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Nairobi summit assesses climate crisis – Industry roundup: 5 September

First African Climate Summit opens

African and international leaders are attending the three-day African Climate Summit, which opened on Monday in Nairobi, Kenya, to debate Africa’s unified position on the climate crisis ahead of COP28, the global climate talks, in December and developing the Declaration for green growth, a blueprint for Africa’s green energy transition.

Kenyan President William Ruto’s government and the African Union launched the ministerial session. “For a very long time we have looked at this as a problem. There are immense opportunities as well,” Ruto said of the climate crisis, speaking of multibillion-dollar economic possibilities, new financial structures, Africa’s huge mineral wealth and the ideal of shared prosperity. “We are not here to catalogue grievances,” he added.

There is nonetheless frustration on the continent about being asked to develop in cleaner ways than the world’s richest countries, which have long produced most of the emissions that endanger climate and to do so while much of the support that has been pledged has yet to appear.

“This is our time,” Mithika Mwenda of the Pan African Climate Justice Alliance told delegates, claiming that the annual flow of climate assistance to the continent is a tenth or less of what is needed and a “fraction” of the budget of some polluting companies.

“We need to immediately see the delivery of the US$100billion” of climate finance pledged annually by rich countries to developing ones, said Simon Stiell, executive secretary of the UN Framework Convention on Climate Change. More than US$83 billion in climate financing was given to poorer countries in 2020, a 4% increase from the previous year but still short of the goal set in 2009.

Kenya alone needs US$62 billion to implement its plan to reduce national emissions that contribute to global warming, the president said.

Outside attendees to the summit include the US government’s climate envoy, John Kerry, and United Nations Secretary-General Antonio Guterres, who has said he will address finance as one of “the burning injustices of the climate crisis.” Kerry said that “of 20 countries most affected by the climate crisis, 17 are here in Africa.”

The United Nations has estimated that loss and damage in Africa due to climate change will be between U$290 billion and USS$440 billion in the period from 2020 to 2030, depending on the degree of warming.

Other challenges for the African continent include simply being able to forecast and monitor the weather in order to avert thousands of deaths and billions of dollars in damages that, like climate change itself, have effects far beyond the continent.

“When the apocalypse happens, it will happen for all of us,” Ruto warned.


IMF warns of increased global trade restrictions and fragmentation

The International Monetary Fund (IMF) has cautioned that global trade restrictions have almost tripled over the past four years.

According to Gita Gopinath, IMF First Deputy Managing Director: “Almost 3,000 restrictions were imposed just last year — nearly three times the number imposed in 2019.”

Gopinath spoke at a conference hosted by the South African Reserve Bank (SARB) and explained that foreign direct investment (FDI) is increasingly motivated by geopolitical considerations rather than geographic proximity. She noted that this points to an “increasingly fragmented world.”

She stated that different nations would experience varied consequences due to this fragmentation.

“Our simulations of the impact of trade fragmentation find that while a few emerging markets (EMs) could benefit, most will lose — including South Africa, with a hit of 5% of GDP,” said Gopinath. She added that other EMs could suffer output losses exceeding 10% of GDP.

Gopinath also warned that the fragmentation of FDI would exacerbate the situation, with developing countries standing to face the most severe repercussions.

Gopinath encouraged countries to bolster their resilience to geo-economic fragmentation by diversifying and implementing reforms. She also recommended that companies invest in modernising crucial infrastructure and undertake stress tests to prepare for future upheavals.

She urged countries to bolster their resilience to geo-economic fragmentation by diversifying and implementing reforms. She also recommended that companies invest in modernising crucial infrastructure and undertake stress tests to prepare for future upheavals.


Retailers must offer digital yuan payment option, says PBOC

As China’s central bank digital currency (CBDC), the digital yuan (e-CNY), goes through technological and business model upgrades, wallet providers should facilitate payment options in all retail scenarios, according to Changchun Mu, director of the Digital Currency Research Institute of the People’s Bank of China (PBOC).

