LONDON—Having fired her chancellor of the exchequer days ago, U.K. Prime Minister Liz Truss must now battle to save her own job after what many political analysts and members of her own party regard as the worst start to a British premiership in modern times.
Ms. Truss’s popularity rating is the lowest of any British prime minister since the early 1990s, according to polls, after a turbulent few weeks that saw her plan to boost growth through the biggest tax cuts in a generation cause turmoil on U.K. financial markets, forcing the new leader to retreat from her signature economic program—the pillar of her campaign to replace ousted former Prime Minister Boris Johnsonjust six weeks ago.
Just a few weeks after he announced spending plans that couldn’t be paid for and caused economic trouble, Truss fired Kwarteng on a day when many things happened quickly. Gilts, which are British government bonds, rose substantially before the press conference. In early trading, the yield on 30-year bonds temporarily hit 4.261%. The correlation between yield and price changes is negative.
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The value of the pound fluctuated wildly during the session. At the time of writing, it was selling for $1.1235, down 0.8% from its previous close. The Conservative government is under more political pressure to change course after announcing tax cuts at the end of last month that can’t be kept up. Investors are still worried about how this might affect the public finances, and polls show that support for Truss’s government has dropped dramatically.
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Without giving any other specifics, Kwarteng informed reporters on Thursday that he will be returning from the United States earlier than expected this week. Several sources said that on Friday, Truss and Kwarteng will abandon their economic ideas. When the debt-funded measures, which were announced on September 23 and are expected to cost £43 billion ($48.7 billion), were made public, the markets went crazy. With the pound falling to a new low versus the dollar, borrowing prices shot up, and the Bank of England was called into action.
Both Truss and Kwarteng have staunchly backed the government’s extreme spending plan, saying time and again that their ideas are what’s needed to jumpstart the economy. On Thursday, Kwarteng addressed concerns that he would make a U-turn when speaking to reporters in the United States. He said that he is “completely focused on fulfilling the growth plan.” In addition, Kwarteng stated that he is “not going anywhere” and that both he and Truss will “100%” still be working at their current positions next month.
There were reportedly talks going on in Downing Street as of Thursday over the possibility of reevaluating some of the tax cuts proposed by Kwarteng in the government’s so-called “mini-budget.” Potential modifications to the dividend tax and corporate tax have been discussed.
Last week, Kwarteng got rid of a plan to get rid of the maximum 45% income tax rate on earnings over £150,000 ($167,646) U.K. International Trade Minister Greg Hands was asked by Sky News on Friday morning if reversals on some sections of the government’s mini-budget were feasible, to which he responded, “Let’s wait and see.” The chancellor will present these ideas on October 31st, so you won’t have long to wait.
“Absolutely firm” is how Hands described Truss and Kwarteng’s commitment to their economic goals, he added. The Office for Budget Responsibility will release a full prediction on October 31st, but until then, we won’t have a complete picture of “the growth plan,” which is the plan’s central focus.
Throughout the week, both Downing Street and the Bank of England took measures to reassure the financial markets.
Kwarteng moved up the deadline for his proposal to balance the government’s budget from October 31 to Monday in an effort to calm remaining fears. The IMF applauded the move. Kwarteng has previously asserted that the administration will not provide any information about its budget strategy until November 23.
As the value of the pound dropped and borrowing prices shot up, the Bank of England said on Tuesday that it would extend its emergency bond-buying program. The report stated, “the likelihood of self-reinforcing ‘fire sale’ dynamics pose a serious danger to UK financial stability.”
As the Bank had already raised the limit for its daily gilt purchases on Monday in anticipation of the purchase scheme’s expected termination on Friday, this action represented the second enlargement of the Bank’s rescue package in as many days.
During the middle of the week, Truss informed the House of Commons that she would not be cutting public expenditure to help pay for the government’s tax cuts.
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Instagram, the popular social-media site owned by Meta Platforms, helps connect and promote a vast network of accounts openly devoted to the commission and purchase of underage-sex content, according to investigations by The Wall Street Journal and researchers at Stanford University and the University of Massachusetts Amherst.
