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It’s one of the biggest long-term threats to price stability.
People really hate inflation. Fortunately, prices are no longer rising nearly as rapidly as they were in 2021 and 2022. However, we may be on the cusp of a longer epoch of periodic inflation caused by climate change, one of the biggest long-term threats to price stability. The Federal Reserve should act accordingly.
America’s central bank has a dual mandate: It calibrates monetary policy to maximize employment while minimizing inflation. With unemployment reaching record lows, the Fed has been focused on controlling the spike in inflation we saw from 2021-2022. It quickly raised interest rates over the last two years in order to cool the economy and put downward pressure on prices. And voila, after peaking in the summer of 2022, inflation has steadily fallen to manageable levels.
However, the Fed’s rate hikes may not have been the primary driver behind disinflation. Inflation, it’s often said, occurs when there’s too much money chasing too few goods. The Fed’s higher-interest rate policy primarily hit the too much money side of the ledger, decreasing demand by making it more expensive for people and businesses to borrow. But there’s mounting evidence that the bigger macro-economic problem was too few goods. The Roosevelt Institute did a close analysis of inflation’s decline since 2022, and found that prices of goods have fallen even while demand has increased. That suggests that most of the decline in inflation has been from increased supply — that is, inflation was cured by recovering from pandemic-era supply chain bottlenecks. Supply chains that got snarled by COVID-19 production shutdowns and Russia’s invasion of Ukraine slowly sorted themselves out; as more goods came on to the market, prices eventually stabilized.
Indeed, the Federal Reserve’s own data found that supply chain pressure closely tracked inflation. Researchers at the San Francisco Fed found that supply chain issues account for 60 percent of inflation in 2021 and 2022.
In order to prevent future inflation flare-ups, we must guard against other foreseeable supply chain shocks. The pandemic may have been a once-in-a-lifetime (let’s hope) calamity, but it won’t be the last supply pileup. Climate change is also expected to wreak havoc on the global movement of goods. As the planet warms, droughts, floods, and other extreme weather will become more frequent and more severe. That will lead to a rise in the magnitude and frequency of supply-chain disruptions as factories are evacuated or shipping routes become untraversable.
For example, in August 2022, Chinese factories were closed not due to the pandemic, but because of a brutal drought. These closures in turn froze international supply chains for cars, electronics and other goods. Significant waterways for international trade, like the Panama Canal and the Rhine, have seen their water levels periodically dry up so much that shipping vessels cannot pass through, halting the shipment of goods.
We’ll see more of this as warming worsens. As the White House Council of Economic Advisers said, “As [supply-chain] networks become more connected, and climate change worsens, the frequency and size of supply-chain-related disasters rises.” The CEA found that over the last 40 years, the frequency of natural disasters around the world has tripled, and the number of billion-dollar disasters each year has risen from five to 20.
Food prices are among the most visible — and painful — forms of inflation for consumers. And we’ve seen climate-related weather events drive up food prices in the past. As the U.S. Department of Agriculture recalled in its 2022 supply chain report, a severe years-long drought in the southern plains states in the early 2010s dramatically culled the population of beef cows and caused historically high beef prices. And global heat waves in recent years have sent the cost of staple crops soaring.
While some amount of warming is locked in at this point, doing all we can to cut emissions as quickly as possible will help minimize future supply chain disruptions. That requires building massive amounts of new clean energy infrastructure. In 2022, the federal government passed major climate legislation as part of the Inflation Reduction Act to offer hundreds of billions of dollars in subsidies to encourage the development of wind farms, solar arrays, and other clean energy sources, as well as financial incentives for consumers to purchase electric vehicles, heat pumps, and other clean-energy home upgrades.
Unfortunately, the passage of the IRA has coincided with the Fed’s generationally-high interest rate policy. High interest rates have made it much more costly to build renewable energy projects in the U.S. and around the world — especially expensive projects like offshore wind farms, which have seen multiple cancellations and delays due to higher-than-anticipated financing costs. High rates are also a heavier drag on renewable energy projects than fossil fuel projects because the bulk of the costs for a wind or solar farm are in upfront construction.
The Fed expects to begin gradually cutting interest rates over the coming year if inflation continues to cool. That would ease borrowing costs throughout the economy, which will help more clean energy projects get built and make EVs more affordable to more buyers. That’s a win-win: A swift pivot to a clean-energy economy will reduce emissions, which will also mitigate future weather-related supply chain shocks. And that will make it easier for the Fed to fulfill its mandate to manage inflation in the future: Lower interest rates now will help support rapid decarbonization, which in turn will reduce climate-induced inflation down the road.
That’s not to say that the central bank needs to morph into a “Green Fed.”
