This week’s developments underscored mounting geopolitical and economic headwinds shaping the energy transition and broader sustainability agenda. As the European Central Bank (ECB) signals a pause in rate cuts, pressure from transatlantic trade tensions and rising global infrastructure costs are complicating the macroeconomic outlook. Meanwhile, regulatory momentum and large-scale industrial projects suggest shifting priorities across clean power, fuels, and climate mitigation strategies.

Macroeconomics and Geopolitics

ECB Holds Rates Steady Amid Data-Heavy Week That Will Shape September Outlook

The ECB is anticipated to hold interest rates unchanged this week for the first time in a year, following eight successive reductions. Markets are watching closely as policymakers analyse July’s business activity data and the ECB’s quarterly Bank Lending Survey, the first since renewed US tariff threats in April. ECB President Christine Lagarde indicated that borrowing costs have reached neutral levels, though Goldman Sachs observed that further easing remains possible should economic weakness persist.

Trump Pushes for Minimum 15%–20% Tariff Floor on EU Goods

The United States is pressing for a minimum reciprocal tariff rate of 15%–20% in its negotiations with the EU, rejecting Brussels’ latest proposal to reduce car tariffs. A final deal remains elusive ahead of the 1 August tariff deadline, with reports suggesting Trump is content to maintain auto duties at 25%. EU Trade Commissioner Maroš Šefčovič described the negotiations as stalled, while the US remains steadfast in its demand for broader trade concessions.

China Threatens Retaliation After EU Sanctions Banks and Firms

Beijing has criticised the EU’s latest round of sanctions, which for the first time target Chinese banks allegedly facilitating trade with Russia. China’s Ministry of Commerce pledged to safeguard the interests of domestic firms and financial institutions, after Brussels blacklisted Heihe Rural Commercial Bank and Heilongjiang Suifenhe Rural Commercial Bank for engaging in crypto-related activities that circumvent sanctions. This development further complicates already strained EU–China trade relations.

Carbon Markets

EUAs Dip but Regain Support Late in the Week

EU carbon allowance (EUA) prices declined by 0.9% over the week, dragged down by a Friday sell-off across European energy markets. A late rally, however, helped prices recover above a key technical support level. With the summer holiday season approaching, trading volumes remained thin and momentum subdued. Traders report a lack of clear direction amid persistent economic uncertainty.

Renewables and Biofuels

Spanish Energy Sector Demands Higher Returns on Grid Investments

Spain’s utilities association Aelec has warned that the proposed return on power grid investments, raised to 6.46% by regulator CNMC, remains insufficient. Aelec is calling for a minimum of 7.5% to attract vital capital and prevent investment diversion to other EU countries. The debate follows a significant blackout in April that reignited concerns around grid reliability and energy transition preparedness.

New York Suspends Offshore Wind Transmission Planning

New York State has paused its offshore wind transmission planning due to uncertainty surrounding federal permitting. The decision delays a programme intended to deliver 8 GW of wind power to New York City by 2033. While existing projects such as Empire Wind and Sunrise Wind remain on course, regulators stated that planning will resume once clearer federal guidance is provided.

China Breaks Ground on £129 Billion Mega-Dam in Tibet

China has commenced construction of a colossal 70 GW hydropower project on the Yarlung Tsangpo River, with an estimated cost of ¥1.2 trillion (£129 billion). The project, three times the size of the Three Gorges Dam, is poised to boost clean power capacity and stimulate the construction sector. However, it carries considerable geopolitical risks, particularly for downstream nations India and Bangladesh. Financing specifics remain unclear, but the scale underscores Beijing’s infrastructure-led development strategy.

German Transport Sector Requires Major Subsidy Push, Advisers Say

A government-appointed panel has recommended that Berlin introduce comprehensive incentives to decarbonise the transport sector, including subsidies for electric vehicles, reduced electricity taxes for lorry charging, and enhanced support for cycling infrastructure. Critics argue the proposals fall short by failing to include direct reforms to fossil fuel usage. Germany could face penalties of €13–34 billion by 2030 if it misses its transport emissions targets.

World’s First Ethanol-to-Jet SAF Plant to Start Operations in Q3

LanzaJet’s sustainable aviation fuel (SAF) facility in Georgia, USA, is set to begin production by the end of Q3, following equipment-related delays. The $200 million plant, backed by US government funding, will initially use Brazilian sugarcane ethanol, even though it does not qualify for the US 45Z tax credit. The company aims to transition to North American feedstocks, but the case highlights misalignments in policy and feedstock readiness.

Corporate Sustainability and Regulation

UK Water Sector Review Urges Comprehensive Regulatory Reform

A government-commissioned review has recommended replacing Ofwat with a unified regulator to better oversee financial management and environmental outcomes in England’s water sector. The proposal follows widespread public backlash over record sewage discharges and the financial troubles of Thames Water, which could face penalties totalling £1.4 billion. A fully integrated regulatory framework is seen as essential to attract the over £100 billion in investment needed over the coming five years.

Environmental and Climate Policy

Brazil Unveils National Climate Mitigation Strategy

Brazil has launched a national emissions mitigation strategy under its Plano Clima initiative, with sectoral targets covering energy, transport, agriculture, urban mobility, and waste. The plan includes timelines through to 2035, cost estimates, and monitoring protocols. This follows a 32% drop in deforestation last year, though over 300,000 km² were still affected. Ensuring enforcement and implementation remains a critical challenge. The public consultation period runs from 28 July to 18 August.