Midmarket buyout firm TJC is expecting to hold a first close on its sixth main fund in the coming weeks, according to documents prepared for a Nebraska state pension fund.
The New York firm, previously known as The Jordan Company, is targeting $5.5 billion for Resolute Fund VI, according to the materials accompanying Nebraska Investment Council’s investment committee meeting, scheduled for Thursday. If successful, the fund would be 10% larger than its predecessor, which rounded out fundraising with $5 billion in 2021.
Blackstone-owned TeamHealth has received a pair of competing offers from two of its biggest creditors that are giving the struggling physician-staffing company starkly different options to repay over $1 billion in debt due next year, according to people familiar with the matter.
Pacific Investment Management Co., which is known as Pimco and is the largest holder of TeamHealth’s loans maturing in February, has proposed swapping those loans for new debt backed by some of the company’s assets, such as its accounts receivable…
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By Corey S. Powell| Photographs by Francesca Forquet for The Wall Street Journal
In this age of wireless everything, engineers are trying to perform the ultimate act of cord-cutting: generating abundant solar electricity in space and beaming it to the ground, no power cables required.
KHERSON, Ukraine—Floodwaters continued to rise on Wednesday after a major dam and power station in a Russian-occupied part of Ukraine were destroyed, forcing thousands of people to flee their homes and throwing a curveball on the battlefield.
With Brazil struggling in its efforts to create a regulated carbon market, the country’s new president is moving to scrap his predecessor’s approach and start anew. But success is still far from guaranteed.
The administration of President
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Luiz Inácio Lula da Silva
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is putting the finishing touches on a proposal laying the groundwork for a new, regulated cap-and-trade system, which he is expected to send to Congress later this month. The approach is starkly different from that of his right-wing predecessor
Jair Bolsonaro,
who last year issued a decree relying on the private sector to establish the basis for a carbon market, which never happened.
In either case, the system would set emission caps for certain industries and allow some companies to temporarily offset their excess pollution by buying allowances from those that cut more emissions than required. One credit would amount to one metric ton of carbon dioxide either removed from or prevented from being emitted into the atmosphere. Over time, the cap would be lowered to reduce emissions.
Financing carbon-capture projects such as reforestation could also generate carbon credits. Proponents say it is a way to protect the Amazon rainforest and other biomes, an approach that could also become an income stream to millions of impoverished residents currently making money off deforestation.
Yet despite broad support from exporters, who deem a regulated carbon market necessary to maintain key consumer markets overseas and attract investment, the initiative faces significant political hurdles at home and may not be enough to tackle the deforestation that is responsible for nearly half of the nation’s carbon footprint.
Brazil prides itself on getting nearly half of its energy and almost all of its electricity from renewable sources. It also already has an active market in voluntary carbon credits, where corporations buy credits from certified environmental projects to offset their emissions to meet self-imposed targets. But all that may still not be enough in a world increasingly worried about climate change.
“There is a global green arms race. Do we want to just sit on our achievements and watch while the tortoise outruns us?” said
Gustavo Pinheiro,
coordinator of the low-carbon economy portfolio at the nonprofit Institute for Climate and Society. “We need to price rising emissions,” he said, “and a regulated market is the least traumatic way to do it.”
As home to nearly 60% of the Amazon rainforest, Brazil is crucial to slowing global warming. Brazil was responsible for about 1.3% of global carbon-dioxide emissions in 2021, according to European Union data, and its population, economy and footprint are expected to grow, pushing the country further away from its commitments in the 2015 Paris global climate agreement and underscoring the need for a regulated carbon market. A cap-and-trade system could also beef up the country’s troubled economy, as global trade increasingly requires cleaner supply chains, some experts say.
“Having a regulated carbon market would be good for the overall economy, [and] would put our corporations in a better position to compete,” said
Luiz Gustavo Bezerra,
a partner at law firm Tauil & Chequer, which is associated with Mayer Brown.
