Economics

Batteries are increasingly setting evening power prices in Australia – pushing more expensive gas generation out of the market. Comparing the final quarter of 2025 with Q4 in the previous year: ✅ Batteries set the price twice as often (36% of the time in 2025 vs 18% in 2024) ✅ Evening peak wholesale prices halved to around $100/MWh ✅ Price volatility was significantly reduced And this trend has continued into Q1 2026, with growing battery capacity soaking up more cheap daytime solar and shifting it into the evening peak – reducing the need for more expensive hydro and gas generation. Gas-fired generation in the NEM has now fallen to a 25-year low. Historically, gas generators often set evening prices in Australia's electricity market. Batteries are increasingly disrupting that dynamic by turning abundant daytime solar into firm evening supply. And this is just the beginning. Large amounts of new battery capacity are still being added across the grid, helping to reduce curtailment, lower evening volatility and further reduce reliance on expensive gas generation.

If you don't understand this, you will not understand why LLM-based agents are irreparably failing for a general-purpose problem solving. An agent (by the way it was the topic of my PhD 20 years ago) to be useful, must be rational. Being rational means to always prefer an outcome that results in the maximal expected utility to its master/user. Let’s say an agent has two actions they can execute in an environment: a_1 and a_2. If the agent can predict that a_1 gives its user an expected utility of 10, and a_2 gives an expected utility of -100, then a rational agent must choose a_1 even if choosing a_2 seems like a better option when explained in words. The numbers 10 and -100 can be obtained by summing the products of all possible outcomes for each action and their likelihoods. Now here is the problem with LLM-based agents. The LLM is not optimizing expected utility in the environment. It is optimizing the next token, conditioned on a prompt, a context window, and a training distribution full of examples of what helpful answers are supposed to look like. Those are not the same objective. So when we wrap an LLM in a loop and call it an “agent,” we have not created a rational decision-maker. We have created a text generator that can imitate the surface form of deliberation. It may say things like: “I should compare the expected outcomes.” “The best action is probably a_1.” “I will now execute the optimal plan.” But the internal mechanism is not selecting actions by maximizing the user’s expected utility. It is generating a continuation that is statistically appropriate given the prompt and prior context. This distinction matters enormously. For narrow tasks, the imitation can be good enough. If the environment is constrained, the actions are simple, and the success criteria are close to patterns seen in training, the system can appear agentic. But for general-purpose problem solving, the gap becomes fatal. A rational agent needs stable preferences, calibrated beliefs, causal models of the world, the ability to evaluate consequences, and the discipline to choose the action with maximal expected utility even when that action is boring, non-linguistic, or unlike the examples in its training data. An LLM-based agent has none of that by default. It has fluency. It has pattern completion. It has a remarkable ability to compress and recombine human text. But fluency is not rationality, and a plausible plan is not an expected-utility calculation. This is why these systems so often fail in strange, brittle, and irreparable ways when given open-ended responsibility. They are not failing because the prompts are insufficiently clever. They are failing because we are asking a simulator of rational agency to be a rational agent.

The European Central Bank is now making the economic case for decarbonisation. Not as climate policy. As monetary policy. Frank Elderson, ECB board member, argues in the Financial Times that Europe's dependence on imported fossil fuels is a structural threat to price stability (👉 https://lnkd.in/eKWWjKbh). The data is damning: energy price shocks pushed euro area inflation to 10.6% in October 2022. Every geopolitical tremor in the Middle East shows up in European energy bills. And the ECB is caught in an impossible bind: tighten to fight inflation and deepen the slowdown, ease to support growth and entrench inflation. The solution is not better forecasting models or finetuned monetary policy. It is cheaper energy. Spain shows what is possible. Wholesale electricity prices in early 2024 were approximately 40% lower than they would have been had wind and solar generation remained at 2019 levels ( 👉 https://lnkd.in/edXgxh9q). Once the infrastructure is built, the energy itself is virtually free. Volatile global commodity markets simply become less relevant. Elderson is explicit: €660 billion per year in clean energy investment sounds large. But Europe already spends nearly €400 billion annually on fossil fuel imports, money that leaves the continent and buys geopolitical vulnerability. Analysis in the UK shows that for every pound invested in sustainable energy, benefits outweigh costs by a factor of 2.2 to 4.1 ( 👉 https://lnkd.in/emEXVfiw). This is precisely what I argued in my piece for Triodos a few weeks ago: Europe's crisis response has been backwards. We keep treating energy dependence as a shock to manage rather than a structural problem to fix. (👉https://lnkd.in/ehFqA6iY) The ECB cannot decarbonise Europe. What it can do is name the conditions: keep the ETS, mobilise capital toward renewable capacity, strip out fossil fuel subsidies, and stop confusing cheap fossil fuels with affordable energy. If people need help with energy costs, target it: don't suppress the price signal that drives the transition. The cheapest energy is the energy we no longer have to import.