Speaking at the annual China International Service Trade Fair, Mu expressed the desire of e-CNY developers to see it widely offered by retailers. According to the official, Chinese CBDC, officially known as the renminbi (RMB), has “undergone a major upgrade” in terms of its “organisational forms” and business model and it is now the turn of the payment tools to be upgraded.

Mu mentioned commercial banks’ apps and such platforms as WeChat and Alipay, reminding them of their obligation to comply with regulations. In the short term, they can focus on implementing the QR codes for CBDC, while upgrading the payment tools in the long term.

The official also spoke on the wholesale payments issue as well. According to Mu, there is no need to completely change the current interbank payment and settlement systems. It would be enough to integrate the CBDC payment option into it. However, no technical details of such integration were mentioned during the speech.

China continues its work on the blockchain backed, yet fully controlled digital infrastructure. In August, Chinese government officials unveiled a new data exchange powered by blockchain. The newly established Hangzhou Data Exchange will streamline the exchange of corporate information technology data by leveraging distributed ledger technology (DĿT).


Turkey’s annual inflation jumps to 58.9%

Turkey’s annual inflation rate again recorded another strong rise in August due to large increases in transportation and food prices.

Turkish inflation came in at 9.1% month-on-month in August, higher than the consensus of 7.0% and the highest August figure in the current inflation series. The jump in inflation was driven by both food and non-food prices, despite a supportive base as the average August inflation rate in the 2003-based index is 0.5%. Accordingly, annual inflation accelerated further to 58.9% last month versus the 58% forecast from the Central Bank of Turkey (CBT).

Core inflation (CPI-C) came in at 8.9% MoM, rising to 64.8% on an annual basis, attributable to exchange rate developments, administered price hikes and a rise in commodity prices. Durable goods prices rose by 7.8% MoM, while core goods inflation increased to 52.0% YoY. The underlying trend (as measured by the three month moving average, annualised percentage change, based on seasonally adjusted series) for all inflation indicators that markedly increased in July accelerated further in August.

After a sharp increase in June and July, PPI has remained on a rapid upswing with a monthly reading of 5.9%, reflecting a significant jump in the Turkish lira (TRY) equivalent of import prices due to commodity and exchange rate increases. The data imply that cost pressures have gained strength again.

Looking at the breakdown, all of the main expenditure groups positively impacted the headline figure. Among them, transportation turned out to be the major contributor at 2.78ppt, due to higher fuel prices, adjustments in transportation services and a weaker TRY. This was followed by food at 2.3ppt as both processed and unprocessed food products witnessed significant price increases. Annual inflation in this group came close to 73% versus the CBT’s assumption in the inflation report of 61.5%.

Among other non-food groups, substantial increases were recorded in household equipment, clothing, health, restaurants and hotels, and entertainment and cultural activities. As a result, goods inflation jumped to 51.5% YoY, while annual inflation in services, which is significantly influenced by domestic demand and minimum wage hikes, reached 79.6% YoY, a new peak in the current inflation series with big annual increases in rents, restaurants and hotels, transport and other services.

The Central Bank of the Republic of Türkiye (CBRT) has taken steps towards normalisation in interest rates and the exchange rate policy. The latest rate hike from 17.5% to 25% last month was significant and likely raised expectations for the final level in the current cycle. This move and its likely impact on deposit and loan rates, along with other macro-prudential decisions, will be important towards tightening financial conditions and controlling domestic demand.


London becoming cashless faster than rest of UK

Londoners are moving away from cash faster than the rest of the country, according to data from Link, the country’s major cash machine network operator. It shows the capital’s residents and workers are taking out £500 million less every month from machines compared to pre-pandemic levels. There are also 2,069 fewer UK cash machines than there were in 2019.

It comes as UK businesses are increasingly rejecting cash. Pizza Hut is one of several fast food chains that has gone cashless, but some independent businesses still only take card and digital payments.

