Carbon credits take center stage
As world leaders gather in Sharm el Sheikh, Egypt, for the COP27 climate conference, questions about how to deal with the potentially catastrophic effects of global warming have reached a new level of urgency. No less contentious: how to pay for solving the problem, and just how much will businesses be asked to pitch in.
The United States is focusing on a new plan for carbon credits, The Financial Times reports. John Kerry, President Biden’s climate envoy, is said to be gathering support for a system in which governments would earn credits for cutting their power sector’s emissions, which companies could then buy to offset their own output.
Centering the plan on credits is contentious, given criticisms that they don’t always save on emissions. But they have grown in popularity as a tangible way for companies and governments to incentivize reducing carbon output. The F.T. added that Kerry’s plan lacks key details at the moment, even as the Biden administration hopes to announce it at the summit meeting.
Corporate commitments to addressing climate change already appear uncertain. Mark Carney, the former governor of the Bank of England who now leads the Glasgow Financial Alliance for Net Zero, said last week that the group’s members were no longer required to follow a U.N. initiative to phase out fossil fuels.
Carney said that members of the coalition, which have a combined $150 trillion in assets, had raised antitrust concerns. Members like Bank of America and JPMorgan Chase had reportedly worried that they could be sued for following global decarbonization pacts.
(Law firms are facing pressure, too. Republican senators including Tom Cotton of Arkansas and Chuck Grassley of Iowa have sent letters to 51 major firms warning them of potential antitrust violations for advising clients on environmental, social and governance issues.)
Meanwhile, Mike Bloomberg is focused on reducing coal use. The billionaire, a special U.N. envoy on climate change, announced a new initiative to help developing countries phase out coal by 2040. That would include devising business plans and technical resources to increase the use of clean energy — but it doesn’t include a new financial commitment.
One more thing to watch at the conference: “loss and damage,” diplomacy-speak for ecological reparations to developing countries from the world’s biggest polluters. “Funding arrangements” for loss and damage — which one study estimates could run up to $580 billion a year by 2030 — are on the conference’s formal agenda for the first time; reparations would come on top of existing financial commitments by industrialized nations to help poorer ones cope with climate change, which have fallen far short of promised targets.
Read The Times’s coverage of COP27 here.
HERE’S WHAT’S HAPPENING
Apple warns that China’s zero-Covid restrictions could cause an iPhone shortage. The tech giant predicted longer wait times for high-end iPhone 14 models because of “significantly reduced capacity” at a major plant in China that had been shut due to Beijing’s strict zero-Covid policies. Analysts said China was unlikely to lift its pandemic policies until next year, despite speculation among investors and the damage to the economy.
Elon Musk’s Acquisition of Twitter
A blockbuster deal. In April, Elon Musk made an unsolicited bid worth $44 billion for the social media platform, saying he wanted to turn Twitter into a private company and allow people to speak more freely on the service. Here’s how the monthslong battle that followed played out:
Meta is expected to announce job cuts as soon as this week. The social media giant has been looking to rein in costs as advertisers pull back, and its push into the metaverse continues to lose money. Sources told The Times that the expected job cuts will be the most significant since its founding in 2004.
Ken Griffin backs Gov. Ron DeSantis for president. The billionaire financier and major Republican donor said that he would support the Florida governor should he run for the Republican nomination in 2024 — even over Donald Trump. “I think it’s time to move on to the next generation,” Griffin told Politico.
Macy’s will invest $30 million in loans for minority-owned businesses. The department-store giant will work with Momentus Capital on financing channels for independent retail-oriented companies. Total financing under the program will run to $200 million.
Twitter’s series of 180s
Week two of the Elon Musk era of Twitter looks as chaotic as ever: The company executed one of the biggest single rounds of layoffs in recent Silicon Valley memory — and, reportedly, is now worrying that it has cut too deeply — while Musk is facing a deepening financial hole that he helped dig.
Twitter has some regrets about its layoffs. The company has reportedly reached out to some of the nearly 3,700 employees it laid off last week, asking them to come back, the journalist and Hard Fork co-host Casey Newton reported over the weekend. Analysts have questioned whether the cuts have left Twitter more vulnerable to cyberattacks, impersonation of users and other challenges.
The reversal comes despite Musk explaining that steep cuts were necessary, given that he says Twitter is losing over $4 million a day. The Twitter co-founder Jack Dorsey appeared to acknowledge that the cull was probably necessary. “I grew the company size too quickly. I apologize for that,” Dorsey tweeted.