The latest reporting from the Financial Times highlights a point that energy analysts have been making for years: geopolitical shocks consistently strengthen the case for renewables, electrification and storage. Microsoft’s global vice-president for energy notes that oil and gas price spikes linked to the Middle East conflict reinforce the value of wind, solar and batteries in providing price stability. Once installed, renewables offer predictable cost profiles and reduce exposure to volatile global fuel markets. We saw this dynamic after Russia’s invasion of Ukraine. Europe accelerated solar deployment, heat pump uptake increased in several countries, and governments revisited questions of energy security through the lens of diversification and electrification. The underlying issue remains unchanged. Fossil fuels must continuously flow through complex global supply chains. When those flows are disrupted, prices spike and economies are exposed. Renewables, by contrast, are capital intensive upfront but deliver long term domestic supply and insulation from commodity shocks. There are short term risks. Inflation, higher interest rates and supply chain constraints can slow clean energy investment. Some governments may also respond by doubling down on gas infrastructure. The policy challenge is to avoid locking in further structural vulnerability. Energy security and climate policy are not competing objectives. In a world of recurrent geopolitical instability, they are increasingly aligned.

𝗪𝗵𝗲𝗻 𝗱𝗲𝗹𝗶𝘃𝗲𝗿𝘆 𝗮𝗽𝗽𝘀 𝗰𝗼𝗺𝗲𝘀 𝘁𝗼 𝘁𝗼𝘄𝗻, 𝗰𝗿𝗶𝗺𝗲 𝗳𝗮𝗹𝗹𝘀! An interesting study by Hugo Allouard, Cecere Grazia, Jose De Sousa, Olivier Marie, Inès Picard (2026) examined how food-delivery platforms affect local labor markets and crime in France. The findings from the study reveal that Gig platforms can potentially activate people who were outside the labor market. The study found that crime fell selectively and meaningfully (After platform entry, 𝗼𝘃𝗲𝗿𝗮𝗹𝗹 𝗰𝗿𝗶𝗺𝗲 𝗱𝗲𝗰𝗹𝗶𝗻𝗲𝘀 ~𝟯%). Crime rate decline was attributed to 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗱𝗲𝘁𝗲𝗿𝗿𝗲𝗻𝗰𝗲 (Legal income—even flexible, low-wage income—raises the opportunity cost of crime) and 𝗦𝗲𝗹𝗳-𝗶𝗻𝗰𝗮𝗽𝗮𝗰𝗶𝘁𝗮𝘁𝗶𝗼𝗻 (Time spent working (often evenings/weekends) reduces unstructured time—when petty crime is most likely). Even imperfect, flexible, low-barrier work can meaningfully change behavior for people at the edge of the labor market—and the justice system. This reframes gig work not just as a labor issue, but as a 𝘀𝗼𝗰𝗶𝗮𝗹 𝘀𝘁𝗮𝗯𝗶𝗹𝗶𝘇𝗲𝗿 𝗮𝘁 𝘁𝗵𝗲 𝗺𝗮𝗿𝗴𝗶𝗻𝘀.

