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Until now, global climate policy has been symbolized by Davos parties and carbon pledges so far in the future that the bill may never come due. But starting this month, countries spewing harmful fumes will have to consider the cost, as Europe rolls out the first-ever carbon-based tariff. There’s also a good chance the fees will lead to inflation in products that are made with fossil fuels.

Imports to Europe will now face a tax based on carbon emissions caused by manufacturing. Initially, the tariff will hit industrial materials the hardest, but companies as varied as PepsiCo (ticker: PEP) and dialysis firm Davita (DVA) have told investors that the new rules could eventually affect their businesses.

“The consequences will be vast,” wrote Elena Belletti, head of carbon research at energy research firm Wood Mackenzie, in a recent report. She thinks the rules will “reconfigure international trade flows” over the next five years, and potentially result in new carbon fees going into effect in more countries.

European policy makers say the system, known as the Carbon Border Adjustment Mechanism, has two goals: encouraging more countries to write laws that reduce emissions, and making sure that European manufacturers stay competitive with rivals operating in “dirtier” jurisdictions.

Companies subject to the border tax won’t have to pay up immediately. For now, the European Union is just asking them to submit records of emissions used to make their goods. Taxes won’t be collected until 2026, and fees will go up gradually until they’re equal to EU carbon prices in 2034.

Industries affected in the first round include some of the largest carbon emitters: cement, iron and steel, aluminum, fertilizer, electricity, and hydrogen. Oil products aren’t yet included, though they’re expected to be added by 2030. By 2040, S&P Global Commodity Insights thinks the tax could bring in $80 billion per year.

Europe is known for far-reaching regulations in technology, privacy, health, and the environment. As with other European regulations, critics have argued that the carbon tariff stifles growth and unfairly targets foreign corporations. Chinese, Brazilian, and Indian officials have warned that it could upend free trade. The U.S. has reportedly asked for exemptions.

To economists, though, carbon taxes and border tariffs aren’t controversial. Dozens of Nobel Prize–winning economists, along with policy makers, signed a 2019 letter recommending that the U.S. impose them because they’re “the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.” In economist-speak, carbon is an “externality” that most companies emit without considering—or covering—the costs that will come tomorrow. “What we’re doing by putting carbon in the atmosphere is we’re imposing costs on future generations, where the climate is going to be a lot worse,” says New York University’s Robert Engle, one of the Nobel economists who signed the letter.

Carbon taxes put a cost on emissions and give incentives to emitters to clean up. In countries that have their own carbon taxes—and the EU has them—a tariff is needed so domestic companies aren’t put at a disadvantage to foreign rivals, Engle says.

Since the 2015 Paris Climate Accords, countries have taken a range of approaches to meeting the goal of limiting global warming to 1.5 degrees Celsius. The U.S. has leaned heavily on subsidies for renewable energy and electric vehicles, including in last year’s Inflation Reduction Act. A few states like California impose a form of carbon tax or have announced targets that tend to be nonbinding from a legal perspective.

Similar to the U.S., the EU has used subsidies to spur development of clean energy. But unlike the U.S., the EU has also devised a legally binding regulatory regime to cut emissions. The European Parliament approved a law this year that will make the group reduce carbon emissions by 55% by 2030 from 1990 levels. The EU created a kind of carbon tax in 2005 that capped the total number of allowable carbon emissions from regulated companies and forced them to pay for any above those levels. The rules created a carbon-credit market, and costs have risen as the limits have gotten stricter.

Other countries also tax carbon for companies within their borders, but with rates that tend to be much lower. For most of 2023, EU carbon prices have been above $100 per metric ton, four times as high as the average country that imposes similar taxes, says Wood Mackenzie. For companies in countries with carbon taxes, those taxes will be discounted from the EU border tax. A Canadian steel maker exporting products to the EU could deduct taxes paid in Canada from their bill.

The countries that export the highest volume of steel and other affected products to Europe include Canada, Turkey, South Africa, Brazil, China, and India, according to S&P Global Commodity Insights. The U.S. ranks tenth, with relatively large iron, steel, and fertilizer exports to Europe.

Those countries are also expected to produce the most carbon emissions from the affected categories, according to S&P Global. That said, countries could reduce their bills significantly if they implement their own carbon taxes or if companies invest in cleaner methods of production. U.S. steel giant Nucor recently announced a partnership to produce steel using nuclear power.

Wood Mackenzie did the math on the tax using steel as an example. A metric ton of steel imported into the EU cost about $1,450 at the end of last year; the full border tariff could average $275 on that. Some countries could see higher bills, however. The tax could hike the cost of Chinese steel by 49% by 2034, and Indian steel by 56%, estimates Wood Mackenzie. That reflects the two countries’ heavy carbon emissions.

