by 2030 and to be net zero by 2050. How likely is it that world emissions will fall by these amounts? The inconvenient truth is that the likelihood is vanishingly small.

Even the developed countries are unlikely to meet their targets. All the political forces that have resisted cuts over the past 30 years will continue to do so. And at budget time, when governments must decide how much money to allocate toward fighting climate change, even sympathetic groups will chime in: What about health care, what about homelessness, what about education, or tax reductions? Many citizens see these as higher priorities than reducing emissions.

As we think about future emissions, the elephant in the room is China . In 1992, as UN action got underway, China was a less developed country and so was not asked to reduce emissions. But it has grown rapidly and is now the world’s second largest economy and a genuine superpower economically, politically and militarily. It is also now — by far — the world’s largest producer of greenhouse gases, emitting more than the developed countries combined. Yet it is still building coal-fired power plants, lots of them, and it has made quite clear that climate policy cannot be at the expense of its economic growth: President Xi Jinping has declared that the pursuit of “common prosperity” should guide future Chinese development.

Heart of the problem

The heart of the problem — in every country — is that people (i.e., you and me), are unwilling to cut emissions if doing so means sacrificing our standard of living. Economic growth is paramount — in both the United States and China. Some climate activists in the West say the problem is capitalism; but the situation is the same under “socialism with Chinese characteristics.”

Technological change cannot save us. The experience of western European countries shows it can help reduce emissions modestly as we continue to grow. But technological change cannot cut emissions 50 per cent by 2030 and to net-zero by 2050 if the world economy continues to grow. To meet these targets, world economic growth would have to stop. We would have to produce and consume less. But — almost universally — we do not want to consume less.

A realistic forecast is that global emissions will not be reduced by enough to keep global warming below two degrees C and that damage from extreme weather and rising oceans will increase. On the other hand, even if we do overshoot two degrees C, the world will neither burst into fire nor be submerged under sea water. Except in relatively small areas our planet will still be inhabitable.

But there is a final inconvenient truth: the fight against climate change will not just be about reducing emissions, it will also be about adapting the world’s buildings, infrastructure and agriculture to the changing climate. Both emission cuts and adaptation will continue to cost billions and billions of dollars.

George Fallis is professor emeritus, economics and social science, York University.

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Greenhouse gas emissions at ‘an all-time high’ - and it is causing an unprecedented rate of global warming, say scientists

