As the rest of the world gets greener, the U.S. backpedals

Summary

Marketplace Morning Report: As the Rest of the World Gets Greener, the U.S. Backpedals Release Date: January 28, 2025

In this episode of the Marketplace Morning Report, hosted by Sabri Benishore, listeners are guided through a comprehensive analysis of the current economic landscape, the state of the airline industry, and the contrasting paths of renewable energy adoption in Europe and the United States. The episode provides insightful discussions with key experts, notable quotes, and in-depth examinations of pressing issues affecting the global economy and environmental policies.

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1. Federal Reserve's Monetary Policy Amid a Shifting Administration

Time Stamp: 00:01 – 02:31

The episode opens with Sabri Benishore exploring the pivotal role of interest rates as the "steering wheel of the economy." Referencing a discussion with David Kelly, Chief Global Strategist at JP Morgan Funds, the conversation delves into the Federal Reserve's current stance on interest rates in light of the new administration's policies.

Key Points:

• Interest Rates as Economic Control: Kelly emphasizes that "interest rates are basically the steering wheel of the economy" (00:01), highlighting their dual role in controlling inflation and promoting growth.
• Federal Reserve's Current Position: With inflation gradually decreasing and the economy performing well, the consensus is to maintain current interest rates. Kelly suggests that the Fed will likely keep rates unchanged as "inflation is being a little stubborn, but mostly coming down, and the economy is doing mostly fine" (00:30).
• Impact of New Administration: The influx of executive orders and policy changes introduces uncertainty. Kelly anticipates that the Fed may take a few months to fully understand these impacts, particularly concerning the forthcoming Tax Reform Act of 2025 and the administration's use of tariffs to fund it (00:57).
• Importance of Fed Independence: Addressing President Trump's recent remarks about influencing interest rates, Kelly warns against jeopardizing the Federal Reserve's independence. "It's very important to have a separation between monetary policy and fiscal policy" (02:02), he asserts, cautioning that political interference could lead to higher inflation and economic instability.

2. Airline Industry: Navigating Growth and Operational Challenges

Time Stamp: 03:23 – 04:49

Transitioning to the aviation sector, Sabri Benishore reports mixed performances within the industry, highlighting JetBlue's modest revenue decline contrasted with Boeing's significant downturn.

Key Points:

• Mixed Financial Results: JetBlue's operating revenue in the fourth quarter saw a slight dip but exceeded expectations, whereas Boeing reported a 31% year-over-year revenue decline (03:23).
• Strong Performance of Major Airlines: Mitchell Hartman from Marketplace discusses the robust results from Delta, United, and American Airlines. "The demand picture is healthy" (03:46), noting that U.S. air travel now surpasses pre-pandemic levels.
• Challenges in Supply and Labor: Despite high demand, airlines face obstacles such as aircraft supply shortages and a lack of air traffic controllers. Nicholas Owens from Morningstar points to problems at Boeing and Airbus, while Kelly adds, "there's also a shortage of air traffic controllers" (04:16).
• Long-term Recovery Outlook: With older planes being flown to mitigate supply issues and maintenance costs rising, industry experts predict that aircraft production levels may not return to pre-pandemic standards until 2028 (04:24).

3. Renewable Energy: Europe Leads as the U.S. Reverses Course

Time Stamp: 04:49 – 08:20

A significant portion of the episode is dedicated to a critical examination of renewable energy progress in Europe compared to the United States, featuring insights from Dave Jones, Insights Director at Ember.

Key Points:

• Europe's Renewable Milestones: Europe has surpassed its 2030 goal by achieving 47% of its electricity from renewable sources ahead of schedule. "Solar generation overtook coal for the first time" (05:51), and gas generation has declined for five consecutive years (06:19).
• Comparison with the U.S.: In contrast, the U.S. relies heavily on coal and gas, with less than 60% of its electricity from non-green sources. President Trump's policies aim to halt wind energy projects and boost domestic oil and gas production, exacerbating the carbon footprint (05:29 – 07:26).
• Integration of Renewable Sources: Europe's success is attributed to substantial investments in wind and solar, supported by nuclear and hydroelectric power, which provide necessary flexibility for grid stability (06:32 – 07:01).
• Global Context and Future Projections: Jones underscores that renewable adoption is a global trend, not limited to Europe. Countries like Saudi Arabia and China are making significant strides, with China surpassing the U.S. in the proportion of electricity generated from wind and solar sources last year (07:26 – 08:13).

