This week, focus remained on economic headwinds and energy transition challenges across Europe and beyond. President Trump’s rally comments reignited debate over monetary policy and trade protectionism, while ECB officials considered cautious interest rate reductions amid global uncertainty. In the realms of climate and energy, divisions within the EU widened over 2040 emissions targets, as the UK and Indonesia advanced key developments in carbon markets. Grid reliability, renewable trade flows, and the future of cross-border regulation also came to the fore as policymakers, industry leaders, and regulators navigated an increasingly volatile landscape.

Macro and Other Developments

Trump Criticises Powell, Defends Tariffs at Michigan Rally

President Donald Trump used a rally marking his first 100 days to renew criticism of Federal Reserve Chair Jerome Powell, blaming him for slow rate reductions and promoting his own tariff policies as a means to revitalise US manufacturing. Despite pledging earlier this month not to remove Powell, Trump claimed greater knowledge of interest rates than the Fed itself. He also defended temporary tariff exemptions on certain automotive parts as a strategic effort to repatriate supply chains. Consumer confidence has slumped to a five-year low, with polls showing increasing public anxiety around economic instability and trade policy.

ECB Urged to Take Cautious Approach on Rate Reductions

ECB Governing Council member Yannis Stournaras stated that the central bank should act cautiously with further rate cuts in light of prevailing global uncertainties. Although a reduction to 2 per cent is broadly anticipated in June, Stournaras highlighted risks linked to US tariffs and divergent inflation patterns.

Carbon Markets

EU Ministers Support ETS2 Reform, Seek Clarity on 2040 Targets

Environment ministers expressed strong backing for reforms to the EU’s second Emissions Trading System (ETS2) for buildings and transport, citing the need to address price volatility and protect household budgets. Many are awaiting clearer guidance on the bloc’s proposed 2040 climate objectives before endorsing final reforms.

New Corporate Carbon Credit Guidance Released

The Voluntary Carbon Markets Integrity Initiative published updated guidance allowing firms to use carbon credits to offset Scope 3 emissions through to 2040. While some climate advocates welcomed the guidance as pragmatic, others cautioned it might dilute corporate climate ambition and potentially mislead stakeholders.

Renewables and Biofuels

Spain Investigates Grid Blackout, Rejects Blame on Renewables

Prime Minister Pedro Sánchez announced an independent investigation into a nationwide power outage, dismissing allegations that renewables were responsible. Officials indicated the blackout, which temporarily cut 15 GW of capacity, stemmed from a sharp frequency disturbance rather than surplus solar or wind power.

Germany Opposes Bidding Zone Split, Citing Market Disruption

German transmission system operators (TSOs), energy associations, and industrial groups voiced strong opposition to proposals to divide the country’s power bidding zone. They argued that such a move would harm market liquidity, increase costs, and deter renewable energy investment. The incoming coalition government is expected to retain the single-zone arrangement.

Gas and Biofuel Markets

China Redirects Used Cooking Oil Exports to Europe Amid US Tariffs

Chinese exporters of used cooking oil, a crucial input for sustainable aviation fuel, are pivoting towards European and Asian markets following the imposition of a 125 per cent US tariff. With US arbitrage effectively closed, traders expect monthly exports to decline by up to 40 per cent compared to 2024 levels.

German Gas Storage Operators Criticise New Compliance Rules

Germany’s INES industry group pushed back against draft regulations imposing uneven gas storage filling targets across facilities. The group warned the proposed measures could lead to supply imbalances and unfair burdens on certain operators, despite the draft’s aim of aligning with more flexible EU-wide guidelines.

Environmental and Sustainability Regulation

EU Remains Split on 2040 Climate Target

EU member states are divided over a proposed goal of achieving a 90 per cent net emissions reduction by 2040. While northern countries such as Finland and Denmark support the target, others—including Italy and the Czech Republic—warn it could negatively impact heavy industry. The European Commission has delayed its announcement due to the ongoing political deadlock.

UK Climate Advisers Warn of Escalating Climate Risks

The UK is ill-prepared for the worsening impacts of climate change, according to the Climate Change Committee. In a new report, the committee forecast a significant rise in flood risks and heat-related fatalities by 2050, and called for stronger adaptation targets and improved coordination across government departments.