Peer-Reviewed Publication

UNIVERSITY OF LEEDS

University of Leeds Press Release

Greenhouse gas emissions at ‘an all-time high’ - and it is causing an unprecedented rate of global warming, say scientists   Human-induced warming averaged 1.14°C over the last decade   A record level of greenhouse gases is being emitted each year, equivalent to 54 billion tonnes of carbon dioxide  The remaining carbon budget - how much carbon dioxide can be emitted to have a better than 50% chance of holding global warming to 1.5°C - has halved over three years   Leading scientists have today launched a project to update key climate indicators every year, so people can be kept informed about critical aspects of global warming   Human-caused global warming has continued to increase at an “unprecedented rate” since the last major assessment of the climate system published two years ago, say 50 leading scientists.    One of the researchers said the analysis was a “timely wake-up call” that the pace and scale of climate action has been insufficient, and it comes as climate experts meet in Bonn to prepare the ground for the major COP28 climate conference in the UAE in December, which will include a stocktake of progress towards keeping global warming to 1.5°C by 2050.    Given the speed at which the global climate system is changing, the scientists argue that policymakers, climate negotiators and civil society groups need to have access to up-to-date and robust scientific evidence on which to base decisions.    The authoritative source of scientific information on the state of the climate is the UN’s Intergovernmental Panel on Climate Change (IPCC) but the turnaround time for its major assessments is five or ten years, and that creates an “information gap”, particularly when climate indicators are changing rapidly.   In an initiative being led by the University of Leeds, the scientists have developed an open data, open science platform - the Indicators of Global Climate Change and website (https://igcc.earth/. It will update information on key climate indicators every year.   Critical decade for climate change  The Indicators of Global Climate Change Project is being co-ordinated by Professor Piers Forster, Director of the Priestley Centre for Climate Futures at Leeds. He said: “This is the critical decade for climate change.     “Decisions made now will have an impact on how much temperatures will rise and the degree and severity of impacts we will see as a result.    “Long-term warming rates are currently at a long-term high, caused by highest-ever levels of greenhouse gas emissions. But there is evidence that the rate of increase in greenhouse gas emissions has slowed.  “We need to be nimble footed in the face of climate change. We need to change policy and approaches in the light of the latest evidence about the state of the climate system. Time is no longer on our side. Access to up-to-date information is vitally important.”  Writing in the journal Earth System Science Data, the scientists have revealed how key indicators have changed since the publication of the IPCC’s Sixth Assessment Working Group 1 report in 2021- which produced the key data that fed into the subsequent IPCC Sixth Synthesis Report.  What the updated indicators show   Human-induced warming, largely caused by the burning of fossil fuels, reached an average of 1.14°C for the most recent decade (2013 to 2022) above pre-industrial levels. This is up from 1.07°C between 2010 and 2019.   Human-induced warming is now increasing at a pace of over 0.2°C per decade.   The analysis also found that greenhouse gas emissions were “at an all-time high”, with human activity resulting in the equivalent of 54 (+/-5.3) gigatonnes (or billion metric tonnes) of carbon dioxide being released into the atmosphere on average every year over the last decade (2012-2021).   There has been positive move away from burning coal, yet this has come at a short-term cost in that it has added to global warming by reducing particulate pollution in the air, which has a cooling effect.    ‘Indicators critical to address climate crisis’  Professor Maisa Rojas Corradi, Minister of the Environment in Chile, IPCC author and a scientist involved in this study, said: “An annual update of key indicators of global change is critical in helping the international community and countries to keep the urgency of addressing the climate crisis at the top of the agenda and for evidence-based decision-making.  “In line with the “ratchet-mechanism” of increasing ambition envisioned by the Paris Agreement we need scientific information about emissions, concentration, and temperature as often as possible to keep international climate negotiations up to date and to be able to adjust and if necessary correct national policies.   “In the case of Chile, we have a climate change law that aims at aligning government-wide policies with climate action.”  Remaining carbon budget   One of the major findings of the analysis is the rate of decline in what is known as the remaining carbon budget, an estimate of how much carbon that can be released into the atmosphere to give a 50% chance of keeping global temperature rise within 1.5°C.    In 2020, the IPCC calculated the remaining carbon budget was around 500 gigatonnes of carbon dioxide. By the start of 2023, the figure was roughly half that at around 250 gigatonnes of carbon dioxide.    The reduction in the estimated remaining carbon budget is due to a combination of continued emissions since 2020 and updated estimates of human-induced warming.    Professor Forster said: “Even though we are not yet at 1.5°C warming, the carbon budget will likely be exhausted in only a few years as we have a triple whammy of heating from very high CO2 emissions, heating from increases in other GHG emissions and heating from reductions in pollution.   “If we don’t want to see the 1.5°C goal disappearing in our rearview mirror, the world must work much harder and urgently at bringing emissions down.  “Our aim is for this project to help the key players urgently make that important work happen with up-to-date and timely data at their fingertips.”    Dr Valérie Masson-Delmotte, from the Université Paris Saclay who co-chaired Working Group 1 of the IPCC’s Sixth Assessment report and was involved in the climate indicators project, said: “This robust update shows intensifying heating of our climate driven by human activities. It is a timely wake up call for the 2023 global stocktake of the Paris Agreement - the pace and scale of climate action is not sufficient to limit the escalation of climate-related risks.”  As recent IPCC reports have conclusively shown, with every further increment of global warming, the frequency and intensity of climate extremes, including hot extremes, heavy rainfall and agricultural droughts, increases.   The Indicators of Global Climate Change (https://igcc.earth/) will have annually updated information on greenhouse gas emissions, human-induced global warming and the remaining carbon budget.    The website extends a successful climate dashboard called the Climate Change Tracker which was created by software developers who took ideas from the finance industry on how to present complex information to the public.    What the analysis revealed  Climate Indicator   Sixth Assessment Report (AR6)   Latest value   Greenhouse gas emissions (decadal average)   53 GtCO2e (2010-2019)   54 Gt CO2e (2012-2021)   Human-induced warming since preindustrial times   1.07°C   1.14°C   Remaining carbon budget (1.5C, 50% chance)   500 GtCO2   About 250 GtCO2 and very uncertain   Headline results from the paper Indicators of Global Climate Change 2022: Annual update of large-scale indicators of the state of the climate system and the human influence.  “AR6” refers to approximately 2019 and “Now” refers to 2022.  The AR6 period decadal average greenhouse gas emissions are our re-evaluated assessment for 2010-2019.  END