Notable Quotes:

• Dave Jones: “This isn't just an EU story, this is a global story” (07:26).
• Sabri Benishore: “President Trump wants to halt leases for wind energy projects. He wants to increase domestic oil and gas production, which is already pretty high” (07:01).

4. Closing Remarks

Time Stamp: 08:18 – 08:24

The episode concludes with Sabri Benishore signing off from New York, reiterating the depth and breadth of the morning's discussions and emphasizing the importance of staying informed on these critical economic and environmental issues.

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Conclusion

This episode of the Marketplace Morning Report effectively highlights the dynamic interplay between economic policies, industry performance, and environmental strategies on a global scale. From the careful balancing act of the Federal Reserve amidst political shifts to the contrasting trajectories of the airline industry and renewable energy adoption, Sabri Benishore and expert guests provide listeners with a nuanced understanding of the factors shaping today's economic and environmental landscapes.

Transcript

[Sabri Benishore]

The economy has a steering wheel. Question is what to do with it. From Marketplace, I'm Sabri Benishore, in for David Brancaccio. Interest rates are basically the steering wheel of the economy. And the Federal Reserve meets today to start deciding what to do with it. By all accounts, the answer right now is nothing. Higher interest rates fight inflation, but lower interest rates promote growth. And right now, inflation is being a little stubborn, but mostly coming down, and the economy is doing mostly fine, so might as well leave things alone. But with the new administration, a lot is changing and it is changing fast. So what now? David Kelly is chief global strategist with the JP Morgan Funds. He's here to talk about it. Good morning.

[David Kelly]

Good morning.

[Sabri Benishore]

We've had so many executive orders and changes with the new administration. How long do you think it'll be before the Fed knows what those mean for the economy and starts to make decisions accordingly?

[David Kelly]

I think it may take a few months, but I think the really important question will actually be the Tax Reform act, whatever they call it, for 2025, which extends the 2017 tax cuts. And second of all, the administration is going to use tariffs to fund some of it. But once they do that, they're going to have to be specific on what the tariffs are. They can't just say, we're going to put 25% tariffs on today and then change their mind the next day. They're going to have to be specific. So once the Federal Reserve has got a sense of what's really going on with immigration, but particularly what's going on with tariffs and what's going on with fiscal stimulus, they'll be able to judge, you know, does the economy really need any further stimulus from monetary policy? If inflation's looking a little high and, you know, the immigration policy and tariffs might push inflation up and the fiscal stimulus might push inflation up. Why should they cut rates?

[Sabri Benishore]

Last week, President Trump said he would demand that interest rates fall. And obviously, that's not something really presidents can do. But, you know, Jerome Powell, the Fed chair, his term will end next year. And I just wonder, if the president did appoint someone more pliable, what would that look like?

[David Kelly]

Well, I think it would be very, very dangerous. It's very important to have a separation between monetary policy and fiscal policy. Because, honestly, what you can see is that under both parties over the years, the budget deficit's gone up. Everybody wants to spend money, nobody wants to raise taxes. So you get a lot of expansion there. And if you force the central bank to just print money to fund that you end up with higher inflation. So it's important they maintain their independence. And I would expect that the new chairperson of the Federal Reserve, whoever that is, will also want to maintain that independence.

[Sabri Benishore]

David Kelly is Chief Global Strategist at JP Morgan Funds. Thank you so much.

[David Kelly]

Anytime.

[Rob]

Hi, this is Rob from London, Ontario. Marketplace is an amazing resource and part of my daily routine. I get highly credible information delivered in an intelligent, interesting, and at times humorous but always engaging manner. My day would be lessened without access to Marketplace. Join me in supporting Marketplace with a gift today. Go to marketplace.org donate JetBlue reported this.

[Sabri Benishore]

Morning that its operating revenue in the fourth quarter was down slightly, but in general it did better than expected. Boeing, on the other hand, reported this morning its revenues were down 31% compared to a year prior. And that kind of encapsulates the state of the air travel industry. Airlines are all right, but other corners of the industry are clipping their wings a little. Marketplace's Mitchell Hartman has more Airlines have.

[Mitchell Hartman]

Been doing well with Delta, United and American delivering strong results.

