Are North American Automakers Ready for a New Paradigm?

The state of the North American auto industry has become an internationally relevant crisis that few of us can ignore. Of course, many of us will say ‘they had it coming’, and we environmentalists will secretly welcome the prospect of an end to business models and marketing responsible for spewing forth parking lots full of SUVs.. however, this won’t be a walk in the park for anyone. The North American economy in general is highly dependent on the Auto industry, and in many local economies its significance is much greater. The secondary effects of a downturn in this sector are likely to branch out to all areas of the economy. Some hard-core environmentalists may argue that for the environment this is not necessarily a bad thing, as consumption is reduced, so is the impact associated with it. However, for environmental market transformation, this is not great news. As economies falter, prices for energy fall, reducing incentives to conserve and drive markets for new, more efficient products.

Clearly some kind of bailout is necessary to avert the economic and social crisis that could befall North American automakers, but will it be enough to get them on track? Can the same leadership that got them into their current position be trusted to bring them out of it? How effectively will a strategic change be implemented across the vast, unionized, and capital intensive operations of the auto sector? The road ahead for these companies is a path full of obstacles. The global economy is one, however even with a strong economic outlook the writing is on the wall for Chrysler et al. Chinese automaker BYD just announced its first hybrid, a plug-in hybrid that effectively leapfrogs the incumbent competition, and offering a 100km range on batteries alone, and a price of roughly $22,000. This is still expensive for the Chinese market, but looks pretty good compared to the alternatives here in N.A. If this company is able to access the full potential of its export market, it stands to do very well. Warren Buffet seems to think so, as he’s currently invested in 10% of the company.

One notable difference between BYM and the struggling North American automakers is that it began life as a battery company- it makes 30% of the world’s cell phone batteries, which gives it an edge on a critical component for plug-in hybrids. For this reason it is far better suited to changing the technological paradigm of personal transportation than its competition. Auto manufacturers are steeped in the history and culture of the internal combustion engine. Envisioning the automobile of the future as an intelligent, electro-mechanical appliance as opposed to an integral link in the petroleum economy will be far easier for companies who possess the capacity for innovation, and for re-imagining the cultural relationship between cars and people.

CFLs: Lighting the path to energy efficiency?

Unless you’re a die hard canadian football fanatic, you probably know that CFL stands for Compact Fluorescent Lamp, and you may also know that around the world, governments are banking on this technology making our old incandescent lightbulbs a think of th past. Canada and Australia have both mandated a ban on incandescent light bulbs (by 2010 and 2012 respectively).

The good news is that CFLs are far more efficient (roughly 3 times) than incandescent light bulbs, and can last much longer (varies, but on the order of 10 times longer). I would still like to see a full life cycle analysis of CFLs which take into account energy and materials used in manufacturing (they are much more complex pieces of technology). One of the drawbacks which has had the greatest attention is the fact that CFL bulbs contain mercury, which, if disposed of impoperly, becomes an airborne, easily absorbed toxin which can pass directly into our bodies and into the food we eat, as well as bioaccumulating in the food chain. The need to combine large scale use of CFLs with an extensive recycling program is therefore crucial. Fortunately, the technology to safely recover the mercury from used fluorescent lamps is fairly simple, and will hopefully be adopted through take-back programs by major retailers. However, mercury contamination due to accidental breakage may still be a concern- see Fox News’ piece of, ahem, reporting on the subject (if you can really take anything from Fox News (or the CEI, source of this story) seriously, which I can’t).

For a more enlightened (ouch, bad pun) illustration of the facts associated with CFLs, Clean Nova Scotia has an excellent page here. In particular, treehugger.com provides an insightful response to mercury concerns:

“Ironically, compact fluorescent bulbs are responsible for less mercury contamination than the incandescent bulbs they replaced, even though incandescents don’t contain any mercury. The highest source of mercury in America’s air and water results from the burning of fossil fuels, such as coal, at utilities that supply electricity. Since a compact fluorescent bulb uses 75 percent less energy than an incandescent bulb, and lasts at least six times longer, it is responsible for far less mercury pollution in the long run. A coal-burning power plant will emit four times more mercury to produce the electricity for an incandescent bulb than for a compact fluorescent.”