Those big bills aren’t coming due for years. The challenge now is to tabulate the emissions. “Like everything else, it starts with measurement,” says Roman Kramarchuk, who leads a group analyzing the impact of the transition on energy companies for S&P Global Commodity Insights.

Major metal and fertilizer makers have not spoken much about the new rules. Heavy industry is difficult to decarbonize, because making products like steel takes high and persistent heat that’s normally provided by burning coal or natural gas.

Fertilizer maker CF Industries (CF) warned in its latest annual report that clean ways of producing ammonia may not be fully developed for a decade or more. “The imposition of any carbon border-adjustment taxes may impact investment and trade flows, which could adversely impact our business,” the company said. Large metals companies, including

Vale, BHP, Nucor, Alcoa, and Reliance Steel & Aluminum, didn’t respond to requests for comment on estimated costs from the tariffs.

While some companies will be hurt by the tariff, others will benefit. One area that analysts cite as a beneficiary is clean hydrogen, a still-nascent industry unlikely to see mass adoption for several years. Among the companies developing it in the U.S. are Plug Power (PLUG) and Bloom Energy (BE).

Two important things could happen before the border tax gets collected. First, companies may shift exports, so their “cleanest” metal ends up in Europe and the rest is exported elsewhere, Kramarchuk says. Second, more countries may enact their own carbon taxes, protecting their manufacturers and speeding up decarbonization. In the U.S., Republicans have tended to oppose carbon taxes. But Sen. Bill Cassidy (R., La.), argued earlier this year for what he calls a “foreign pollution fee” aimed at Chinese chemicals, metals, and other products. Such a fee “curtails China‘s ability to undercut U.S. manufacturers,” he wrote.

Environmentalism and protectionism are potent forces. They’re coming together now in Europe. They may not end there.

ZDNET conducted thermal imaging tests on iPhone 15 Pro after Apple's iOS 17.0.3 update and has concluded the overheating issue with fast-charging appears to be resolved.

Apple rolled out its iOS 17.0.3 update on Wednesday with a release note that it "addresses an issue that may cause iPhone to run warmer than expected." ZDNET has tested this update and using a thermal camera has concluded that it has indeed resulted in the iPhone 15 Pro and Pro Max running cooler when fast-charging.

As widely reported since the arrival of iPhone 15 Pro on September 22, the iPhone 15 Pro and iPhone 15 Pro Max could get very warm when fast-charging or when using third-party apps such as Instagram, Uber, or Asphalt 9 that appeared to exacerbate a flaw in the iOS 17 software. Apple insisted that the overheating issue was related to a software bug and was not related to the new hardware or design in the iPhone 15 Pro models, which introduced a new titanium frame with an aluminum substructure to replace the stainless steel frame from the past several pro models.

In my testing with the iPhone 15 Pro and Pro Max, I experienced two overheating issues. The first and most major one was the iPhone 15 Pro Max getting very hot to the touch when fast-charging it with Apple's USB-C cable connected to a 35W charging brick. I was able to replicate this experience in another location using the same cable and charger. I used a thermal camera to measure the heat and found that the iPhone 15 Pro Max got as hot as 107.1 degrees Fahrenheit.

This was much hotter than other iPhone and Android phones, which typically maxed out at 85 to 95 degrees when fast-charging in my tests. The hottest any other phone got when testing in the same conditions was the Samsung Galaxy Fold 5, which got up to 98.7 degrees Fahrenheit.

The other overheating issue that I noted in my iPhone 15 Pro review appeared when jumping between the third-party camera app Halide and Apple's stock camera app while I was shooting a lot of photos outside on an 82-degree day. When I would swap back to the Apple camera app, it would very briefly display a message saying "iPhone needs to cool down" for 1-2 seconds before I could start using it again. Halide has also issued an update to its app that appears to have resolved that issue.

OpenAI, one of the best-funded AI startups in business, is exploring making its own AI chips.

Discussions of AI chip strategies within the company have been ongoing since at least last year, according to Reuters, as the shortage of chips to train AI models worsens. OpenAI is reportedly considering a number of strategies to advance its chip ambitions, including acquiring an AI chip manufacturer or mounting an effort to design chips internally.

OpenAI CEO Sam Altman has made the acquisition of more AI chips a top priority for the company, Reuters reports.

Currently, OpenAI, like most of its competitors, relies on GPU-based hardware to develop models such as ChatGPT, GPT-4 and DALL-E 3. GPUs’ ability to perform many computations in parallel make them well-suited to training today’s most capable AI.

