Friday, June 3, 2016

Will car companies do better than coal companies in embracing the climate challenge?

Today in Slate, Daniel Gross published a thought-provoking piece entitled "Could Coal Have Survived by Going Green?" It highlights how the industry itself contributed to its own demise not only by fighting environmental policies but also by failing to invest in ways to utilize coal much more cleanly.
The Cadillac Escalade: this one is as black as coal and its
tailpipe spews nearly nine tons of CO2 into the air per year.

Coal fueled the industrial revolution and even in this post-industrial era it still provides a bedrock source of energy for much of the world. Although now overtaken by natural gas for generating electricity in the United States, coal remains second only to oil as the world's largest source of commercial energy. Its low resource cost could give it a role even in an increasingly climate-constrained future. But for that to happen, the industry's leaders would have had to embrace carbon mitigation as a worthy, investment-stimulating challenge instead of spending down their dwindling political capital to fight the inevitable.

One can see some parallels here to the recent near-death crisis of U.S. domestic automakers. Although General Motors, Ford and Chrysler had often talked a green line and showed off a few token green-branded products, for many years their major investment and lobbying strategies emphasized evading energy and climate policies instead of embracing them.

As the low fuel prices of the 1990s gave way to the tighter world oil market that many had foreseen, and that tighter market proved vulnerable to Middle East turmoil that was also bound to recur sooner or later, consumers turned away from the later-day road boats known as SUVs and other light trucks, hurling the Detroit-based firms toward bankruptcy. General Motors for a time became "Gubmint Motors." Ford avoided the court by the skin of its teeth and mortgaging the brand. After a nearly decade-long dalliance with Daimler and a short-lived buyout by Cerebrus Capital, Chrysler went through a government-managed bankruptcy and its remnants ended up in the arms of Fiat.

As we approach the upcoming mid-term review of motor vehicle fuel economy and GHG emissions standards, it's not yet clear that car companies are fully on board with the need to steadily improve efficiency. Detroit automakers may not yet (or at least not obviously) be dusting off the dodgy tactics they used to parry policy in the past. But troubling spin is starting to emanate from their trade association and allied consultancies as they gear up for a potential campaign to weaken the standards.

The pump price roller coaster is a key reason why regulation is essential for spurring industry investments that will contribute to climate protection while protecting car companies and consumers from future oil price hikes. Unfortunately, automakers are using the lower customer interest in auto efficiency tied to lower fuel prices as an argument against regulation. It would be much better if they recognized this foreseeable challenge and worked constructively with policymakers to not only maintain the tightening of tailpipe CO2 standards but also develop information and incentive programs to foster ongoing consumer interest in more efficient vehicles when unfettered market forces fail to do so.

The coal industry was a major culprit in killing a very reasonable approach to climate policy -- the 2009 cap-and-trade bill -- that would have given them the time and incentives to invest in being part of the solution. Notably, by then the Detroit automakers were publicly backing national climate legislation, realizing that it offered a more balanced approach than piecemeal policies that had them bearing the brunt of the effort. However, at the coal industry's behest, the Democratic senator from West Virginia, Joe Manchin, ran a vicious ad in which he blasted the bill with a rifle.

That harks back to when Trent Lott, then-Senate minority leader and Republican from Mississippi, made his infamous "Purple People Eater" remarks as part of the auto industry orchestrated attack against fuel economy standards. Legislation to raise the standards was then defeated in March 2002, just six months after 9/11 reminded America of the dangers due to the Middle East's role in global oil supply. At the same time, automakers fought the parallel effort to cut tailpipe CO2 emissions being pioneered in California. Although it took several more years for the changing market to break Detroit, chances are that if they had made a serious, policy-guided effort to upgrade their lineups starting in 2002, they would have been in much better shape as pump prices spiked several years later.

Have any lessons been learned? We can only hope so.

1 comment:

  1. Isn't the problem a combination of technology path dependency and legislative capture? If the incumbants have vested interest in maintaining the status quo (see the resistance to Tesla) then any change will be tentative at best. If so, then the most likely uptake will be from countries which are just evolving their transport grid and therefore can start from a relatively clean slate (eg China). For example, whilst Volvo et al are promoting DME and CNG for their trucks as fleet replacement, only China have introduced a methanol based heavy duty vehicle.