Link's data suggests many Londoners still rely on cash to budget their finances and are likely to be among the most deprived people in the capital. Nick Quin, head of financial inclusion at Link, said: “Cash remains vital to 700,000 Londoners. London is using less cash, but it's not going cashless yet.”

Abi Wood, from Age UK London, raised concerns about cashless transactions excluding older people. She said while some were comfortable using apps and cards to pay for things, there was a “sizeable minority” who relied on cash. “This move to a society where cash is increasingly rarely being accepted, it's isolating them,” she added.

The UK government has said it does not plan to introduce a similar rule to one in Slovakia, where the parliament passed an amendment to the constitution guaranteeing citizens the right to pay in cash.

A Treasury spokesperson said that it was up to businesses what payments they accepted, adding: “We have taken action to encourage businesses to continue accepting cash by ensuring that the vast majority will be within three miles of cash withdrawal and deposit facilities.”


Elon Musk’s X has ambitions to move into payments

X, the social media platform formerly known as Twitter, is reported to have obtained money transmitter licences from seven US states over the past month.

After his US$43 billion takeover of Twitter in April, the world's richest man, Elon Musk, outlined his ambitions to transform the platform into a financial super app, along the lines of Chinese social media app WeChat.

In a gathering on Spaces, Musk mused on an idea to emulate his first business PayPal, creating the infrastructure for Twitter to process payments, complete with connected debit cards and bank accounts.

The new payment licences from the states of Arizona, Georgia, Mayland, Michigan, Missouri, New Hampshire and Rhode Island are among the first steps to be taken to realise this vision.

Musk has said that he envisions users connecting their online bank accounts to the social media service, with the company moving later into “debit cards, checks and whatnot.”

Twitter has before now remained at the fringe of financial services, adding a tipping feature for users to reward creators on the platform and enabling people to charge subscription fees for exclusive content, like newsletters.

In April, the company rolled out a feature that will let users access stocks, cryptocurrencies and other financial assets through a partnership with eToro.


Southeast Asia green energy manufacturing could generate US$100 billion revenue by 2030

Ramping up production of renewable energy-related products like solar photovoltaic cells, batteries and electric cars could spur economic growth in Southeast Asia, according to a recent study led by the Asian Development Bank (ADB). 

ADB estimated low-carbon mobility and clean power manufacturing can generate US$90 billion to US$100 billion in additional revenues by 2030 and potentially create six million jobs by 2050 across the region.

Currently, the region already produces 9% to 10% of the world’s solar PV cells and modules, about half of global nickel output, and 6% to 10% of all electric two-wheeled vehicles. 

It said Southeast Asia possesses natural advantages to scale up production as it has 16 terawatt (TW) of technical solar potential and a 25% market share in the two-wheeler market globally. ADB noted the region is also home to a quarter of the world’s nickel reserves and 10% of cobalt reserves.

In solar PV manufacturing, the study estimated the region to more than double its capacity to produce modules to 125 to 150 gigawatts (GW) by 2030 from 70 GW currently.

Southeast Asia can also establish a regional battery manufacturing value chain, boost demand locally and across the region, as well as position itself as a global export hub according to the study.

ADB estimated the region could jack up its manufacturing capacity to up to 180 GW hours of battery cells by 2030 from zero footprint currently, with a focus on export sales considering the limited demand in Asia.

Opportunities also lie in the assembly of electric two-wheelers where the study expects the region to boost its capacity by nearly threefold to four million units each year at the end of the decade, from 1.5 million units per annum currently.


Carbon credit registry debuts in Singapore 

Carbon-intensive industries in Asia – including factories and construction and petrochemical firms – will have more types of carbon credits to offset their pollution with the launch of a new registry based in Singapore.

The Asia Carbon Institute (ACI), a non-governmental organisation, checks on the legitimacy of projects that minimise or remove greenhouse gases before certifying and registering them with carbon credits for the voluntary carbon market. The carbon credits can then be traded monetarily on a carbon exchange.