But the generative AI boom — a windfall for GPU makers like Nvidia — has massively strained the GPU supply chain. Microsoft is facing a shortage of the server hardware needed to run AI so severe that it might lead to service disruptions, the company warned in a summer earnings report. And Nvidia’s best-performing AI chips are reportedly sold out until 2024.

GPUs are also essential for running and serving OpenAI’s models; the company relies on clusters of GPUs in the cloud to perform customers’ workloads. But they come at a sky-high cost.

An analysis from Bernstein analyst Stacy Rasgon found that if ChatGPT queries grew to a tenth the scale of Google Search, it’d require roughly $48.1 billion worth of GPUs initially and about $16 billion worth of chips a year to keep operational.

OpenAI wouldn’t be the first to pursue creating its own AI chips.

Google has a processor, the TPU (short for “tensor processing unit”), to train large generative AI systems like PaLM-2 and Imagen. Amazon offers proprietary chips to AWS customers both for training (Trainium) and inferencing (Inferentia). And Microsoft, reportedly, is working with AMD to develop an in-house AI chip called Athena, which OpenAI is said to be testing.

Certainly, OpenAI is in a strong position to invest heavily in R&D. The company, which has raised more than $11 billion in venture capital, is nearing $1 billion in annual revenue. And it’s considering a share sale that could see its secondary-market valuation soar to $90 billion, according to a recent Wall Street Journal report.

But hardware is an unforgiving business — particularly AI chips.

Last year, AI chipmaker Graphcore, which allegedly had its valuation slashed by $1 billion after a deal with Microsoft fell through, said that it was planning to job cuts due to the “extremely challenging” macroeconomic environment. (The situation grew more dire over the past few months as Graphcore reported falling revenue and increased losses.) Meanwhile, Habana Labs, the Intel-owned AI chip company, laid off an estimated 10% of its workforce. And Meta’s custom AI chip efforts have been beset with issues, leading the company to scrap some its experimental hardware.

Even if OpenAI commits to bringing a custom chip to market, such an effort could take years and cost hundreds of millions of dollars annually. It remains to be seen if the startup’s investors, one of which is Microsoft, have the appetite for such a risky bet.

Riyadh signaled to White House it would act if crude prices are too high to win goodwill in Congress

DUBAI—Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high—a move aimed at winning goodwill in Congress for a deal in which the kingdom would recognize Israel and in return get a defense pact with Washington, Saudi and U.S. officials said.

That understanding is part of an effort to seal a three-way agreement that would also likely include U.S. nuclear assistance and represents a notable shift by Riyadh, which a year ago rebuffed a Biden administration request to help lower oil prices and fight inflation, severely straining relations.

Still, Saudi negotiators emphasized that market conditions would guide any action on production and officials familiar with the talks said the discussions didn’t represent a long-term agreement to cut prices.

Spokespeople for the White House National Security Council and the Saudi government didn’t respond to requests for comment.

Talks on a deal have centered on Saudi recognition of Israel—a move that could revamp the geopolitics of the Middle East—in return for U.S. weapons sales, security guarantees and help building a civilian nuclear program. An agreement would be a diplomatic coup for President Biden as he faces a tough re-election battle.

Saudi Arabia hasn’t recognized Israel since its founding in 1948, and a deal establishing diplomatic relations would expand Israel’s ties to the Arab world, potentially constrain Iran’s military ambitions and curb China’s efforts to supplant American influence in the region.

Two top White House officials, Brett McGurk and Amos Hochstein, flew late last month to Saudi Arabia, where they emphasized that soaring petroleum prices would make it harder to win support in Washington, the officials said.

The White House may need congressional support for a deal. Negotiators are now discussing a new defense pact with the kingdom that could require Senate approval as well as U.S. support for Saudi efforts to create a civilian nuclear program, and billions of dollars in weapons sales.

The trip by McGurk and Hochstein came amid a climb in oil prices, with the global benchmark, Brent crude, rising 25% this quarter and trading as high as $95 a barrel. It has pulled back in recent days, trading above $84 a barrel Friday.

The Saudis have been pressing for higher prices as they pour tens of billions of dollars into megaprojects aimed at transforming the kingdom’s economy. Public acknowledgment that the Saudis could act to cool the oil market next year might have the effect of capping oil prices under $100 a barrel, a historically high level that has in the past fueled inflation and led to calls in Washington for action.

As the world’s largest oil exporter, Saudi Arabia has a unique capacity to influence crude prices, with the ability to restrict the world’s oil supply or flood it. The kingdom has used that power to calm markets during periods of global turmoil, but under Crown Prince Mohammed bin Salman, the nation’s oil policy has become known as “Saudi First,” as the kingdom looks to fund its economic diversification.