🆕 Following extensive consultations with our stakeholders, the European Commission has proposed a Steel Regulation that should help restore balance to the EU #steel market. WHY❓Global overcapacity, driven by non-market policies, is threatening the long-term competitiveness of European steel. In just a decade, the EU's steel trade balance has deteriorated dramatically: from a 11 million tonne surplus to a 10 million tonne deficit. Meanwhile, other economies are rapidly expanding their steel sectors. This is no longer just one country issue. WHAT❗️A new import regime, replacing the current safeguard that expires on 30 June 2026, will: ✔️ Cut the tariff-free import quota by 47%, from 33 million tonnes to 18.3 million tonnes. ✔️ Introduce a prohibitive 50% out-of-quota tariff. ✔️ Imports from all third countries - except our EEA partners - will be covered. ✔️ While importers must disclose where the steel was melted and poured. 🔜 These measures are WTO-compatible, clearly allowed under existing rules. Unlike others, the EU continues to be largely open and will transparently engage with partners under GATT Article XXVIII, offering compensation. We're committed to rules-based trade but must defend our interests. 👉 https://lnkd.in/ecmuXZSD 👉 https://lnkd.in/egGRdXpx EU Trade

🌍 We Can’t Afford to Get Climate Policy Wrong—A Look at the Data Behind What Really Works 🌍 In the race against time to combat climate change, bold promises are everywhere. But here’s the critical question: Are the policies being implemented actually reducing emissions at the scale we need? A groundbreaking study published in Science, cuts through the noise and delivers the insights we desperately need. Evaluating 1,500 climate policies from around the world, the research identifies the 63 most effective ones—policies that have delivered tangible, significant reductions in emissions. What’s striking is that the most successful strategies often involve combinations of policies, rather than single initiatives. Think of it as the ultimate teamwork: when policies like carbon pricing, renewable energy mandates, and efficiency standards are combined thoughtfully, the impact is far greater than any one policy could achieve on its own. It’s a powerful reminder that for climate solutions the whole is indeed greater than the sum of its parts. Moreover, the study’s use of counterfactual emissions pathways is a game changer. By showing what would have happened without these policies, it provides a clear, quantifiable measure of their effectiveness. This is exactly the kind of rigorous evaluation we need to ensure that every policy counts, especially when we’re working against the clock. If we’re serious about meeting the Paris Agreement’s targets, we need to focus on what works—and this research offers a clear roadmap. Let’s champion policies that have proven to make a difference, because we don’t have time to waste on anything less. 🔗 Full study in the comments #ClimateAction #Sustainability #PolicyEffectiveness #ParisAgreement #NetZero #ClimateScience

A couple of news items have me thinking. And frankly, getting a bit agitated. The first was the news that the Kiwisaver gender gap has got worse in the past year. New research from Te Ara Ahunga Ora The Retirement Commission shows a 36 percent gap between the amount men and women are putting into KiwiSaver each year, far outpacing the actual gender pay gap. Men and women are contributing the same percentage of their salaries, but women are disadvantaged by working part-time and taking greater (unpaid) care responsibilities. The other bit of not-unrelated news, is the NZ Herald’s list of top-earning CEOs. Of the top 10 - just one woman. In the 54 CEOs surveyed: seven women. In the immortal words of Carrie Bradshaw: I couldn’t help but wonder… WTF is going on here? How have we not come further? Of those top 10 CEO’s companies, how many are reporting on their gender pay gaps? (The answer, according to the Mind the Gap registry: 4) Is there a relationship between perimenopause/menopause support (or lack of it) and the lack of women in CEO roles in our top organisations? AND between perimenopause/menopause and the Kiwisaver gender gap? I think there might be. We know, for example, from the work of Sarah Hogan who found in her NZIER research that 14% of women said they had to reduce their working hours to manage their menopause symptoms, and 6% had changed roles. Twenty percent of women who experienced symptoms said it would have been helpful to be able to make adjustments, but they never requested any, mostly because of menopause and gendered ageism stigma. All of us who are working in menopause education have heard stories from women who - at a critical stage in their careers in midlife - have made the call to step back rather than step up into senior roles, because of the challenges of menopause and the lack of support for them in their organisations. We have to talk more about this. In fifty years we’ve made so little progress… we REALLY don’t want our granddaughters to be still facing these kinds of shocking statistics in fifty years’ time. 