Local exporters say they could benefit from regulation compatible with rules already in place in key overseas markets, which increasingly demand low-carbon supply chains. For example, a local regulated carbon market could help exporters avoid the carbon border adjustment mechanism the EU plans to charge on some imported products from 2026.
Brazil is one of the largest exporters of iron used to make steel for a range of things, such as home appliances, vehicles and wind turbines. Iron-ore exporter
which aims to have net-zero emissions by 2050 and uses an internal price of $50 per metric ton for its greenhouse-gas emissions, said in emailed answers that initiatives to price carbon are “important for the competitiveness of Brazilian industry.”
Brazil’s President Luiz Inácio Lula da Silva.
Photo:
evaristo sa/Agence France-Presse/Getty Images
The nation is also a major global supplier of soybeans, corn and beef, products often associated with deforestation. Farming group Roncador, a producer of grains and beef, said it is worried about increasing global restrictions to products lacking environmental certificates.
“Since Brazil still doesn’t have a regulated [carbon] market, we are developing our own research and have developed our own protocol to ensure our activities have a positive impact on the environment,” the group’s Chief Executive
Pelerson Penido Dalla Vecchia
said.
Exporters also hope a regulated market would help repair Brazil’s abysmal environmental reputation, a product of its history of deforestation. “We have great expectations that the government will better regulate carbon markets,” said
Antônio Queiroz,
vice president of innovation, technology and sustainable development at
one of the world’s largest petrochemical companies.
A regulated market could also help lure green-economy investments, according to lawyer Bezerra: “We are always approached by private-equity firms looking for areas in Brazil to invest in reforestation or forest preservation.”
The country could earn up to $120 billion through 2030 on carbon credits, assuming an “optimistic scenario” of $100 a metric ton of carbon, according to a study by the Brazilian division of the International Chamber of Commerce and local carbon consulting firm WayCarbon. While that price is multiples of current voluntary market credits—lately valued at about $1—the EU credits have recently been trading around €82 a metric ton, equivalent to $88, according to OPIS.
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Brazil has a goal of reforesting an area bigger than Pennsylvania, said
Ana Toni,
head of the National Secretariat for Climate Change: “How many countries have that?”
But carbon-capture projects based on forest preservation are typically traded in the so-called voluntary markets, often not covered by government regulation. Many have come under scrutiny recently after failing to fulfill their promises. For example, a Wall Street Journal investigation into a reforestation project in Peru found little of the money designated for rainforest preservation actually reached locals.
Despite these and other problems that bedevil this form of credit, Brazil’s Ministry of Development, Industry, Trade and Services said its proposal will allow credits from the voluntary market to be used, to a certain extent, in the new regulated one.
The da Silva administration plans to have a carbon market operating in a couple of years, Toni said. But da Silva lacks a majority in Congress, and in any case is expected to give priority to major fiscal and tax legislation ahead of the carbon-market bill.
And in a sign of the difficulties ahead, lawmakers recently passed legislation to weaken the Environmental Ministry led by sustainability advocate
Marina Silva,
who is backing the effort to create a regulated carbon market.
Annie Groth,
head of advocacy and policy at Biofílica Ambipar Environment, a developer of carbon projects in the Amazon and other biomes, said there is hope that carbon legislation could be approved before the United Nations Climate Change Conference in Dubai beginning Nov. 30.
But she cautioned, “It’s the most optimistic scenario.”
Byju’s, an India-based education-software company backed by high-profile investors including BlackRock and Silver Lake, filed a lawsuit against a group of lenders following months of negotiations over an alleged default the company disputes.
On Monday, Byju’s filed a lawsuit in state court in New York against holders of roughly three-quarters of the company’s $1.2 billion in loans, alleging the lender group has made false allegations of default in order to gain control of the company.
SYDNEY—The Governor of the Reserve Bank of Australia, Philip Lowe, warned Wednesday that there are no guarantees around the central bank’s narrative of moving to lower inflation over a long time frame while simultaneously seeking to preserve recent strong gains in employment.
Mr. Lowe said recent data showed the inflation outlook deteriorated, and the central bank wouldn’t tolerate any further delay in cooling price pressures.
