Tom Lee Devlin (2:52)

It's been a difficult few years for the European auto industry, and one of the things that they've been pushing hard for is a watering down of the EU's plan to ban petrol cars. And that's what we've now seen happen.

Rosie Blore (3:06)

Tom Lee Devlin is the Economist's Business editor.

Tom Lee Devlin (3:10)

But I think the important point here is that favoring petrol power in the long run, it's not really going to be in the interests of European and American carmakers.

Rosie Blore (3:20)

So Tom what's really going on here? Is the EU just shifting the goalposts or is it a full U turn?

Tom Lee Devlin (3:27)

So instead of an outright ban, car makers will now have to cut their tailpipe emissions by 90% by 2035, compared with the 2021 levels. Interim targets along the way, and also goals for electrifying commercial vehicles have been watered down as well. So in one sense, yes, I think you can say this is a reversal. In 2035, you are still going to be able to buy a petrol car in the eu, but it is still somewhat restrictive for the European auto industry.

Rosie Blore (3:59)

And why has this happened?

Tom Lee Devlin (4:01)

Two years ago, when this commitment was first set, growth expectations for EV sales in Europe were very high. Carmakers had made big promises to their investors around rapid expansion of EVs. A lot of that was based on enviously looking at Tesla, which had just soared to a $1 trillion market value at the time. But in reality, the road to electrification in Europe has been much slower and much bumpier than people expected back then. So this year, around 1 in 5 cars sold in Europe will be pure EVs. And on the kind of current trajectory by 2035, when that ban was meant to come in place, we were really on course for only around 3/4 at best, of cars in the block being pure electric.

Rosie Blore (4:51)

That still seems like quite a lot to me, given that it was a pipe dream even 10 years ago. But why aren't Europeans taking to EVs as fast as expected?

Tom Lee Devlin (5:01)

There are a number of challenges here. I mean, EVs do come with significantly higher upfront costs. Smaller car models are very popular in Europe, and there are fewer of those in EVs to choose from. There are also lingering concerns about the availability of charging infrastructure. Another factor here has been some toing and fro ing by governments around purchase subsidies. So if we take the example of Germany, EV sales there collapsed when incentives for EV purchases were removed at the end of 2023. You do see a similar story playing out in the US to an even greater extent. Fewer than 1 in 10 cars sold there are pure electrics and the rate has really stall completely. Donald Trump has made very clear his preference for gas guzzling cars. He's rolled back some of the incentives and other measures to support EVs that were put in place by the Biden administration. So we're also seeing a similar story play out on the other side of the Atlantic.

Rosie Blore (6:00)

So where does all of this leave the EU car industry?

Tom Lee Devlin (6:03)

Well, European carmakers have been clamoring for this change But I think it's important to say that slamming the brakes, if you can excuse the pun, also comes with dangers. One of the big strategic threats that the European auto industry is facing is the rise of Chinese competitors, in particular Chinese EV makers. A year or so ago, the EU introduced some hefty tariffs on Chinese EVs, but they're still expanding on the continent. Their share of the Western European car market as a whole in the first 10 months of the year was 10.7%, and that was a percentage point up from a year ago. Despite these hefty new tariffs, and in particular, we've seen very strong growth of hybrid electric cars from China which are not subject to the new tariffs.

Rosie Blore (6:50)

And more importantly, Tom, where does this leave the EU's overall carbon emissions targets?

Tom Lee Devlin (6:56)

Well, obviously this is a setback and it was a high profile commitment that the EU made cars are a significant contributor to carbon emissions. I do think in the long run, we are still heading towards a future dominated by electric vehicles. They are becoming rapidly cheaper, not least because of the innovations and the scaling up of the ecosystem in China. And Western carmakers, a number of them are still pushing ahead with their plans for electrification. The reality is that America and Europe are not the only car markets in the world. China is a huge and still a very important car market for a number of these Western car companies, even though they've lost share in recent years. And they're also competing against Chinese companies that are growing quickly in other markets, particularly in the global South. So, yes, this does represent a setback of sorts in the ambitions around carbon emissions. But I do think we're still heading towards a future of significantly lower emissions from cars.

Rosie Blore (7:53)

Tom, thank you very much for talking to me.

Tom Lee Devlin (7:55)

Thanks very much for having me.

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Lane Green (8:39)

Today.

Rosie Blore (8:48)

Early next year, a decision is in the offing that will have a big impact on the world economy. Who will be the next chair of America's Federal Reserve? Donald Trump says he's already decided who to nominate, a decision he's expected to Reveal in the coming weeks. Even before that appointment, Trump has started to make demands on the Fed. He wants it to speed up its interest rate cuts. He's tried to oust Lisa Cook, a Fed governor, and he's already put one of his own advisors, Stephen Mirren, on the Fed board temporarily, who then voted for bumper rate cuts. With such political pressure in sway, next year could be testing for more than just America's economy.

Henry Kerr (9:28)

The most likely candidate to be the new Fed chair, taking office in May, is Kevin Hassett. That's President Trump's close economic adviser.