The European Commission has introduced a new carbon tax on imported goods called the Carbon Border Adjustment Mechanism (CBAM). This is meant to make sure that European companies and companies from other parts of the world are on the same page when it comes to carbon pricing and environmental commitments. Here are the main changes: 🔴 Emissions Reporting: Starting in October this year, companies have to start keeping track of how much carbon is linked to the goods they import. They need to start reporting this data by January 2024. This reporting will continue until the end of 2025. 🔴 Carbon Leakage Prevention: CBAM is a way to prevent companies from moving their production to places with weaker environmental rules to avoid carbon costs. It makes sure that European products and products made outside of Europe have similar carbon costs. 🔴 CBAM Certificates: Importers have to get CBAM certificates to match the carbon pricing between EU and non-EU products. They need to provide details about the product's carbon footprint, where it's from, how it's made, and its emissions data. This includes emissions during production and indirect emissions, like electricity use. 🔴 Covered Sectors: CBAM applies to industries with high carbon emissions like iron and steel, cement, fertilisers, aluminium, electricity, hydrogen, and some downstream products like screws and bolts. It also covers certain indirect emissions under certain conditions. Importers mainly need to report emissions during the transition phase until 2026. To help importers and producers outside of the EU adapt, the EU Commission is providing guidelines and tools to calculate emissions. They're also offering training materials and webinars. Some important data points to consider: 🟢 Carbon Leakage: A study by the European Environmental Bureau warns that unchecked carbon leakage could cause a 15% increase in global emissions, undermining climate efforts. CBAM aims to prevent this. 🟢 Emissions Differences: The World Trade Organization says that different countries have different emissions rules, leading to different carbon costs. CBAM aims to make this fairer. 🟢 Economic Impact: The European Commission estimates that the global carbon allowance market could be worth €4.5 billion per year by 2030. CBAM will significantly affect international trade and revenues. 🟢 Industry Shift: A study by the European Parliament Research Service shows that without CBAM, high-emission industries might move to places with weaker rules, leading to job losses and less competitiveness in the EU. 🟢 Green Transition: The International Monetary Fund says that well-designed carbon pricing like CBAM can encourage industries to become more environmentally friendly, contributing to a greener global economy. 🟢 Regulatory Challenges: CBAM's reporting requirements might be tough for importers initially. However, the long-term benefits of fair carbon pricing are expected to outweigh the challenges.

A Time to Reflect on the Tensions Between Growth and Sustainability #NYCW Next week, world leaders and industry giants will gather for New York Climate Week, ready to discuss collaboration to tackle the climate crisis. It’s a promising step, right? But here’s the twist: this all happens in a country that champions a capitalist economy—one that demands perpetual growth and profits. Can we really expect a system designed for “more, more, more” to suddenly protect the planet and its people? On one hand, development fuels progress, and progress is rooted in growth. On the other hand, that very pursuit of growth undermines sustainability. How can we reconcile this? Take maritime decarbonization: we’re focused on alternative fuels to cut emissions. But maybe the real solution lies in reducing global trade itself. Fewer ships, fewer emissions. Can we embrace that reality in a globalized world? Perhaps it’s time to rethink sustainability altogether. Instead of focusing solely on economic growth, we need to re-balance our approach, placing environmental sustainability on equal footing. Just as governments and regulators have propped up the economy, we need that same commitment to protect our ecosystems. Without environmental checks and balances, does a capitalist economy really set us up for a sustainable future? As we head into Climate Week, it’s worth critically evaluating the very foundations of our assumptions. Are we ready for real change—or are we simply polishing the surface of a flawed system?