“The Federal Reserve is not and will not be a ‘climate policymaker,’” Chairman Jerome Powell said in October, when the Fed and other agencies unveiled guidance for how banks should manage climate-related financial risk. “Decisions about policies to address climate change must be made by the elected branches of government.”
The Fed takes a thousand-foot view of the economy, and can’t set rates based on the needs of any one industry, no matter how important. But as climate change reshapes the world around us, all institutions will feel its effects, including the Fed. While environmental goals won’t drive Fed policy, managing long-term inflation will mean paying attention to how the bank’s actions affect the climate. Just as the Fed monitors how interest rate policy affects key sectors like the housing market, it should also pay increasing attention to how it affects the clean-energy sector.
When the Inflation Reduction Act passed, the law’s name drew some scorn as a supposed misnomer for what was fundamentally a climate bill. But over the long haul, combating climate change is a big part of what we need to do to ward off inflation. If we fall short, then missed decarbonization opportunities today will increase the threat of extreme-weather supply-chain bottlenecks tomorrow. And that means more inflation. Even if it’s not a “climate policymaker,” the Fed will come to care about climate change.The only question is whether that happens years from now, when climate inflation arrives in earnest, or now, when we still have a chance to do something about it.
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On the Chevy Bolt’s return, China’s rare earth crackdown, and Nestle’s spoiled climate push
Current conditions: A possible nor’easter is barreling toward New York City with this weekend with heavy rain, flooding, and winds of up to 50 miles per hour • While Hurricane Priscilla has weakened to a tropical storm, it’s still battering Baja California with winds of up to 70 miles per hour • A heatwave in Iran is raising temperatures so much that even elevations of more than 6,500 feet are nearly 90 degrees Fahrenheit.
The Bureau of Land Management has canceled Nevada’s largest solar megaproject, Esmeralda 7, Heatmap’s Jael Holzman scooped late Thursday. The sprawling network of panels and batteries in the state’s western desert was set to produce a gargantuan 6.2 gigawatts of power — equal to nearly all the power supplied to the southern part of the state by the state’s main public utility. At maximum output, the project could have churned out more power than the country’s largest nuclear plant, the nearly 5 gigawatts from Plant Vogtle’s four reactors in Georgia, and just under the nearly 7.1-gigawatt Grand Coulee hydroelectric dam in Washington, the nation’s most powerful electrical station. It would have been one of the largest solar projects in the world.
Backed by NextEra Energy, Invenergy, ConnectGen, and other renewables developers, the project was moving forward at what Jael called “a relatively smooth pace under the Biden administration, albeit with significant concerns raised by environmentalists about its impacts on wildlife and fauna.” The solar farm notched a rare procedural win in the early days of the Trump administration when the Bureau of Land Management advanced its draft environmental impact statement. When the environmental review came out, BLM said the record of decision would arrive in July. “But that never happened,” Jael wrote. Instead, as part of a deal with conservative harderliners in Congress to pass his tax megabill, Trump issued an executive order that, among other actions aimed at curtailing renewables development, directed the Department of the Interior to review its policies toward wind and solar. A series of departmental orders followed that effectively froze all permitting decisions for solar. Fast forward to today, when Esmeralda 7’s status on the BLM website was changed to “cancelled,” normally an indication that the developers pulled the plug.
The Coastal Virginia Offshore Wind project, a 2.6-gigawatt giant that’s nearly triple the size of the nation’s current largest operating seaborne wind farm, is just six months from coming online, its leadership said. In an August earnings call, Dominion Energy CEO Robert Blue said the project would start producing electricity in “early 2026.” But on Thursday, the company told Canary Media’s Clare Fieseler that “first power will occur in Q1 of next year,” and “we are still on schedule to complete by late 2026.” As of the end of last month, Dominion had installed all 176 turbine foundations.
Since returning to office, President Donald Trump has waged what Jael called a “total war on wind power,” halting work on projects that were nearly 80% complete and ordering a half dozen federal agencies to join the effort. But the industry has fought back. Two weeks ago, as I reported in this newsletter, a federal judge lifted the administration’s stop-work order. While Secretary of Energy Chris Wright last month brushed off the targeting of offshore wind as a “one-off complication,” the assault has alarmed even the administration's favored sectors of the energy industry. Earlier this week, Shell’s top executive raised the alarm over what she said could set a precedent that blows back to big oil in the future.