Rosie Blore (9:38)

Henry Kerr is our economics editor.

Henry Kerr (9:41)

He's in the White House now. He was in the White House during the first Trump administration, but he has declined in the betting markets. He's not a sure thing anymore, but he is still the favourite.

Rosie Blore (9:52)

So tell me a bit more about his background as a potential Fed chair.

Henry Kerr (9:55)

Yeah, he's quite an interesting guy. When I was reporting in Washington, decade ago, before he joined the Trump administration, he had a reputation as a quite technocratic guy. I mean, he was clearly partisan Republican, had campaigned for Republicans and so on, but he had also published in top economic journals, would present at wonkish conferences on tax policy and so on. Now, after a decade roughly, of working with Trump, he's viewed as someone who's much more partisan, who's left his time as a technocrat behind him to be more of a political operator, who will will defend the President on television, who has changed his position on trade and who has put out models and numbers which a lot of economists turn their noses up at and say are politically motivated. So the question, if it is Kevin Hassett, is which Kevin Hassett do you get? Does he become a technocrat again, which is definitely somewhere in his bones, or does he act like an agent of Trump in the Fed? And that's the big question about him.

Rosie Blore (10:56)

And is that unusual that you even could have a Fed chair who's that partisan?

Henry Kerr (11:01)

Well, not in terms of having an explicit party allegiance. Janet Yellen worked in Bill Clinton's White House and became Fed chair. Everyone knew Ben Bernanke was a Republican. Everyone knew the political leanings of Alan Greenspan, who had also worked in a Republican White House. So that's not unusual. What is more unusual is having someone go from one minute being quite a political operator into a role where the convention at least, is that you have independent technocracy. So I do think it would be unlike any Fed chair appointment for a long time in that respect, even though historically Fed chairs have hailed from a.

Rosie Blore (11:43)

Particular party and you say that Hassett's been the favourite in the betting markets, but who are the other potential candidates?

Henry Kerr (11:49)

Yes. So there was a short list of five. There were two existing Fed governors, Chris Waller and Michele Bowman, who have been calling for rate cuts this year, which aligns with what Trump wants. You have Kevin Hassett, you have a reader who is from BlackRock, the investment firm, and then finally Kevin Walsh. And following remarks that President Trump made last week to the Wall Street Journal, it looks like it's now between Kevin Hassett and Kevin Walsh, the two Kevins. Kevin Walsh is someone who was on the Fed already. He was a Fed governor during the global financial crisis, but again, slightly interesting figure because he was then and subsequently spent the 2000 and tens being quite hawkish on monetary policy. And of course, what Trump wants is someone who's going to cut interest rates. So he's a Republican and he's always in the mix for these sorts of jobs. He always pops up on the lists. But it's not actually clear how much he's having to contort himself into being what Trump really wants, which is a monetary dove. And the way it seems as if he's trying to square this circle is as Scott Besson, the Treasury Secretary who's been leading the search, has been doing by really criticizing the Federal Reserve's record on QE or quantitative easing, which is something everyone can get on board with as a criticism of the Fed, if you like your technocrats criticism of the Fed that somewhat dodges the issue of whether you're a hawk or a dove on interest rates.

Rosie Blore (13:15)

Henry, it sounds like the stakes are really high here. Of course, you're choosing a Fed chair, which is important for the future of the US economy. But this sounds even greater than that about the future of the Fed's independence.

Henry Kerr (13:27)

Yes. So it's not just about who Kevin Hassett is and what kind of Fed chair he would be. It's about the context in which this is happening. President Trump has blabbusted the Fed for not cutting interest rates fast enough. He's explicit that he wants lower interest rates in order to lessen the costs of servicing the US government's debt. And I can tell you, if you're an economist and you hear someone saying that, it's like a red alarm bell going off the stability of the monetary fiscal regime. And you also have this court case about whether or not Trump can fire Lisa Cook, who's one of the Fed governors. He's been trying to get rid of her because of irregularities in mortgage paperwork that she submitted before she was Fed governor to get a mortgage. And it's not clear whether the Supreme Court's going to let him do that or not. But it's possible he'll get the new Fed chair. It's possible that he'll be able to appoint someone to replace Lisa Cook. And it's possible that when Jerome Powell's term as chair ends in May, he leaves and another seat on the Fed board comes up as well. So you have this potential for Trump to nominate the chair and other people to the Fed to the point where he has much more influence over it. One check against that, of course, is the Senate, which has to confirm the nominations to the post. And the senators know about the importance of the Fed. But there's no question that Kevin Hassett would be confirmed. And then it plays into this bigger picture in which you have these big US Deficits, you have potentially the tariffs getting struck down in January as well. So you could have a lot of instability around America's economic policy all at once. So it's not just about who Hassett is, it's about that broader context.

Rosie Blore (15:05)

Henry, thank you very much.

Henry Kerr (15:07)

Thank you, Rosie.

