Group Economics writes daily about developments in the macro economy. Here are our latest forecasts on interest rate and currency developments, prices in commodity markets and the economic trend in developed and emerging markets.

Despite high uncertainty, the eurozone economic recovery is unfolding broadly as expected. The first signs of frontloading are visible, providing a temporary boost to activity. Growth still subdued but on a recovery path, while inflationary pressures continue to slowly ease. The ECB is expected to pause as it nears neutral, though the April meeting will be a close call.

The second GDP calculation confirmed the Dutch economy grew by 0.4% q/q in Q4-2024. International developments have been unfolding rapidly, and we will revise our forecasts after April 2nd.

Import frontloading depresses 2025Q1 GDP nowcasts, while private domestic demand remains solid. This increases the probability of a technical recession, especially if further tariffs arrive later in Q2. Recession probabilities marginally elevated with current policy, with upside risks if tariffs are increased.

Chinese economy shows resilience despite the stepping up of US import tariffs, and targeted retaliation. We expect policy makers to continue with stepwise fiscal stimulus and more monetary easing, although Beijing is keeping part of its powder dry, with more US tariffs threats looming in April.

Recently we published an ESG economist about the carbon cycle. There are different places to store carbon such as in the lithosphere, which is the crust and uppermost solid mantle (including fossil fuel reserves), in the soil, in plants, in the ocean and in the atmosphere. But to limit climate change we would need to limit the carbon stored in the atmosphere. According to the Global Carbon Budget there are only 65 Gt, 160 Gt and 305 Gt of carbon left for the 1.5°C, 1.7°C and 2.0°C pathways. This translates into a CO2 budget of 238 Gt CO2, 586 Gt CO2 and 1,117 Gt CO2 for the 1.5°C, 1.7°C and 2.0°C pathways, respectively. As there is only limited availability especially for the 1.5°C scenario, there is a need for technologies that remove carbon from the atmosphere and store it. In recent years we have published several notes on Carbon Capture Storage Utilisation and carbon sequestration geoengineering. In this publication we focus on two technologies, namely, direct air capture and the relatively novel technology direct ocean capture. Direct air capture removes CO2 from the atmosphere and direct ocean capture removes CO2 from the ocean. In the next sections, we compare these technologies and look at their pros and cons. We end with a conclusion.

In 2024, Dutch companies that fell under the European Emissions Trading System (EU-ETS) have emitted more CO2 than they did a year ago. According to the Dutch Emissions Authority (NEa), the increase was 2.3%, which amounts to approximately 1.4 million tonnes more CO2 emissions. In this short update on emissions among EU ETS companies, we not only look at emissions in the Netherlands, but also compare this with the trends in emissions in the other 26 EU member states. We also highlight the trend in carbon costs. Based on the expected CO2 price and the path of emissions towards 2030, we estimate the carbon costs in the period through to 2030.

Sustainability and climate change seem to have lost relevance in a world marked by tariffs, wars, and inflation. This note aims to establish a business case for sustainability, despite a loosening of regulatory standards and less participation of greens in the European Parliament.

Carbon can be stored in the atmosphere, ocean, soil, vegetation and in the lithosphere. The carbon cycle is a closed system. To limit temperature increase also the amount of carbon stored in the atmosphere needs to be limited. Limiting the amount of carbon stored in the atmosphere means that it needs to be stored in one of the other sinks and this will have an impact on those sinks.

Back in September 2019, the Italian utility company Enel issued what would be the first ever sustainability-linked bond (SLB). In total, since 2019, EUR 257 billion was issued by 400 issuers through 823 SLBs. The SLB market reached a peak in 2021, fuelled by the entry of prominent issuers, and has been steadily declining since 2022, due to unfavourable economic conditions, rising interest rates, and heightened concerns around the credibility of the SLB market have hampered volumes since. Last year, SLBs accounted for 5% of all ESG bonds listed worldwide (i.e., green, social, sustainability, and sustainability-linked bonds).

Following the first green bond issued in 2007 by the European Investment Bank, the green bond market has evolved to become what is now a USD 5 trillion issuance market. Green bonds offer several benefits for both issuers and investors, leading discussions amongst academics whether these advantages translate into green bonds trading at tighter spread levels (higher prices) compared to non-green bond. This spread difference is called the greenium and is positive if the green bonds trades at tighter spread levels. In this note, we aim to evaluate this topic and explore potential advantages of green bonds for market participants, such as volatility and liquidity. This note is the first of a series of notes about the greenium.

So far this year, the price index for transition commodities has risen by 10%, mainly due to the strong recovery of copper prices and some early signs of recovery in Chinese industrial activity.

The European Union Emission Trading System (EU-ETS) is the flagship climate policy in the EU. It has been around since 2005 and mainly covers emissions from electricity generation, heavy industry, aviation, and most recently international shipping. The remaining combustion emissions from the road transport, buildings, and other light industry sectors will be addressed in a separate system called EU-ETS2. EU-ETS2 will be phased in gradually with a monitoring and reporting phase starting in 2025 and the system shall be fully operational in 2027. Fuel suppliers, rather than consumers, will be responsible to report their emissions and surrender allowances. The new system envisions lower emission reduction targets of 43% by 2030 from 2005 levels, compared to 62% under EU ETS1. The system will cover main fuels like natural gas, gasoline, diesel, heating oil, Liquefied Petroleum Gas (LPG), and coal, which sometimes is used in some industrial settings. In an earlier note [1] we covered the main aspects of EU-ETS2 such as the phase in process, associated mechanisms, and potential dynamics. This note aims to highlight the channels by which ETS2 affects regulated entities, along with monetizing the expected impacts on households energy bills in the Netherlands.

Gas consumption in the Netherlands was on average 27% lower over the period 2022-2024 compared to the 2019-2021 period. Electrification on the basis of renewable energy sources is gaining in importance in the Netherlands, but gas-fired power generation will remain necessary for the time being. Despite the decline in gas usage and GHG emissions, lower gas prices in 2025 could lead to an increase in gas consumption and emissions, especially in industry and greenhouse horticulture.

The next German coalition government will likely include the CDU/CSU and the SPD, reviving the famous GroKo (Grand Coalition), and following on the heels of what was considered as one of the most “climate ambitious governments” in the world.

Jaap Teerhuis is a Senior Fixed Income Strategist at Group Economics of ABN AMRO Bank

Larissa Fritz is a Senior Fixed Income Strategist, with focus on ESG at Group Economics of ABN AMRO Bank.

Jan-Paul van de Kerke is Senior Economist covering the Netherlands and the eurozone at Group Economics of ABN AMRO Bank.