[Dave Jones]

The demand picture is healthy.

[Mitchell Hartman]

Mike Stengel at Aerodynamic Advisory says overall US Air travel now exceeds pre pandemic levels. The major airlines are earning more on premium seats and destinations, and airfares are up about 8% year over year.

[Dave Jones]

A lot of the revenge travel is behind us. We still see carriers getting creative like United launching service to Greenland and Mongolia.

[Mitchell Hartman]

The big problem is on the supply side for aircraft and labor, says Nicholas Owens at Morningstar, trouble at Boeing and.

[David Kelly]

Similar backups on Airbus planes. There's also a shortage of air traffic controllers.

[Mitchell Hartman]

That makes it hard for airlines to add new aircraft and flights. Mike Stengel at Aerodynamic Advisory says they're flying older planes, driving up maintenance costs. He predicts Boeing and Airbus won't catch up to pre pandemic production levels until 2028. I'm Mitchell Hartman for Marketplace.

[Sabri Benishore]

Europe had a goal of using renewable energy for 40% of its energy needs by 2030. It got there early. 47% of its power now comes from renewable energy sources. Meanwhile, in the U.S. president Trump has pulled the country out of the Paris climate agreement again and is pushing more fossil fuel development. Dave Jones is Insights Director at Ember and joins us to talk about it. Welcome.

[Dave Jones]

Thank you so much.

[Sabri Benishore]

So 47% of electricity in Europe comes from renewables. Another 24% comes from nuclear. So that's 71% of its energy is not emitting greenhouse gases first. How does that compare to the U.S.

[Dave Jones]

Yeah, that's of the electricity supply when you Compare that against the US electricity supply, that's around under 60% is from coal and gas. Gas is by far the biggest. Coal has been falling for quite a few years now and is obviously the biggest private success from a US perspective.

[Sabri Benishore]

So how did Europe get to this point?

[Dave Jones]

Yeah, so much of that buildup has been through wind and solar, which has really been the priorities of the European Commission and of countries throughout Europe. And there were a couple of big changes that happened in 2024 when we did our annual review. The first one was that solar generation overtook coal for the first time. And the second one was even as that coal is falling, we registered a fifth year in a row of fall gas generation.

[Sabri Benishore]

People talk about, you know, well, you know, the wind can stop blowing, the sun isn't shining 24 hours a day, and so you need some amount of constant power. How much more room is there to grow for renewables, would you say?

[Dave Jones]

According to some of the countries ambitions, absolutely huge. I think that many countries are relying with a mix of generations. So nuclear is still the largest source of electricity generation within Europe. Many people forget that as even as Germany have closed its last reactors and then you've got a Hydro underpinning all of that, which is really useful in terms of providing some of the flexibility that there's been needed to integrate wind and solar throughout the last 10 years or so.

[Sabri Benishore]

Here in the U.S. president Trump wants to halt leases for wind energy projects. He wants to increase domestic oil and gas production, which is already pretty high. The U.S. of course, is a major source of greenhouse gases. So if the adoption of renewables here is going to decelerate, what does that mean for global goals to curb warming and slow climate change?

[Dave Jones]

When you look back at the CO2 emissions per capita within the electricity sector, they're three times bigger within the US not just because that mix has more fossil fuels in, but the average electricity demand use per capita is twice that of what it is within Europe. One of the biggest installers of solar panels last year was in Saudi Arabia. It's got a target to go from almost zero renewables to 50% renewables by 2030. This isn't just an EU story, this is a global story. And already China's had that big takeoff in the last two years where it's been playing catch up on wind and solar. And as a proportion of electricity from wind and solar, China overtook the US for the first time last year.

[Sabri Benishore]

Dave Jones is Insights director at the global energy think tank Ember, thank you so much.

[Dave Jones]

Thanks so much, Sabrina.

[Sabri Benishore]

In New York. I'm Sabri Benishore with the Marketplace Morning.

[David Kelly]

Report.

[Sabri Benishore]

From APM American Public Media.

[Rachel]

Hi, this is Rachel from Richardson, Texas. I love the unique perspective that Marketplace offers. As a psych major, I love listening to stories and interviews that include behavioral economics and consumer psychology, which can be hard to find in other reporting about the economy. I also enjoy hearing the experiences of small business owners around the country. Join me in supporting Marketplace with a gift today. Go to marketplace.org donate.