Any move by the Saudis to raise output would be complicated by its energy-production alliance with Russia, itself one of the world’s largest oil producers. The kingdom has moved in lockstep with Moscow, which has tried to keep oil prices high by restricting production, keeping oil money flowing into its coffers to fund its war in Ukraine.

The Saudis and Russians lead an oil-producing group known as OPEC+, which is set to meet at the end of November to decide output levels. The 23-member group cut oil production by two million barrels a day a year ago in a move that infuriated the Biden administration, and Saudi Arabia and Russia have cut even more on their own since then—actions that are due to expire by the end of 2023.

The Biden administration hopes to broker a Saudi-Israel agreement in the next six months. The three sides have broadly agreed on the contours of the deal and are starting to hash out thorny details.

McGurk, the White House’s top Middle East official, and Hochstein, Biden’s senior adviser for energy and infrastructure, have repeatedly pressed Saudi Arabia to make moves to repair its image in Washington, where Congress could play a key role in making or breaking a diplomatic deal with Israel.

Lawmakers from both parties have expressed reservations about offering such support to Saudi Arabia or giving a diplomatic boost to the 38-year-old crown prince, who, while moving to revamp the economy and ease conservative social mores, has also sought to silence dissenters.

U.S. intelligence officials said Mohammed sent a special team to Istanbul, where its members killed Jamal Khashoggi, a dissident Saudi journalist, U.S. resident and Washington Post columnist who wrote pieces critical of the kingdom’s young ruler.

Mohammed characterized the Saudi hit team as a rogue unit and has said that he has moved to prevent any similar killings from happening under his watch.

Biden himself vowed when he took office to treat the kingdom as a pariah because of its record on human rights. But Biden began to shift course last year when he flew to the kingdom and famously gave Mohammed a fist bump that signaled a new cooperative relationship between their two countries.

Since Russia’s invasion of Ukraine sent energy prices soaring, the Biden administration has focused more attention on oil-rich Middle East petrostates whose problems it tried to de-emphasize early in the president’s term. There has been progress on several fronts.

Since Biden took office, Saudi Arabia has moved to extricate itself from a long-running war in Yemen. Saudi Arabia halted airstrikes and agreed to a cease-fire that has brought significant calm to Yemen for the past year. The U.S. and United Nations have been working to broker a long-term truce and to accelerate peace talks meant to bring the war to a close.

The Biden administration has been encouraged by Saudi Arabia’s recent outreach to Israel, including the kingdom’s rare decisions to allow two Israeli ministers to visit the Gulf nation.

The talks over oil come during a period when the world’s oil supply is beginning to fall short of demand. OPEC+ forecasters predict a global deficit of 3.3 million barrels a day in the fourth quarter, and many oil analysts now expect prices Brent to eventually top $100 a barrel.

The International Monetary Fund estimated earlier this year that Riyadh’s break-even oil price to balance its budget is about $81 a barrel. If Saudi Arabia keeps struggling to attract foreign investment to projects such as Neom, the break-even price could rise closer to $100, analysts say.

“It could prove challenging to convince Saudi Arabia to front load any significant energy assistance before a comprehensive deal is essentially done,” said Helima Croft, the chief commodity strategist at Canadian broker RBC.

EU to loosen new rules on EV sales in attempt to defuse row with UK

Brussels says it will interpret ‘made in Europe’ rules very loosely in 2024

The European Union is drawing up a plan to postpone tariffs on electric vehicle sales between the UK and the bloc for a year in an attempt to defuse a row over the new rules, which are due to come into effect in January.

Maroš Šefčovič, European Commission vice-president, told the Financial Times that Brussels would interpret “made in Europe” rules very loosely in 2024, giving carmakers more time to switch battery sourcing from Asia to Europe.

“We want to solve it and we are also discussing this with UK partners,” Šefčovič said, adding that he would be “very happy” if a deal could be struck before the December 31 deadline.

The post-Brexit Trade and Cooperation Agreement (TCA) dictates that tariffs of 10 per cent will be imposed on EVs shipped across the Channel if they have batteries substantially made outside Europe or the UK.

London has asked for a simple three-year postponement to the changes.

Šefčovič said the commission wanted to redefine what counts as European under the so-called rules of origin. “We do not have a precise timeline, but we are now working on our internal position discussions and we know that this is the pressing issue for the EU and the UK,” he added.

If finalised, the compromise will be welcomed by the industry on both sides of the Channel, who have warned the tariffs were likely to cost them billions and stifle electric vehicle demand.