While I think more policy action needs to be taken to encourage new technologies, I acknowledge that government light bulb bans could be seen as jumping onto a technological bandwagon before all the ramifications are clear (full life-cycle impacts for example, possibility of mercury exposure due to breakage) . However, because of these decisions, we should see a lot more focus on addressing these concerns as well as other possible efficient lighting solutions. Besides CFLs there are other promising technologies such as LED lighting, which will get a needed boost from the light bulb bans (not to mention the world of possibility in natural lighting through good design…).

As a side-note/rant: What I would like to know is how all these right wing, (purported) ‘free-market’ advocates like the CEI (who also generally take the view that technology, rather than behavioural change, will save us from the effects of our own consumption) think new solutions will be found if we persist in clinging to old technologies without providing incentives for new ones to develop? Their answer no doubt will be ‘market forces’ but this simply ignores the facts that existing markets are flawed in that they don’t account for all the externalities they create.

Photo Feature: Wind Farms

I’ve been a bit slow in writing new posts the last couple of weeks, so I thought I’d cheat a bit and share some photos I took recently of two wind power projects in southern Ontario. The first is the Windshare / Toronto Hydro single turbine installation at Exhibition Place near downtown Toronto. It stands in contrast both in location, intent and in scale to Canadian Hydro Developers’ 45 turbine Melancthon I project, located an hour and a half or so north of the city.The main arguments against wind farms stems from an aesthetic point of view, and as such it is difficult to judge without actually seeing an installation in its particular environment. Melancthon I is a LARGE project, and its aesthetic impact is quite different from the Windshare project at Exhibition Place. Despite the fact that the land used for it was previously developed as farmland, it clearly brings about a transformation of the landscape. My impressions are that there is a real need to understand the nature of individual sites, and their suitability not just technically, but in terms of preserving the experiential value of natural landscapes. How these factors weigh against the benefits of wind power vs. alternatives is an issue for debate, which I encourage as much involvement in as possible. As it stands I feel there is still too much debate steered by corporate interests, whether for or against wind power, and very little that stems from real stakeholder positions.

One noteworthy difference between the two projects is in their financing models- Windshare uses a cooperative model in which individuals purchase shares in the co-op portion of the project- the intent is that this will give them rights to the green power attributes of the project (once the obligations to the co-developer, Toronto Hydro have been satisfied). This model provides the advantage of the capacity to directly involve community stakeholders in the payoffs of the project. In contrast, commercial projects provide little direct payoff to community stakeholders (with the exception of landowners who are paid rent), which is another source of criticism of such projects. This is yet another advantage of distributed generation over centralized generation- if the green power created is used by the community, NIMBYism can be minimized.

Windshare, CNE, Toronto

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Melancthon Wind Project

Carbon Trading & the Entrepreneurial Spirit

A group of US States have agreed to implement a carbon trading systems despite opposition of such from the federal government. Now Australian states are heading in the same direction by contemplating opening a carbon market, despite outright opposition from prime minister John Howard, who argues that such a system would impact Australia’s coal industry. It would seem that many do not agree with this analysis; that such systems would represent an undue burden to industry. On the contrary, many companies perceive the opportunity to develop a competitive advantage.

