The world in 2016: Business

It will be money, rather than politics that will finally gives impetus to the shift from fossil fuels to clean energy, and the super jet may be end up a casualty.

US actor and former California governor Arnold Schwarzenegger, leaves after a press conference as part of the COP21 UN conference on climate change, on December 8, 2015, in Le Bourget near Paris. Alain Jocard / Agence France-Presse
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At the recent Paris climate talks Arnold Schwarzenegger may have provided the most prescient quote about the future of energy.

The movie action hero-turned-California governor, while doing the rounds in the French capital, posted on social media: “I don’t want to be like the last horse and buggy salesman who was holding out as cars took over the roads. I don’t want to be the last investor in Blockbuster as Netflix emerged.”

The hyperbole that greeted the deal may have been dominated by politics, but Schwarzenegger had put his finger on what ultimately will matter in terms of the shift away from fossil fuels and toward the sunlit uplands of a “new energy” world. It will be the profit motive that drives innovation. Government policies may help it along, but the pace of change next year will be determined by money.

The questions then become how fast will drivers turn the trickle of conversion to electric cars into a flood? When will a critical mass of homes become “digitally smart” and tricked out with their own clean power sources? The treehugger case for new energy that has long been a feature of the left-wing mantra is now buttressed by a mainstream pro-business case that a political conservative like Schwarzenegger is comfortable making.

Bill Gates underlined this convergence when he put his – and two dozen other billionaires’ – money where his mouth is by unveiling the “Breakthrough Energy Coalition” in Paris. The group, which made an initial commitment of US$2 billion (Dh7.3bn), includes some well-known tech entrepreneurs, such as Jeff Bezos of Amazon and investor John Doerr, but also Saudi Arabia’s Prince Alwaleed bin Talal, and Mukesh Ambani of India’s Reliance group.

Despite the inevitable cynicism that greeted the Paris accord, there is agreement that the world is moving away from fossil fuels. But how quickly? One leading indicator is the fact that sales of hybrid electric vehicles in China tripled in the year to October, overtaking the US as the largest market in the world.

While Gates’s coalition is aimed at accelerating these trends, the Microsoft founder’s “future energy” guru, Canadian professor Vaclav Smil, still thinks the transition to a post-fossil fuel world will take generations. And that brings the question of the pace of change back to policy. It is why Gates also helped organise the Mission Innovation initiative (committed to spending an additional $20bn by 2020) alongside his private-sector coalition, backed by the governments of the 20 most developed economies. They’ll play their part next year in picking the “new energy” winners and losers.

Anthony McAuley is senior correspondent for energy at The National.


Is the Airbus A380 set for grounding?

It has been just 10 years since Airbus launched its A380, the world’s largest passenger aircraft. When the super-jumbo made its first commercial flight in 2005, it was viewed as the future of air travel. The double-decker allowed airlines to carry more people without buying extra landing slots at increasingly congested airports.

The Gulf’s three biggest airlines – Emirates, Etihad Airways and Qatar Airways – all operate the superjumbo. Emirates in particular has made the A380 the backbone of its fleet, with about 65 in operation and more than 70 on order. Qatar and Etihad have together bought 20. But there have been no new orders since 2012.

When Airbus designed the A380, it predicted that more people would want to travel between large airport hubs. Its rival Boeing instead bet that fuel efficiency was key as people would want to fly to many new destinations direct. So while Airbus concentrated on the super-jumbo, Boeing developed the 787 – a smaller, more efficient airliner than can still fly long distances.

Airlines consider the A380 expensive – it needs special gates at airports and burns massive amounts of fuel, which is the the largest component of a carrier's costs. With that in mind, the Emirates president, Tim Clark, has said he is ready to buy up to 200 more A380s – if a more fuel-efficient model is introduced.

Airbus has instead hinted at the possibility of discontinuing the A380 programme altogether, though in November, Fabrice Brégier, the company’s chief executive, said that he still expected to meet a target of selling 25 of the jets this year. He also said there was “no urgency” to build a more fuel-efficient version because of the low oil price. “I think we need to catch more customers,” he said.

With the continued production of Boeing’s long-flying “Queen of the Skies” 747 facing its own scrutiny, the year ahead may prove a last gasp for the jumbo jet.

Shereen El Gazzar is aviation correspondent at The National.


The US dollar flexes some muscle

Diamonds, or for that matter gold or any precious metal, are no longer forever: the US dollar is.

The dollar has been the world’s best-performing currency this year and the year before that. The Bloomberg dollar index, a gauge of the dollar versus a basket of 10 other currencies, is up almost 20 per cent in the past two years. And in all likelihood, the dollar will continue to maintain its supremacy in 2016 as investors pile into one of the few certainties left in a world pockmarked by wobbly economic growth.

Many currencies witnessed some of their steepest drops ever against the dollar this year, especially the currencies of developing nations that rely heavily on the sale of commodities. Colombia’s peso for example has dropped to historic lows.

Investors in global markets are essentially of two minds as to the fortunes of the dollar. The bulls see the greenback strengthening, particularly so given the US Federal Reserve's raising of interest rates by a quarter of a percentage point, prompting a flight to safer assets as the seven-year spate of cheap money starts coming to an end. This is the first increase since 2006 and a vote of confidence in the US economy. Meanwhile, the bears feel that all of the above is already priced in and other currencies could recover.

Either way, however, it’s likely in 2016 that the dollar will remain fundamentally strong as the US economy continues to be the main driver of global growth.

What does it all mean for us here in the UAE? We’re lucky to be paid in a currency that’s pegged to the dollar because Gulf residents’ purchasing power has been increasing, making trips to countries like Thailand and Egypt cheaper; likewise for goods made in China and other Asian emerging markets. On the flip side, debt commitments, like your mortgage, in the UAE will get more expensive to service following the US rate increase because the UAE’s monetary policy is linked to that of the Fed’s. It may also mean that the value of your home here goes down if demand slides as it becomes more expensive to pay for a mortgage.

Practically speaking, it wouldn’t be a bad idea to convert some of your dirhams into dollars. It’s unlikely that the UAE will de-peg its currency from the US dollar, but you never know. And if that happens, it means you won’t be getting as much buck from your dirham. Better to be safe than sorry.

Mahmoud Kassem is banking correspondent at The National.