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A fresh jolt for the Bolt. Justin Sullivan/Getty Images
Elon Musk’s promise to deliver a Tesla for under $30,000 may — as I wrote here yesterday — remains unfulfilled, but one of his biggest rivals is bringing back its popular affordable electric vehicle. General Motors announced on Thursday that it’s rolling out a new line of Chevrolet Bolts in 2027, starting at $29,990 and later introducing a $28,995 model. “The Chevrolet Bolt was the industry’s first affordable mass-market, long-range EV and it commanded one of GM’s most loyal customer bases thanks to its price, versatility and practicality,” Scott Bell, Chevrolet’s global vice president, said in a statement. “After production ended, we heard our customer’s feedback and their love for this product. So the Bolt is coming back — by popular demand and better than ever — for a limited time.” When Chevy discontinued the Bolt in 2023, the car was popular but had some problems, Andrew Moseman wrote Thursday in Heatmap. And while the 2027 Bolt “is virtually indistinguishable from the old car,” he wrote, “what’s inside is a welcome leap forward.” Notably, the new Bolt’s lithium-ion-phosphate battery delivers a max range of 255 miles and can handle a 100% charge without risking long-term damage to the battery’s lifespan.
Though the $7,500 federal tax credit for electric vehicles expired last month, it’s morning in America for battery-powered car drivers. The U.S. is adding charging stations at a record clip, Bloomberg reported Thursday.
China’s Commerce Ministry announced a new edict Thursday requiring foreign suppliers to obtain approval from Beijing to export some products with certain rare earths if the metals account for 0.1% of the goods’ total value. Export applications for products with military uses “generally won’t be approved,” The Wall Street Journal reported, and licenses related to semiconductors or artificial intelligence will be granted on a case-by-case basis. “This is a very big deal,” Dean W. Bell, a senior fellow at the Foundation for American Innovation, wrote in a post on X. “China has asserted sweeping control over the entire global semiconductor supply chain, putting export license requirements on all rare earths used to manufacture advanced chips. If enforced aggressively, this policy could mean ‘lights out’ for the US AI boom, and likely lead to a recession/economic crisis in the US in the short term.” The new restrictions even apply to some lithium batteries and equipment used to make them.
Less than two years ago, Nestle formed an industry alliance with food giants Danone and Kraft Heinz to cut methane emissions from the dairy industry’s hundreds of thousands of suppliers. But last month, Nestle’s logo vanished from the initiative's website. On Wednesday, Bloomberg reported that the Swiss behemoth had abandoned the effort. “We have decided to discontinue our membership of the Dairy Methane Action Alliance,” a company spokesperson told the newswire.
The exit comes as sustainability executives, academics, and carbon-accounting experts spar over how to measure companies’ emissions in what Heatmap’s Emily Pontecorvo called an “obscure philosophical battle that could reshape the clean energy economy.” With the Trump administration phasing out wind and solar tax credits next year, Emily wrote, “voluntary action by companies will take on even greater importance in shaping the clean energy transition. While in theory, the Greenhouse Gas Protocol solely develops accounting rules and does not force companies to take any particular action, it’s undeniable that its decisions will set the stage for the next chapter of decarbonization.”
Increasingly extreme weather is driving up insurance costs all over the world, making homes almost impossible to underwrite in fire- or flood-prone places such as California or Florida where climate change is raising recovery costs. But Japan’s largest non-life insurer is taking a different approach than just canceling policies. As the Financial Times reported Thursday, Tokio Marine purchased Integrated Design & Engineering this year for roughly $642 million in a bid to offer the design consultancy’s services to “Japanese companies at risk of landslides, flooding, and natural disasters related to climate change” to upgrade facilities before destruction occurs.
It would have delivered a gargantuan 6.2 gigawatts of power.
The Bureau of Land Management says the largest solar project in Nevada has been canceled amidst the Trump administration’s federal permitting freeze.
Esmeralda 7 was supposed to produce a gargantuan 6.2 gigawatts of power – equal to nearly all the power supplied to southern Nevada by the state’s primary public utility. It would do so with a sprawling web of solar panels and batteries across the western Nevada desert. Backed by NextEra Energy, Invenergy, ConnectGen and other renewables developers, the project was moving forward at a relatively smooth pace under the Biden administration, albeit with significant concerns raised by environmentalists about its impacts on wildlife and fauna. And Esmeralda 7 even received a rare procedural win in the early days of the Trump administration when the Bureau of Land Management released the draft environmental impact statement for the project.
When Esmeralda 7’s environmental review was released, BLM said the record of decision would arrive in July. But that never happened. Instead, Donald Trump issued an executive order as part of a deal with conservative hardliners in Congress to pass his tax megabill, which also effectively repealed the Inflation Reduction Act’s renewable electricity tax credits. This led to subsequent actions by Interior Secretary Doug Burgum to freeze all federal permitting decisions for solar energy.
Flash forward to today, when BLM quietly updated its website for Esmeralda 7 permitting to explicitly say the project’s status is “cancelled.” Normally when the agency says this, it means developers pulled the plug.