Germany and about 10 of the 27 member states support the UK demand for a three-year delay to implementing the rules, while France remains opposed.

However, officials close to Thierry Breton, the French industry commissioner, said he considered the year-long postponement to be a workable solution as it did not reopen the Brexit deal or compromise EU ambitions to build European battery supply chains.

Under rules of origin, EVs traded across the Channel must have 60 per cent of their battery packs and 45 per cent of their parts by overall value sourced from the EU or UK or face 10 per cent tariffs. There are similar rules for the cathode chemicals and cells that comprise the battery pack and are mostly imported.

Šefčovič said: “What is important is how you actually do the counting of the rules of origin. We are in the process of developing this methodology and building up the battery industry in Europe and in the UK so I think we have to recognise as originating in Europe any part of that battery [that is European].”

He declined to offer further details, saying they were still being worked on.

But he was clear that the rules could only be postponed for one year because he wanted to encourage battery investment in the EU.

Sam Lowe, a trade expert at consultancy Flint Global, said: “One of the easiest ways to resolve this is to fiddle with the definitions. This could work if the thresholds are high enough to account for the high value of imported foreign chemicals. If not, it won’t.”

But he said it was unclear whether the UK would accept a one-year fix.

The UK government said: “We need a joint UK-EU solution to avoid consumers facing tariffs on electric vehicles from 2024 which do not apply to diesel cars.

“We have raised this with the European Commission and industry and are ready to work with them to find a solution within the existing structure of the Trade and Cooperation Agreement. The UK remains one of the best locations in the world for automotive manufacturing.”

Competition commissioner says inquiry could follow similar move to challenge China’s sales of electric vehicles in Europe

Brussels is considering whether to investigate China’s use of subsidies to promote the country’s wind turbine manufacturers, a leading official said on Friday, despite the angry reaction from Beijing over a similar probe into electric vehicles.

Didier Reynders, the acting competition commissioner, said cheap Chinese imports could threaten European businesses.

“In the wind energy sector there are components that could be in competition with Chinese components. If there is a possibility of too much aid on the Chinese side . . . we could open an investigation in the same way [as electric vehicles],” he told France’s BFM TV.

Europe’s wind power companies have been lobbying for more support, arguing that cheap Chinese imports are pushing their own turbine manufacturers to the brink of collapse.

The move could come this month, three EU officials told the FT, as part of broader proposals aimed at boosting Europe’s wind industry.

It would be the second significant action against China is as many months, after commission president Ursula von der Leyen said in September Brussels would look into unfair practices in the electric vehicle market.

The move to challenge China’s increasing sales of electric vehicles in Europe prompted an angry response from Beijing, which called it a “naked protectionist act”.

A senior EU official said “sufficient elements” warranted a similar investigation into wind turbine parts. But the official acknowledged Brussels was concerned about retaliation.

“They already thought something announced in the speech of the president was too high,” the official said. “They will digest [the electric vehicles] one and adapt. If we add another, they might be really angry.”

The discussions come amid a planned visit to China over the coming days by Josep Borrell, the EU’s foreign policy chief, and Kadri Simson, the bloc’s energy commissioner.

The commission declined to comment.

Thierry Breton, the EU’s internal market commissioner, in September called for an anti-dumping or anti-subsidy investigation into wind turbines made in China.

“Chinese wind equipment manufacturers have been implementing an aggressive strategy to enter European markets,” he wrote, adding that Chinese manufacturers were offering European project developers steep discounts and the option to defer payments for up to three years.

Leading Chinese wind turbine manufacturers include Goldwind, Envision, Mingyang and Windey.

Brussels has already imposed tariffs on Chinese companies’ glass fibre fabrics, which are used in wind turbine blades. Industry concerns that the EU has become too dependent on Chinese green technologies have risen in recent years.

“[The region’s clean technology] will be manufactured outside of Europe, and Europe will simply swap its dependency on Russian gas for one on Chinese clean energy equipment,” WindEurope, a trade body for European industry, said earlier this year.

Another senior EU official said von der Leyen had started to back a strategy of supporting domestic industry and keeping out some Chinese imports.

“Without European manufacturing capacity, we don’t have control,” they said, adding that, without measures, the EU’s Green Deal of zero emissions by 2050 would be impossible to honour. “The president is starting to get it.”

Giles Dickson, chief executive of WindEurope, said broader proposals to boost the industry were being “actively discussed” by the commission and the sector. “You know what other tools [Chinese manufacturers] have at their disposal . . . [EU officials] know what we are up against,” he said, without explicitly referring to an anti-subsidy probe.

The broader proposals are set to include guidance to member states on providing direct financial support to the industry and improving auction designs for wind farms.