---

JOURNAL

Earth System Science Data

DOI

10.5194/essd-15-2295-2023 

METHOD OF RESEARCH

Data/statistical analysis

SUBJECT OF RESEARCH

Not applicable

ARTICLE TITLE

Indicators of Global Climate Change 2022: Annual update of large-scale indicators of the state of the climate system and the human influence

ARTICLE PUBLICATION DATE

8-Jun-2023

 

Study: Arctic Sea Summers Could be Ice-Free by Early 2030s

(NASA)

PUBLISHED JUN 7, 2023 2:05 PM BY THE MARITIME EXECUTIVE

 

With the ongoing debate on the pace of Arctic Sea melting, a new study released this week is shedding some new light that we could be staring at ice-free summers in the Arctic, earlier than estimated. According to the recent sixth assessment report of the IPCC (Intergovernmental Panel on Climate Change), the Arctic was projected to be practically ice-free starting September of 2050, under intermediate and high-greenhouse gas emissions scenarios. Based on observed trends for the past 41 years, the strongest melting happen during September- October.

However, the new study, published in the Nature Communications Journal, claims that the IPCC models could have underestimated the rate of Arctic sea ice decline. Through re-evaluating the models’ datasets, the study projects ice-free Septembers could begin by 2030s to 2040, adjusting IPCC’s estimate by over a decade. Further, this revised Arctic Sea ice area (SIA) decline would proceed even in a low-emissions scenario.

“We are basically saying it has become too late to save the Arctic summer sea ice. There’s nothing really we can do about this complete loss anymore, because we have been waiting for too long,” commented Dirk Notz, an Oceanographer at the University of Hamburg and one of the study’s five authors.

The study emphasizes the profound impacts of greenhouse gas emissions on the Arctic and demonstrates the need to plan and adapt to a seasonally ice-free Arctic in the near future.

For the last four decades, the warming of the Arctic has been reported to be much faster than the rest of the world, a phenomenon known as Arctic amplification. Unfortunately, the impact of Arctic sea ice loss affects human society and ecosystems both within and outside the Arctic.

Loss of ice in this critical region will open the Arctic Ocean, leading it to absorb - rather than reflect - heat, causing global heating to escalate. This would upend the planet’s climate system, amplifying weather events such as El Nino and La Nina, associated with drought and flood emergencies.

A recent study by Australia’s Commonwealth Scientific and Industrial Research Organization (CSIRO), found that loss of permafrost ice, especially in the Antarctic, could slow some of the world’s most significant ocean currents. Typically, deep ocean circulation helps in nutrient cycling and replenishing oxygen in global oceans.

Meanwhile, Arctic Sea ice loss will open this pristine region to activities such as shipping. Russia is currently preparing to begin year-round voyages in the Arctic, along the Northern Sea Route (NSR). While the idea might look attractive from a commercial perspective, climate campaigners have warned it will exacerbate climate impacts. Shipping is still burning fossil fuels and an increase of vessels operating in the Arctic would introduce additional emissions in the region the scientists warn.