I’ve reached out to some of the companies behind Esmeralda 7 but was unable to reach them in time for publication. If I hear from them confirming the project is canceled – or that BLM is wrong in some way – I will let you know.
It’s not perfect, but pretty soon, it’ll be available for under $30,000.
Here’s what you need to know about the rejuvenated Chevrolet Bolt: It’s back, it’s better, and it starts at under $30,000.
Although the revived 2027 Bolt doesn’t officially hit the market until January 2026, GM revealed the new version of the iconic affordable EV at a Wednesday evening event at the Universal Studios backlot in Los Angeles. The assembled Bolt owners and media members drove the new cars past Amity Island from Jaws and around the Old West and New York sets that have served as the backdrops of so many television shows and movies. It was star treatment for a car that, like its predecessor, isn’t the fanciest EV around. But given the giveaway patches that read “Chevy Bolt: Back by popular demand,” it’s clear that GM heard the cries of people who missed having the plucky electric hatchback on the market.
The Bolt died at the height of its powers. The original Bolt EV and Bolt EUV sold in big numbers in the late 2010s and early 2020s, powered by a surprisingly affordable price compared to competitor EVs and an interior that didn’t feel cramped despite its size as a smallish hatchback. In 2023, the year Chevy stopped selling it, the Bolt was the third-best-selling EV in America after Tesla’s top two models.
Yet the original had a few major deficiencies that reflected the previous era of EVs. The most egregious of which was its charging speed that topped out at around 50 kilowatts. Given that today’s high-speed chargers can reach 250 to 350 kilowatts — and an even faster future could be on the way — the Bolt’s pit stops on a road trip were a slog that didn’t live up to its peppy name.
Thankfully, Chevy fixed it. Charging speed now reaches 150 kilowatts. While that figure isn’t anywhere near the 350 kilowatts that’s possible in something like the Hyundai Ioniq 9, it’s a threefold improvement for the Bolt that lets it go from 10% to 80% charged in a respectable 26 minutes. The engineers said they drove a quartet of the new cars down old Route 66 from the Kansas City area, where the Bolt is made, to Los Angeles to demonstrate that the EV was finally ready for such an adventure.
From the outside, the 2027 Bolt is virtually indistinguishable from the old car, but what’s inside is a welcome leap forward. New Bolt has a lithium-ion-phosphate, or LFP battery that holds 65 kilowatt-hours of energy, but still delivers 255 miles of max range because of the EV’s relatively light weight. Whereas older EVs encourage drivers to stop refueling at around 80%, the LFP battery can be charged to 100% regularly without the worry of long-term damage to the battery.
The Bolt is GM’s first EV with the NACS charging standard, the former Tesla proprietary plug, which would allow the little Chevy to visit Tesla Superchargers without an adapter (though its port placement on the front of the driver’s side is backwards from the way older Supercharger stations are built). Now built on GM’s Ultium platform, the Bolt shares its 210-horsepower electric motor with the Chevy Equinox EV and gets vehicle-to-load capability, meaning you’ll be able to tap into its battery energy for other uses such as powering your home.
But it’s the price that’s the real wow factor. Bolt will launch with an RS version that gets the fancier visual accents and starts at $32,000. The Bolt LT that will be available a little later will eventually start as low as $28,995, a figure that includes the destination charge that’s typically slapped on top of a car’s price, to the tune of an extra $1,000 to $2,000 on delivery. Perhaps it’s no surprise that GM revealed this car just a week after the end of the $7,500 federal tax credit for EV purchases (and just a day after Tesla announced its budget versions of the Model Y and Model 3). Bringing in a pretty decent EV at under $30,000 without the help of a big tax break is a pretty big deal.
The car is not without compromises. Plenty of Bolt fans are aghast that Chevy abandoned the Apple CarPlay and Android Auto integrations that worked with the first Bolt in favor of GM’s own built-in infotainment system as the only option. Although the new Bolt was based on the longer, “EUV” version of the original, this is still a pretty compact car without a ton of storage space behind the back seats. Still, for those who truly need a bigger vehicle, there’s the Chevy Equinox EV.
For as much time as I’ve spent clamoring for truly affordable EVs that could compete with entry-level gas cars on prices, the Bolt’s faults are minor. At $29,000 for an electric vehicle in the U.S., there is practically zero competition until the new Nissan Leaf arrives. The biggest threats to the Bolt are America’s aversion to small cars and the rapid rates of depreciation that could allow someone to buy a much larger, gently used EV for the price of the new Chevy. But the original Bolt found a steady footing among drivers who wanted that somewhat counter-cultural car — and this one is a lot better.