Those who argue against carbon trading don’t appear to be able to offer up an alternative that would be as effective in reducing emissions. They make the arguments that such a scheme would impact industries and consumers, mostly through the added cost of energy. The problem with this is that no course of action besides “doing bugger all” will result in zero added cost in the short run (and even that strategy will incur high hidden future costs).Everyone acknowledges that something should be done to reduce pollution- no politician would succeed today on a platform calling for “more fossil fuel combustion! continued liberation of toxins into the air!” (though we have seen at the federal level in Canada and the US a policy of inaction that is basically supporting just that). The alternatives generally touted are technology, and, well, er.. technology. The public seems to be painfully aware of the oil & gas dependence that exists, therefore other energy technologies such as nuclear and “clean” coal are usually discussed. But the added cost argument falls flat given the costs of all the alternatives- clean coal technology reprepsents a costlier technology to implement- adding cost to energy producers and therefore consumers. I have yet to see a profitable private nuclear power producer. In fact, any new “technology” is likely to increase costs to industry in the short term as it is adopted.

Why no talk about technologies such as solar, wind, geothermal, tidal and other energy sources which are not only clean, but renewable? Simply, because these technologies do not yet have an established industrial base with which to influence policy. Conservative politicians who decry carbon-trading as unfair should take a dose of their own erstwhile free-market rhetoric, and the public should be asking itself whose interests these policy makers are really serving.

Long ago, economists realized that a free market is most efficient in terms of allowing the greatest value to be exchanged through trade. This shouldn’t be confused with equitable distribution, and doesn’t necessarily mean that all things should be distributed by way of a free market (basic services and public goods come to mind). But carbon IS a commodity- regardless of the price, the basic utility is the same, and the more you burn the more you can produce, ergo the more you can sell, and the better off you are.To enable a free market, you must have a sufficient quantity of players on both sides. This produces competition, which is essential to technical innovation. If “technology” is going to help us reduce our emissions, how do the carbon trading opponents suppose it is going to be developed? Dr. Hugh Saddler of the Australian company Energy Strategies, recently expressed his views with respect to the Australian government’s opposition:

“It’s really a cynical planning, picking-winners approach. It’s more akin to what used to happen in the old Soviet Union. Instead of letting the market decide which technologies are the best ones, letting consumers decide because they have a price signal, or letting different generators decide they might build a different type of power station, he actually seems to be saying, we’re going to choose the technologies and we’re going to put public money into them, not let the market decide, we’re going to decide as politicians. And then they are going to be the technologies which reduce emissions.

“We need to change the ways we use energy and the sources of energy towards lower emission energy sources and that’s not going to happen in a market economy unless you give all the economic agents a price signal, and a trading scheme is the first step towards giving just that price signal.

Perusing the members of the currently operating Chicago Climate Exchange yields a number of industry leaders such as Dupont, IBM, Ford, etc. who are participating in the trading system through voluntary emissions reductions. Is it all image? or are these companies deriving an advantage from such initiatives? The voluntary state of the carbon market means prices are much lower than with legislated limits. The environmental pages of the companies’ websites make no mention of carbon trading, so PR doesn’t seem to be an objective. Simply put, these are the companies who have the expertise and the means to find innovative ways to reduce emissions and become more efficient. Getting paid for the credits generated is icing on the cake.

But these companies can also gamble- small companies with innovative solutions but high risk exposure are being hurt as they wait in the wings for certainty about the future of emissions regulations. In Canada’s own burgeoning carbon market, the Montreal Climate Exchange (MCeX) has put off launch until after the Federal government unveils its plan (another potential player, the Canadian Climate Exchange (CCE) based in Winnipeg, has been MIA for over a year, and presumed dead).

This stands as just another sign that the world’s “business friendly” conservative governments are doing a disservice to the pursuit of efficient economics- they are seemingly more swayed by the self-interest of the status quo than by the need to encourage innovation and entrepreneurship in a dynamic marketplace.

The corporate and government leaders who recognize that strategy must look ahead and not backwards have begun to take the initiative. With the help of a little entrepreneurial spirit, hopefully in the future the label “green” will stand for both environmental and economic performance.

Energy Blog

The Energy Blog provides plenty of great information about energy technologies in the context of sustainable energy strategies.