Big tech and geopolitics are reshaping the internet’s plumbing - The Economist | New rules for America’s green-hydrogen industry are controversial - The Economist | Can anyone bar Europe do luxury? - The Economist | German business is fed up with a government in disarray

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Big tech and geopolitics are reshaping the internet’s plumbing - The Economist

WHEN THE navies of Britain, Estonia and Finland held a joint exercise in the Baltic Sea earlier this month, their goal was not to hone warfighting skills. Instead, the forces were training to protect undersea gas and data pipelines from sabotage. The drills followed events in October when submarine cables in the region were damaged. Sauli Niinisto, the Finnish president, wondered whether the Chinese ship blamed for the mischief dragged its anchor on the ocean bed “intentionally or as a result of extremely poor seamanship”.

Submarine cables used to be seen as the internet’s dull plumbing. Now giants of the data economy, such as Amazon, Google, Meta and Microsoft, are asserting more control over the flow of data, even as tensions between China and America risk splintering the world’s digital infrastructure. The result is to turn undersea cables into prized economic and strategic assets.

Subsea data pipes carry almost 99% of intercontinental internet traffic. TeleGeography, a research firm, reckons there are 550 active or planned submarine cables that currently span over 1.4m kilometres. Each cable, which is typically a bundle of between 12 and 16 fibre-optic threads and as wide as a garden hose, lines the seabed at an average depth of 3,600 metres. Close to half have been added in the past decade. Newer ones are capable of transferring 250 terabits of data every second, the equivalent of 1.3m cat videos. Data may be stored in the cloud, but it flows under the ocean.

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New rules for America’s green-hydrogen industry are controversial - The Economist

A CURIOUS LETTER sent on November 6th recently surfaced in Washington, DC. On that day, nearly a dozen American senators sent a stern note to Janet Yellen, America’s treasury secretary, Jennifer Granholm, its energy secretary, and John Podesta, the senior adviser to the White House on clean energy. It was about the legal guidance they expected from the Internal Revenue Service (IRS) on tax rules governing a generous new subsidy for “green” hydrogen. They insisted that the rules for this clean fuel, that can replace fossil fuels in hard-to-decarbonise industrial sectors like steel and chemicals, must be “a robust and flexible incentive that will catalyse and quickly scale a domestic hydrogen economy”.

That was but one heavyweight salvo in a months-long war waged by technology companies, environmental groups, energy lobbyists and business chambers over this previously obscure topic. To influence the handful of tax nerds and their political masters making this decision, millions have been spent on full-page advertisements in the New York Times and Washington Post, on podcasts and—to the bewilderment of punters looking for a mindless rom-com—on mainstream streaming services like Hulu.

Perhaps that was fitting, for the ruling looks to be a blockbuster. The long-delayed draft guidance on the 45V tax credit, as the proposal is formally known, was finally unveiled on December 22nd (the White House tried to bury the controversy in pre-Christmas distractions). Those senators calling for flexibility will not be pleased. There is always tension between growth and greenery in environmental regulation, and especially when it comes to writing rules for an industry that does not yet exist. The Biden administration has tilted strongly towards greenery in its proposals. In doing so it will probably kick up a hornet’s nest of industry protest.

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Can anyone bar Europe do luxury? - The Economist

At this year’s holiday soirées luxury bosses may be stingier than usual with the champagne. It has not been a sparkling six months for the industry, as well-heeled consumers from East to West have tempered the excesses of recent years. The S&P global luxury index, which tracks the industry’s performance, is down by 9% since the middle of the year. Still, the purveyors of splendour need not forgo the merrymaking altogether. The global market for personal luxury goods, from handbags to haute couture and horology, grew by 4% this year, reckons Bain, a consultancy. That is disappointing compared with 20% last year—but nothing to scoff at amid fears of a slowing global economy.

The past two decades have been remarkable for the industry. Global sales have tripled to nearly $400bn, thanks largely to a swelling of the ranks of crazy rich Asians. The biggest beneficiaries of the boom have been European companies. These account for around two-thirds of luxury-goods sales, according to Deloitte, another consultancy, and nine of the world’s ten most valuable luxury brands, according to Kantar, a market-research firm. Bernard Arnault of LVMH, a European luxury goliath, is the world’s second-richest man. The industry remains a rare bright spot for Europe at a time when the continent seems at risk of fading into economic and technological irrelevance. Why has it been so immune to foreign competition?

Heritage is one explanation. Europe’s luxury firms have ridden high on the world’s continuing fascination with the old continent. It is home to seven of the ten most visited countries in the world. Tourists flock to Europe’s historic cities to ogle its artworks, taste its local delicacies and drink its fine wines; the rich and famous gather in the summer for lavish parties on the Riviera. In his book, “Selling Europe to the World”, Pierre Yves Donzé, a business historian, argues that the ascendancy of European luxury is thanks to “the powerful attraction of an idealised way of life, combining elegance, tradition and hedonism”.

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German business is fed up with a government in disarray - The Economist

Many GERMAN bosses wanted just one thing for Christmas—Förderbescheid. The country’s business circles have talked about little else than these “formal funding notices” since November 15th. On that day the federal constitutional court declared that the government’s plan to repurpose €60bn ($66bn) in “emergency” covid-19 credit lines towards infrastructure and the energy transition was unconstitutional. This blew a hole in the coalition government’s spending plans. It also raised concerns among those companies which depend on public support for their investments. Though not that numerous, they are central to the government’s economic vision—and that vision, in turn, matters to German enterprise as a whole.

In early December Northvolt, an innovative Swedish battery-maker, received a Förderbescheid for a €564m subsidy to construct a €4.5bn factory in the northern German state of Schleswig-Holstein. Other companies, including those behind 11 of Germany’s 27 “important projects of common European interest” that have yet to receive a formal funding offer, anxiously awaited their economic sweeteners.

What they got instead was a bitter dose of austerity. “We have to get by with significantly less money,” said Olaf Scholz, the Social Democrat chancellor on December 13th. After tense discussions with his Green and Free Democrat partners, Mr Scholz unveiled €29bn in savings, including €12bn less for an off-budget climate and transition fund. Details have yet to be hammered out, but some of this will come from an early end to subsidies for electric vehicles and solar power, a higher-than-expected rise in the carbon tax and a new fee on companies that use plastics. Not another Förderbescheid in sight.

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