 

Op-Ed: Bio-LNG En Route to Deliver Decarbonization

(Image courtesy SEA-LNG)

PUBLISHED JUN 7, 2023 5:06 PM BY PETER KELLER

 

The zero-emissions profile, availability, and cost of bio-LNG as a marine fuel have been widely discussed in the maritime industry. This includes in my last article, ‘The Emergence of Bio-LNG’ and The Maritime Executive’s coverage of the latest independent study commissioned by SEA-LNG – ‘The Role of Bio-LNG in the Decarbonization of Shipping’.

The expanding use of bio-LNG and the regulations surrounding its use continues to evolve as we travel down the LNG pathway to decarbonization. Work is now focused on the finer details such as the realization of regulations, feedstock traceability, and cementing the next steps on the journey. These practical discussions highlight the growing maturity of the bio-LNG value chain and its place in the LNG pathway that SEA-LNG has been highlighting for years.

Reaching the Regulatory Mile Marker

The journey to decarbonization is an incremental one, as recognized in the recent agreement in Brussels on FuelEU Maritime. This European legislation sets out probably the world’s most ambitious path to zero-emission shipping. 

FuelEU Maritime has outlined greenhouse gas (GHG) intensity targets for all energy used onboard ships larger than 5,000 gross tonnes for intra-EU voyages, and 50% of the energy used on ships stopping in the EU and sailing to or from ports outside the EU. The trajectory specified starts with a 2% reduction in intensity by 2025 over a 2020 baseline, 6% by 2030, 14.5% by 2035, 31% by 2040, 62% by 2045, and 80% by 2050. 

The use of LNG as a marine fuel enables vessels to be compliant with the well-to-wake GHG intensity targets proposed under the legislation until 2039, depending on engine technology. Following the LNG pathway, the use of a 20% drop-in blend of bio-LNG can extend compliance for a further 5 years. Thereafter, compliance can be achieved through increasing use of blends containing bio-LNG and its electro-fuel cousin, renewable synthetic (e-) LNG produced from renewable hydrogen as and when it becomes available together with other anticipated green fuels.

This compliance with FuelEU Maritime and strong performance within its framework highlights that the LNG pathway to decarbonization is not only a viable one but also a strong and practical route for shipowners and operators to continue to consider. The commercial weight behind LNG is proof that shipowners recognize this fact. Shipping stakeholders are investing in LNG because it provides a low risk, incremental pathway for decarbonization, starting now, not years or even a decade in the future. 

Putting the right Gas in the Tank

For bio-LNG to be a zero-emission fuel, it must be produced from sustainable biomass feedstocks, i.e., those that do not compete with food, fiber, or fodder production. This generally means it is derived from waste streams, residuals from agricultural or forestry residues, as well as dedicated non-food energy crops grown on marginal land unsuitable for food production. This is not a challenge to bio-LNG supply as these feedstocks are plentiful and widely distributed.

Currently, the main way to produce bio-LNG (liquified biomethane) is through a process called anaerobic digestion. Here one puts waste biomass, mainly agricultural slurries, into a digester where it produces biogas. This biogas is then cleaned to remove impurities resulting in streams of pure biomethane and other commercially valuable byproducts.

While the traceability of bio-LNG supply chains and resulting certification is an international challenge that will require continued global collaboration, the EU does already have standards in place. Namely the revised Renewable Energy Directive (EU) 2018/2001 (RED II). Certification schemes like the International Sustainability and Carbon Certification EU (ISCC EU) are compliant with this standard and are recognized by the European Commission. These certification schemes ensure that bio-LNG can be traced back to a sustainable source.

This means it is increasingly simple for ship owners and operators, bio-LNG suppliers, and regulators to ensure that they’re putting the right gas, from the right source, in the tank. The recent bunkering of MSC’s new cruise vessel, the MSC Euribia, with bio-LNG supplied by Gasum, sets a new global standard for vessels operating at net zero emissions through the use of bio-LNG. When bio-LNG from sustainable biomass feedstocks is used, the net-zero or net-negative emissions benefits are clear. Further, there is a significant contribution to the circular economy offered by bio-LNG as it turns waste into a viable product.

Comparing the Viable Routes

Just as your satellite navigation systems might compare multiple routes to a destination, the shipping industry must compare its routes to zero emissions. The sat nav’s computer evaluates each route based on a consistent set of metrics and calculations and we must do the same for the emissions, availability, cost, and safety implications of each alternative fuel. We must compare alternative fuel pathways on a like-to-like basis.