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Jason Palmer (15:55)

Our sister show on science and technology. Babbage has been putting together an evidence based guide on reviving all of the delightful but unhealthy habits we tend to adopt over the holiday period. Our science correspondents answer questions like how bad really is all of the sugary food we're eating? What does alcohol do to our bodies when we drink? And why do hangovers seem to get worse as we get older?

Tom Lee Devlin (16:19)

As people age, they typically lose muscle.

Lane Green (16:22)

Mass in favor of fat.

Tom Lee Devlin (16:24)

Muscle mass holds a lot of water. Alcohol is water soluble.

Lane Green (16:29)

So as a body becomes fatter, it becomes less able to absorb and basically.

Tom Lee Devlin (16:34)

Agreeably absorb the alcohol.

Lane Green (16:36)

So you get uncomfortable jumps in buzziness.

Tom Lee Devlin (16:40)

It also tends to make hangovers worse.

Jason Palmer (16:44)

I want to promise that it's not all bad news. Check it out. Babbage is out later today. You might just hear some familiar voices pop up. Okay, Tuxedo, check Envelopes, check. Mic check. Checked. All right, cue the band. Taped from the economists offices in London. It's time for the award show. We convinced our editors was a legitimate use of our work hours. It's the word of the year. And back for our annual show, it's our guardian of the grammar wizard of words. Welcome to the stage, Lane Green.

Lane Green (17:31)

Thank you, Jason, for that warm introduction. Yes, it's time for Word of the Year.

Jason Palmer (17:39)

Okay, for a start, Lane, do us the honor of running through the nominees, the shortlist.

Lane Green (17:43)

Our first nominee actually won in another category this year. The winner for foreign Word of the Year, nominated by several of our China correspondents, was neizwan. It's Mandarin for involution. That means the increasingly cutthroat competition between businesses such as those that make electric vehicles, despite their diminishing returns as they compete their prices down. It's also become used by workers to refer to that same sense of running ever faster on the treadmill to get nowhere.

Jason Palmer (18:14)

But does this word have what it takes to be word of the year? Well, we're going to have to see. Let's hear the second nominee, Lane.

Lane Green (18:20)

Taco was one of this year's strong favorites. It was coined by Robert Armstrong, a journalist at the Financial Times, and it stands for Trump Always Chickens out, pointing to the many terror fights that Donald Trump has picked and then subsequently backed down from.

Jason Palmer (18:36)

Moving swiftly on then to our third nominee, Lane.

Lane Green (18:39)

Our third nominee is. Six. Seven. No, don't pronounce it 67. It's a ubiquitous bit of youth speak that, as the lexicographers@dictionary.com admit, has no fixed meaning. Instead, as they say, it has all the hallmarks of being brain rot, which was Oxford Dictionary's word of the year in 2024. Brain rot, of course, is a state caused by the over consumption of mindlessly entertaining junk, particularly the online kind.

Jason Palmer (19:06)

Of course I remember it well. All right, take us home.

Lane Green (19:08)

The final nominee. Our final nominee, Jason, is not a new word, but it has a new meaning in our culture. And that is slop. This year's word was spurred by OpenAI's release of Sora, which is a generative artificial intelligence platform that creates videos based on a text prompt. Suddenly you' social media feeds were filled up with such clips. And a term that started circulating already a couple of years ago in the early days of generative AI is now everywhere. Your feeds are filled with slop.

Jason Palmer (19:40)

All right, let's run through this then. The nominees are Nejuan Tako, 67, not 67 and Slop Lane, I think you have the envelope there in front of you. Please reveal the word of the year.

Lane Green (19:56)

And the winner is Slop.

Jason Palmer (20:00)

Fantastic, Lane. Now tell us what gave it the edge to make it our winner.

Lane Green (20:04)

Slop has a staying power, I think. You may not like it, but you are living with it and it is almost certainly here for the long haul. You can find slop merchants clogging up the Internet with Dribbble. You can enter a health question or a travel destination on Google and see how many of the top results are brand new webpages filled with AI written garbage. Or scroll through Instagram and see how long it takes you to come across a video that it's made up of fake clips and an AI voiceover. Or head on over to X and see if you can distinguish the real MAGA accounts from those that were revealed by X's new About this Account feature to be Slop shops in places like Pakistan or Thailand or Nigeria, so that might sound pretty bad, but I think there could at least potentially be an upside to a world awash in slope. If the news ecosystem is suddenly sodden with slop, maybe trust in established news organizations might rebound. If your social media sites become filled up with slop too, either those platforms will have to get serious about their content moderation or else their users are going to have to shut them off and go outside and have a real conversation. So is this then perhaps a case for sloptimism?

Jason Palmer (21:18)

Love what you've done there, Lane. Thanks very much as ever for your time.

Lane Green (21:21)

Thank you, Jason.

Rosie Blore (21:35)

That's it for this episode of the Intelligence. Don't forget you can listen to the Intelligence free of ads on the Economist app. If you're a subscriber, you can also access our new video offering in Insider, which has weekly shows featuring our senior editors and specialist correspondents on subjects ranging from defense and geopolitics to economics and tech. Download it wherever you get your apps and we'll see you back here tomorrow.

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