ACI’s focus is on technology-based and urban-related solutions, unlike other carbon verification organisations that mostly focus on projects that are nature-based or located in developing economies.

Concrete manufactured from carbon capture utilisation technologies would be an example of a technology-based project in urban space.

Asked why these projects tend to be overlooked, ACI founder John Lo said: “In some cases, new methodologies need to be developed. These types of projects typically generate a smaller quantity of carbon credits, compared with nature-based projects.”

The potential for projects to mitigate greenhouse gases is huge in Asia – it is home to over 60 per cent of all megacities and is where many carbon-intensive manufacturing industries can be found, yet there is little focus on carbon credits in these areas, added Mr Lo.

There are currently 20 projects in the pipeline waiting to be certified by ACI, ranging from energy efficiency and greenhouse gas avoidance to blue carbon and nature-based type of projects.

In her recent keynote address at the launch of ACI, Ministry of Trade and Industry senior director Tang Zhi Hui noted: “(In) our journey towards net zero, carbon credits play a vital role in offsetting residual emissions for hard-to-abate sectors of the economy.

“However, concerns around the integrity of standards and the quality of carbon credits have dampened global confidence in the carbon market.”

ACI is also applying to become a member of the Climate Action Data Trust, a global platform consolidating carbon credit data set up by the International Emissions Trading Association, the World Bank and the Singapore Government.

In Singapore, industrial facilities with annual direct greenhouse gas emissions of 25,000 tonnes of carbon dioxide equivalent are liable to pay carbon tax. From 2024, approved international carbon credits can be used to offset up to 5% of taxable emissions.


LSE plans blockchain-based digital assets initiative

The London Stock Exchange Group (LSEG) has drawn up plans for a new digital markets business to offer extensive trading of traditional financial assets on the blockchain technology known for powering cryptocurrency, the Financial Times report.

The company has reached an “inflection point,” having examined the potential for bringing traditional markets to blockchain rails for nearly a year and has now decided to take plans forward, LSE Group's Head of Capital Markets, Murray Ross, told the FT

Ross stressed that the project does not involve cryptocurrencies and only uses the blockchain technology underpinning the digital assets to make buying, selling and holding of traditional assets more efficient. “The idea is to use digital technology to make a process that is slicker, smoother, cheaper and more transparent . . . and to have it regulated,” he said.

A blockchain is a distributed, immutable ledger, facilitating record of transactions and tracking assets in a business network.

According to the FT, LSEG is also considering a separate entity for the blockchain-based markets business and is in talks with regulators, multiple jurisdictions and the UK government and Treasury. The reported move comes as several traditional finance firms look to come on chain to offer tokenised versions of traditional assets like gold and US Treasury notes.


BlinkPay hopes to replicate UK open banking success in New Zealand

Payment processing and solution platform provider BlinkPay has partnered with banks across New Zealand to bring open banking to the region. 

BlinkPay hopes to bring the success open banking has seen elsewhere to change how merchants and consumers interact financially in New Zealand. July this year saw the UK’s open banking sector reach a milestone of over 11.4 million payments – a 9.3% increase in total payments from the previous month.

As CTMfile recently reported, the UK has already seen a dramatic increase in the adoption of open banking, with a 105% cent rise in active users from June to July 2023. BlinkPay does not expect this trend to become a passing phase but instead signifies a “significant shift” in how financial transactions take place.

Adrian Smith, chief product officer at BlinkPay, discussed the potential significance of the move for New Zealand: “Open banking is changing the game for both consumers and businesses.

“It’s not just about new technology; it’s about offering more choices, better security, and simpler financial management. For merchants, this means quicker payments, lower transaction costs, and happier customers. We at BlinkPay are thrilled to be at the forefront of bringing these benefits to New Zealand.”

BlinkPay also explained that it believes one of the largest benefits open banking could bring is a significant reduction in fees when compared to traditional payment methods.

It also referenced the possibility for real-time transactions to help merchants improve their cash flow; while open banking also eliminates the need for sharing sensitive card details – making transactions more secure.

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