It is also important to recognize that there can be multiple viable routes to decarbonization. Just as today, different vessel types may favor certain fuels due to design and operational considerations, that will continue into the future. SEA-LNG has long stated that there are likely to be a basket of alternative fuels and technologies if shipping is to reach its decarbonization destination. Our coalition believes the LNG pathway currently offers the safest, most practical, and realistic, cost-competitive pathway to net zero for maritime. It also is the only pathway with significant infrastructure in place thereby freeing the industry from massive investments into untried technologies.

The shipping industry is making newbuild investment decisions right now that will impact emissions today and for the next 25-30 years, the typical lifetime of a deep-sea vessel. Shipowners and operators need factual and practical like-for-like analysis that can inform their decisions and actions. 

Acting now on shipping’s GHG emissions is a key point. Waiting is not an option. GHG emissions are cumulative and the longer low-emission, zero-emission, and net zero fuel decisions are delayed, the more carbon continues to accumulate in our atmosphere. Shipowners and operators can start down the LNG pathway to decarbonization now because the technologies are mature, and the fuel and infrastructure are in place. The LNG pathway to decarbonization looks like a four-lane highway, while some alternative routes look more like dirt tracks with the first paving is only in the initial planning phase. 
 

Peter Keller is the chairman of SEA-LNG, a multi-sector industry coalition established to demonstrate LNG's benefits as a viable marine fuel.

 

UK Researchers Developing High-Speed Zero-Emission Passenger Ferry

Research seeks to develop the trimaran foiling high-speed ferries (Solent University)

PUBLISHED JUN 7, 2023 9:16 PM BY THE MARITIME EXECUTIVE

 

A research project is getting underway in the UK to develop a new generation of high-speed zero-emission passenger ferries. According to the engineers, initial testing has demonstrated the potential for a foiling trimaran with low drag and power requirements that could provide a new cost-effective zero-emission solution for passenger ferries.

“Recent advancements in electrical propulsion technology mean zero-emission, low-drag, high-speed medium-capacity passenger vessels are now viable,” said Dr. Laurie Wright, leader of the project and Associate Professor of Marine Sustainability at Solent University. "These types of passenger vessels can open 'blue corridors', encouraging a shift from road to alternative transport on otherwise underutilized coastal waterways.”

The UK Government is funding the development of new clean maritime technology across a two-year period. The £1.86 million ($2.3 million) project to develop the high-speed ferries is being funded by Innovate UK, under the Cleaner Maritime Demonstration Competition. The project seeks to develop and build a scaled demonstrator vessel, proving that the concept is viable and can operate in a range of weather and sea conditions. The effort is being undertaken by an industry-led collaboration between Solent University, Chartwell Marine, and Newcastle Marine Services.

The concept was initially developed by Solent University, which reports promising results in its initial research. The goal of the new effort is to build on the original concept to develop an electric hydro-foiling high-speed trimaran. The group is aiming to have a vessel capable of carrying up to 40 passengers on short- to medium-range coastal routes.

“A traditional, diesel-powered, 40-passenger catamaran ferry operating at 25 knots typically requires well over 1000kw of power. The trimaran foiling ferry concept has the potential to reach 28 knots using just 250kW of power - equivalent to the power used by two modern electric family cars (2×125Kw motors),” explains Giles Barkley, leader of Solent University’s yacht engineering-based degrees. “This means it is possible to power the craft using zero-emission electric motors, with a significant reduction in associated fuel and operational costs compared to a traditional diesel craft.”

According to the project organizers, following the successful deployment of the demonstration vessel, a full-size vessel could be built for commercial operation offering cost-effective, zero-emission solutions for high-speed passenger ferry operators both in the UK and abroad.

