Environmental Policy Brief #108
Title: General Motors and Wall Street can’t wait to plug into the new economy
By Todd J Broadman
February 12, 2021
Soon after President Biden’s election victory, General Motors Corporation (GM) publicly stated their vision: to manufacture vehicles that feature zero carbon emissions. That vision is the leading feature of their “triple zero,” which also includes zero congestion and zero crashes (through advanced safety technologies and self-driving vehicles). Over the next 15 years, GM will completely phase out the production of petroleum powered vehicles and will solely manufacture electric vehicles (EV). There are to be 30 such EV models available by 2025.
In addition, GM has a goal to transform their internal operations to be carbon neutral by 2040. Their path to that aim includes powering all of their facilities – U.S. and abroad – with renewable energy by 2035. They estimate the cost to re-tool at $27 billion dollars.
Mary Barra, GM’s CEO since 2014, was hired in part for her vision and enthusiastic attitude towards technology. She is aligning GM with the new administration and met recently with: Gina McCarthy, climate change adviser to the President, and Brian Deese who heads the White House National Economic Council. Both administrators will play a lead role in creating the new auto rules.
Other political actors of importance to GM include: California Gov. Gavin Newsom (D) who issued an executive order that 100% of medium- and heavy-duty vehicles in the state will be zero-emission by 2045. Former GM executive Debbie Dingell and now a Democrat Representative of Michigan, had cautioned Barra, “When Joe Biden gets elected, your world will turn upside down. You’ve got to be at the table or else this thing gets jammed down your throat.” States including Massachusetts and New Jersey have since laid the groundwork for setting the same goal as California.
Barra has also found a strange bedfellow in Fred Krupp, President of the Environmental Defense Fund. Mr. Krupp is confident they can reach “common ground” and create a “shared vision for an all-electric future.” Mr. Krupp’s annual compensation is nearly $600,000 and among EDF’s major contributors are the Walton Foundation, Chevron, and Exxon-Mobil. And others like Larry Fink, CEO of the world’s largest hedge fund, BlackRock, who claimed their business model “will be compatible with a net-zero economy.” Like others, the transition to green technology represents the next sector worthy of major investment.
Curiously enough, GM did not join BMW, Ford, Honda, Volkswagen and Volvo when those auto manufacturers signed onto California’s aggressive fuel economy standards: an average of 51 miles per gallon by 2026. Perhaps GM is awaiting the new 2026 – 2035 federal emission rules.
Underlying the “save the planet” ethic, what GM and other auto suppliers need is a sustainable business model. 68% of U.S. oil use is from transportation; petroleum is a commodity that will soon be in painfully short supply. Yet less than 5% of GM’s revenue comes from EV sales. Contrast that with the book value of Tesla, the world’s biggest EV manufacturer, at $752 billion, about ten times that of GM. And much of Europe has already said they will ban sales of new gasoline and diesel cars starting in 2030.
President Biden wasted no time in signing an executive order directing the Environmental Protection Agency to develop tough tailpipe pollution regulations, vehicles being the U.S.’s biggest contributor to planet-warming pollution. In terms of the necessary charging station infrastructure, he has an immediate call for 500,000 more public charging stations. Federal agencies will be required to purchase EV. Consumers can expect tax incentives to make the switch. He sees the creation of vast numbers of “green jobs.”
In spite of these trends, The American Petroleum Institute (API), a leading oil trade group, suggested customers, not automakers, should be driving any vehicle transition. “This is a free market, and every auto company is going to do what makes sense for their customers and their business model. Ultimately, it should be up to American consumers to choose what kind of car they want to drive,” according to Frank Macchiarola, API’s vice president for policy.
Aside from the flimsy “free choice” argument, there are more substantial underlying problems with electric vehicles: their range is limited to around 200 miles before requiring a charge; they are still more expensive than gas-engine cars. EV battery technology is relatively new and it takes far longer to charge than to fill a gas tank. EV still isn’t practical for a multiday camping trip or long rural drives. The electric charging infrastructure will take time to build and plugging in thousands of cars could fundamentally alter the country’s electric grid’s patterns. According to Paul DeCotis, a former New York state energy official and an analyst for consultancy West Monroe, “Utilities are going to need to make significant investments in infrastructure to accommodate this.”
GM has already announced operational plans: three of its U.S. plants will immediately begin the transition to produce electric vehicles. An EV battery plant is being built in Ohio. The industry is leaning in the right direction. Whether society will lean with it and how soon remains to be seen.
- https://www.theverge.com/ The Verge is an ambitious multimedia effort founded in 2011 to examine how technology will change life in the future for a massive mainstream audience.
- https://www.greencarreports.com/ Green Car Reports helps consumers decipher the rapidly changing world of “green” cars: hybrids, plug-in hybrids, electric vehicles.
- https://www.greentechmedia.com/ GTM is the leading information services provider for this next-generation electricity system.
- https://www.bloomberg.com/businessweek Bloomberg is the global leader in business and financial data, news and insight.