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

While a US-EU trade deal remains uncertain, US-China de-escalation is constructive for the EZ outlook. The recovery is subdued due to tariffs in the near term; fiscal policy raises growth outlook in 2026. Disinflationary forces mean the ECB is likely to cut rates further to 1.5% by September.

Q1 GDP growth slowed to 0.1% q/q – a poor start to the year before the tariffs hit. We have lowered our growth forecasts to 1.2% for 2025 (was 1.4%) and 1.0% for 2026 (was 1.3%). In addition to the direct and indirect impact of tariffs, uncertainty is also weighing on our forecasts.

‘Soft’ consumer and business confidence data deteriorated rapidly due to US government policy. ‘Hard’ data has held up better, partly due to frontloading effects from the tariffs. But now the negative impact is starting to show in the hard data as well.

April data show impact of trade war escalation last month, before Geneva truce. (Temporary) reduction of tariffs softens key drag, although uncertainty remains high. We raise our annual growth forecasts for 2025/ 2026 to 4.7% (from 4.1%) and 4.2% (from 3.9%).

This publication focuses on three factors that increase production costs: energy prices, environmental taxes on gas and electricity, and the CO2 levy. First, we examine the trend in margins for highly energy-intensive companies and industrial companies that are less energy-intensive. We also look at the impact of fossil energy consumption versus energy prices. Next, we examine environmental taxes – including in an international context – and the impact of the CO2 levy on Dutch industry. Finally, we look at deindustrialisation in the Netherlands and the extent to which this has already become a reality. We also investigate how the government's announced relief measures could affect the sustainability of the sector. We will end this note with a conclusion. (Photo by Mario Caruso on Unsplash)

The Carbon Border Adjustment Mechanism (CBAM) is integral to the EU Green Deal, designed to level the playing field for domestic and foreign producers while minimizing carbon leakage. The European Commission's Omnibus proposal offers simplifications to ease administrative burdens, ensuring most emissions remain covered.

As geopolitical fears mount, EU countries are discussing options to ramp up defence spending. Currently, there are three options: finance it with debt, raise taxes and/or cut spending elsewhere, or use EU programmes.

The European Commission is considering softening its 2040 emission reduction target according to reports. The EC may stick to a proposal for a 90% reduction by 2040, but make the emission reduction back-loaded with a slower pace to 2035. This target would be consistent with a carbon budget of around 1.7 degrees, even assuming an improbable collapse in emissions post 2035. In fact, even a 95% reduction would no longer be consistent with a 1.5 degree pathway given current emission trends. Meanwhile, the use of carbon credits to meet targets may also be allowed, which could push down on ETS prices, blunting incentives. It also seems likely that targets for 2030 and beyond will in any case be missed, which would make any 2040 ambition more difficult to be met.

The Net Zero Banking Alliance (NZBA) provides guidance to banks on setting climate goals. Initially, the NZBA had a key principle that banks should aim to limit global warming to 1.5°C above pre-industrial levels by 2100 and work towards transitioning to a net-zero economy by 2050. Banks committed to structure their portfolios according to these guidelines. On April 15, the NZBA released version 3 of its key principles[1]. These principles still align with the Paris Agreement, but the requirement to specifically target 1.5°C has been removed. This change gives banks more flexibility in choosing their paths to reducing emissions. In this note, we consider the potential impact of this change on emission reduction efforts.

International shipping is responsible for about 2% of the world's greenhouse gas emissions. This means it plays a part in reaching net-zero emissions, which would help limit global warming to 1.5 degrees. The shipping industry follows various regulations and targets from organizations like the International Maritime Organization (IMO), the Poseidon Principles, and the European Commission's Fit for 55 initiative. Shipping was included in the Emissions Trading System (ETS) in 2024. During the IMO's Marine Environment Protection Committee meeting (MEPC 83) from April 7-11, policy measures were discussed to meet the emissions targets set in the IMO's 2023 strategy. This publication focuses on the results of this meeting and what they mean for the maritime shipping industry.

Carbon prices plunged to levels last seen twelve months ago after a temporary surge in late March. The decrease in prices was driven by a decline in gas prices following the announcement of the sweeping global US tariffs on 2nd of April, which was beyond expectations both in terms of their scope and levels. The tariffs have led to deterioration of the global economic outlook. Lower expected Asian demand, a main competitor for LNG, relieved the tightness in the market and drove European gas prices downwards. Carbon prices closely followed the movement of gas, as the correlation between the two markets remains at high levels. Accordingly, market positioning has moved back to more neutral levels, as traders unwound long positions. Meanwhile, new emission data shows a reduction of 2.3% in 2024 compared to 2023, where emissions witnessed a decrease in the power and industrial sectors, while that of aviation observed an increase. Furthermore, the carbon market remains responsive to weather conditions and geopolitical developments. EUA prices were trading around 66 EUR/tCO2 at the time of writing.

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.

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.