 

Seafarer Labor Shortage Reaches 17-Year High Reports Drewry

The shortage of officers is forecast to continue for at least the next five years (IMO file photo)

PUBLISHED JUN 7, 2023 6:51 PM BY THE MARITIME EXECUTIVE

 

Drewry warns in its latest report that the supply of officers and seafarers is growing increasingly tight for ships and is not expected to improve in the coming years.  The global consultancy warns in its Manning Annual Review and Forecast that the shortfall has reached a record high and is likely to have lasting impacts on the shipping industry.

The new report says that the shortfall for officers widened dramatically in the past year. Drewry calculated that it was at about five percent a year ago and has now nearly doubled to nine percent of the global pool. They report that the shortfall is at “the highest level since Drewry first started analyzing the seafarer market 17 years ago.”

The report cites several factors contributing to the growing shortage of officers and seafarers. They write that the effects of Covid-19 persist saying that while the pandemic is over it had an impact on training. Equally significant is the psychological impact due to the reports of seafarers becoming “stuck on board vessels.” 

The war in Ukraine is having another significant impact as both Russia and Ukraine historically supplied large numbers of seafarers and officers to the commercial industry. Drewry believes that some crews have returned home or gone to join the military.  

“The seafarer labor market has become particularly tight,” writes Drewry. They warn that the shortfall has “important implications for recruitment and retention as well as manning costs,” for shipping companies.

As a result, the importance of well-being they conclude has become increasingly important in employee retention. “The trend of looking beyond wage rates is becoming stronger by the day,” they write in the report,” saying that “Things like good communication channels with families at home, comfortable facilities onboard, and a supportive work environment are gaining importance.”

Forecasting the outlook for the market, they predict that vessel manning will be challenging for the next few years, especially with regard to officer availability. The deficit is projected to continue at least until 2028 based on the limited number of new seafarers becoming available in the next five years.

“Employers are seeking alternative sources of supply to fill the gap, and wages have also begun to show more volatility,” said Rhett Harris head of manning research for Drewry. “While sectors like containerships and offshore supply vessels have already seen increasing wage rates due to the strength of the sectors, we expect wage cost to accelerate for other vessel types as well.”

 

White House Encourages Labor Negotiations as Delays Begin for Ships

Reports indicate that ships are beginning to be delayed by the labor shortages at West Coast ports ( file photo)

PUBLISHED JUN 7, 2023 5:59 PM BY THE MARITIME EXECUTIVE

 

The White House on Wednesday confirmed that it is monitoring the situation at the West Coast ports as sporadic reports of vessel delays are beginning to appear attributed to labor shortages. While the ports report they are open, individual terminals continue to be short staff as daily employees are still not to showing up for shifts.

During the daily briefing at the White House on June 7, the spokesperson was asked about President Biden’s position and if they planned to honor the requests coming for retailers and manufacturers for the White House to intervene and guide the process to a resolution. Both the National Retail Federation and the National Association of Manufacturers issued statements on Monday calling for action saying the labor issues were likely to disrupt the supply chain and threatened the U.S. economy.

“Acting Secretary Su (Department of Labor) and others in the administration are regularly engaging with the parties, encouraging them to stay at the negotiating table and finish their work,” White House Press Secretary Karine Jean-Pierre told reporters. “When it comes to the West Coast ports, I can say that the President respects the collective bargaining process as the best way for workers and employers to reach mutually beneficial solutions, which he — we have said before.”

She said the White House is calling both parties to come to the table to resolve the issues. “The path forward is for the port workers and their employers to resolve the negotiations so that workers get the wages, benefits, and quality of life that they so deserve.”

Most terminals are officially open, although handling of containers appears to be moving at a slower than normal pace. The Port of Oakland, California however had a tragic accident on Tuesday afternoon in which reports said a crane operator was killed. A port spokesman confirmed the incident to the local media. The port suspended all operations, sending everyone home Tuesday afternoon while the incident was being investigated.

The Marine Exchange of California which oversees vessel movements into and out of the ports of Los Angeles and Long Beach released a list on Wednesday afternoon showing that six vessels in port were now reporting delays. In addition, four vessels due to arrive were also shown as reporting delays.