Twitter’s new verification plan has been delayed until after the midterms, The Times reports. The move came just a day after the company announced that it would begin charging $8 a month to receive a check mark on their profiles, and was born out of worries that users could create verified accounts to pose as politicians, electoral officials or news outlets to spread disinformation.
Yet Twitter has already been cracking down on those impersonator accounts, particularly those pretending to be Musk’s, including celebrities like the comedian Kathy Griffin. On Sunday night, the billionaire — who had previously said “comedy is now legal” on the platform — said parody accounts needed to be clearly labeled or risk being permanently suspended.
Meanwhile, Twitter’s financial woes are deepening. As Musk asserted that his new company is bleeding money, he blamed “activist groups pressuring advertisers” to at least temporarily halt campaigns on the platform. (He also threatened a “thermonuclear name & shame” of advertisers who halted spending on the social network.)
But advertisers had started to pull the plug on their campaigns before pressure from activists had begun, largely over uncertainty about the company’s future (and indeed, some reportedly did so during Musk’s call with advertisers last week).
Two crypto titans spar, wiping out billions
On Sunday a rift broke into the open between Changpeng Zhao and Sam Bankman-Fried, two of the most influential figures in the crypto sector, hitting already battered investors hard.
Zhao, who goes by C.Z., is the founder of Binance, the world’s largest crypto exchange. Yesterday, he announced that the company would sell off its holdings in FTT, the token of the rival exchange FTX, founded by Bankman-Fried. FTT plunged more than 10 percent at one point on Sunday knocking billions off its market valuation.
“Due to recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books,” C.Z. wrote. He didn’t explain his cryptic note, but crypto insiders took it as referring to a recent report in CoinDesk questioning the finances of Bankman-Fried’s hedge fund, Alameda Research, and the fund’s financial ties to FTX. Binance was an early investor in FTX, and got a sizable chunk of FTT when it exited the company last year. Adding to their ties, Zhao was once a mentor to Bankman-Fried.
Understand Elon Musk’s Twitter Takeover
“It’s time to build. Make love (and blockchain), not war,” Bankman-Fried — known as S.B.F. — wrote in a thread yesterday that noted both his frustration with and respect for C.Z.
Frustration has been mounting at S.B.F.’s growing stature in Washington. The crypto mogul has become a major political donor and a big influence on congressional thinking about digital assets. He’s a fixture in the nation’s capital lobbying for policy proposals that some in the industry say will advance FTX but harm others. A policy piece that he had posted online recently generated fury from all corners of the crypto community, and he quickly walked back some of his positions. But it seems all has not been forgiven.
“We won’t support people who lobby against other industry players behind their backs,” C.Z. later tweeted. “Onwards.”
CEOs are saying the R-word, a lot
Despite a surprisingly resilient labor market, talk of a downturn is in the air. Last week, James Tisch, the C.E.O. of the hotel and industrial conglomerate Loews, was just the latest business leader to forecast a recession.
Recession has been a hot topic this quarter. Of the 409 S&P 500 companies that have held analyst calls this quarter, the R-word came up as a topic 165 times, according to Sentieo, a market data provider. A year ago, “recession” was uttered on 42 earnings calls by S&P firms in the entire third quarter.
Earnings growth has slowed significantly. Profits are up just over 2 percent on average for S&P 500 companies that have reported this quarter, down from 6 percent a quarter ago, according to FactSet, which tracks corporate profits and other market data. Worse, analysts now expect that profits will decline in the fourth quarter for S&P 500 companies, which would be the first time that has happened since the start of the pandemic.
The week ahead
Climate talks are on the agenda, but so too are politics, profits and inflation.
Tuesday: It’s Election Day. Control of the Senate is considered a tossup; Republicans have better odds of taking the House. You can follow the Times’s election coverage here. On the earnings front, Disney, the movie theater chain AMC, and the oil and gas producer Occidental report.
Wednesday: Rivian, Roblox and Adidas report quarterly results.
Thursday: Inflation hawks will be closely watching the Consumer Price Index report. Economists surveyed by Bloomberg are forecasting that prices rose by 7.9 percent last month.
Friday: Britain’s latest G.D.P. data and the University of Michigan’s U.S. consumer sentiment report will both be published.
THE SPEED READ
To get around U.S. sanctions, Chinese tech companies are designing slower processing chips. (FT)
Tom Barrack, the financier and ally of Donald Trump, was acquitted on charges that he worked for the United Arab Emirates and lied to U.S. officials about it. (NYT)
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