This week’s developments underscore rising political tensions in Europe, pressure from central banks in the United States, and ongoing uncertainty surrounding the European Union’s ambitious climate objectives. Carbon markets progressed following major CBAM updates, while renewable energy markets received a boost thanks to revised US policy. However, increasing resistance to the EU’s 2040 emissions targets highlights the ongoing struggle to reconcile climate action with economic realities across member states.

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Macroeconomics

Von der Leyen Faces Vote of No Confidence Amid Growing EU Strains

European Commission President Ursula von der Leyen is set to face a vote of no confidence next Thursday in Strasbourg, following a motion by a far-right Romanian MEP that surpassed procedural thresholds. While unlikely to succeed, the vote reflects mounting internal political pressure within the EU as climate, energy, and economic policies challenge the bloc’s cohesion.

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Starmer Confirms Reeves to Remain as UK Chancellor

‍UK Prime Minister Keir Starmer has confirmed that Chancellor Rachel Reeves will continue in her role, in an effort to reassure financial markets after a selloff in bonds and a decline in sterling, sparked by rumours surrounding her position. Reeves, regarded by markets as fiscally prudent, had come under pressure following a failed welfare reform initiative and an emotional parliamentary address.

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Trump Demands Immediate Resignation of Fed Chair Powell

‍US President Donald Trump has intensified his criticism of Federal Reserve Chair Jerome Powell, calling for his immediate resignation while pushing for interest rate cuts to stimulate economic growth. Powell countered that trade tariff policies under the Trump administration had previously delayed rate reductions, reaffirming that future decisions would remain data-dependent.

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Carbon Markets

EU Proposes Export Safeguards Under Carbon Border Levy

‍The EU is drafting measures to shield exporters from competitive disadvantages under the forthcoming Carbon Border Adjustment Mechanism (CBAM). The European Commission aims to use CBAM revenues to support sectors at risk of carbon leakage, as free allowances are phased out, striving to maintain a balance between climate ambitions and industrial competitiveness, while staying within WTO rules.

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International CO₂ Credits to Be Counted Toward EU’s 2040 Target

‍For the first time, the European Commission has proposed that member states may use international carbon credits to fulfil up to 3 per cent of the EU’s 2040 target of a 90 per cent emissions reduction compared to 1990 levels. This move, intended to ease domestic industry burdens, will see credits phased in from 2036, with legislation to set quality standards scheduled for 2026.

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Renewables and Biofuels

European Renewables Surge Following US Policy Shift

‍Shares in European renewable energy firms rose after a revised US Senate budget bill improved the landscape for wind and solar developments. The bill extends eligibility for renewable tax credits to projects commencing before 2026, offering greater certainty to developers and lengthening the US renewables cycle into the next decade.

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Record HVO Demand Forecast Amid Stricter EU Rules

‍Hydrotreated vegetable oil (HVO) demand is expected to reach record levels by 2026, driven by tougher EU biofuel mandates. Producers are increasingly shifting from traditional biodiesel to waste-based HVO to meet stricter greenhouse gas reduction targets, while anti-dumping measures on Chinese imports are reshaping trade flows and bolstering prices.

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Germany and Netherlands Advance Cross-Border Gas Extraction

‍Germany’s cabinet has endorsed a deal with the Netherlands to pursue gas extraction from a shared North Sea reservoir, aimed at bolstering domestic energy supplies after ceasing Russian imports. Environmental organisations have criticised the move, citing risks to the Wadden Sea World Heritage Site, and the project still awaits regulatory approval in Germany.

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Corporate Sustainability and ESG

NGOs Warn Against Outsourcing EU Climate Action

‍Environmental NGOs have raised alarms over the EU’s plan to count international carbon credits towards its 2040 emissions targets, warning that it risks outsourcing climate responsibility rather than reducing emissions domestically. While the International Emissions Trading Association welcomed the flexibility, NGOs stress the need for robust standards and caution against overreliance on carbon removals.

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Volkswagen Bank Issues €1.5 Billion Green Bond

‍Volkswagen Bank has successfully issued its first green bond, raising €1.5 billion to finance electric vehicle purchases. The transaction highlights strong investor interest in sustainable finance and supports the Volkswagen Group’s ongoing shift to electric mobility.

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Environmental and Sustainability Regulation

Poland and Czech Republic Reject EU’s 2040 Climate Target

‍Leaders from Poland and the Czech Republic have firmly opposed the European Commission’s proposed target of a 90 per cent emissions reduction by 2040, citing economic constraints and readiness concerns. Both governments argue that existing goals are sufficient and are calling for more flexibility to protect economic competitiveness and maintain public support for climate initiatives.