“Basically every container vessel is having their schedule pushed back by about a day or two,” they wrote in the update. While some agencies were not reporting reasons for the changes in their schedules, the Marine Exchange said it was hearing that the main cause is due to lack of “lashers.” Their report shows that there are currently 67 vessels registered on the Master Queuing List as heading toward the twin ports for berths.

One data analytics firm, Gatehouse Satcom, is reporting that it believes the number of berthing vessels outside the LA ports had already tripled. The Marine Exchange is reminding shippers that if a ship is delayed more than three days, unless already inside the safety and air quality area, it should remain outside until it is within three days of its scheduled berthing date/time.

CNBC is also reporting as of late today that the slowdown by the longshore workers has started to create congestion in the ports that is spreading to the freight railroads. Union Pacific briefly paused on Tuesday accepting empties and exports bound for the ports writes CNBC, although the railroad resumed on Wednesday while reporting it is monitoring the situation carefully. The concern is that backlogs will also begin to build inland.

For its part, the ILWU Tweeted messages of solidarity that it is receiving from sister unions. Unconfirmed media reports are saying that the contract talks are ongoing with the Pacific Maritime Association and the ILWU continuing their blackout on comments after their public statements in the past few days.

 

Analysis of Vessel Inspections Shows Safety Gaps in Offshore Sector

IMCA highlights the gaps in inspecting and safety identified in its analysts (file photo)

PUBLISHED JUN 7, 2023 4:45 PM BY THE MARITIME EXECUTIVE

 

Concerns are being raised over the accuracy and thoroughness of inspections especially as it relates to the safety elements for vessels operating in the offshore sector. The International Marine Contractors Association (IMCA) released its annual analysis of the safety inspections performed on vessels and uploaded it into its database finding ongoing concerns around technical inspections and especially safety gaps identified in the reports.

The IMCA is a trade association representing the vast majority of contractors and the associated supply chain in the offshore marine construction industry worldwide. Among the services they provide the marine and offshore industry with standardized formats for vessel inspection. Offering a safety management system, the association says improves the quality and consistency of inspections while reducing their frequency on individual vessels through the adoption of a commonly recognized process. However, their recent review of the more than 1,500 reports on vessel inspections undertaken and uploaded to their database between April 2022 and April 2023, showed common themes that highlighted potential safety gaps that need to be addressed.

Fully 10 percent of the larger vessels covered with the association’s eCMID inspections had not completed technical inspections by their operators. They highlight that normally these inspections are carried out by a fleet superintendent and identify potential issues that need to be addressed. 

Among some of the specific gaps in safety found by reviewing the surveys is that nine percent of vessels inspected did not have enclosed space entry adequately controlled. The association highlights this noting that confirmed spaces and their dangers remain a significant issue for the maritime industry. They report between May and August 2022, 11 seafarers lost their lives due to not following enclosed space entry procedures.

Some of the other issues that recurred in the review of the surveys were that seven percent of vessels had defects reported with their lifesaving appliances. They also report that nine percent of vessels had issues with bridge navigation equipment while an additional nine percent had obvious leaks in their machinery spaces and eight percent had issues with mooring and/or towing equipment. Also, 15 percent of vessels did not have a lifting equipment management system in place while 13 percent of vessels did not have formal cyber security incident response, disaster recovery, and business continuity plans in place. 

A range of similar safety issues were also found in the review of the reports on smaller vessels. Many of the issues highlight failures to inspect and test systems following regulations. 

“The high number of ISM non-conformances revealed in this analysis demonstrates very clearly why the eCMID and eMISW are credible and justifiable vessel inspection tools which allow us to identify, monitor, and drive down unsafe practices for vessel owners and operators which have the potential for accidents and safety incidents,” said Mark Ford, Marine & Quality Manager at IMCA. “This analysis will enable IMCA and its membership to focus efforts on reducing the number of findings,” he said while also saying their goal is to also reduce inconsistency in reporting and feed into training enhancements and system improvements.

The analysis of the inspections highlights the broad range of safety issues present on vessels that are putting the people working aboard in danger. IMCA’s goals are to enable the development of the world’s marine energy resources while raising the standards for safety and sustainably.