For the auto industry, the economics of going green will be very costly indeed, and the costs will come in areas that have hardly been looked at so far. The obvious big-bucks expenses will be in retooling, converting production, developing new-fuels infrastructure, and reinventing dealerships—not to mention the marketing-education efforts required to convert buyers to efficient cars.
I haven’t found much worthwhile analysis of any of these things. We seem to be too busy promoting newer, bigger, more powerful cars. In other words, conducting business as usual.
But as government intervenes (properly or not) to create standards and promote greenness, other even less-noticed costs—sometimes hidden, sometimes not—will be added. The Detroit News has written recently about how newly evolving state and federal standards will change vehicle design and add cost—lots of cost—in order to achieve worthwhile environmental goals.
The paper came down hard on the California Air Resources Board for its “cool cars” rules that require new windows for cars by 2014 to keep out 45 percent of the sun’s energy, thus requiring less air conditioning and less fuel. One problem is that the proposed metal oxide coating interferes with cell phone and GPS use, along with “ankle bracelets for parolees,” of which there are plenty in California.
The initial standard will cost $111 over the life of a vehicle; the 2016 standard will add $250 to the cost of each vehicle. California says it will take five to 12 years for consumers to recoup the costs from reduced gasoline use.
The good part is that by 2020, the Board predicts 700,000 metric tons of CO2 will not be put in the air. That’s the equivalent of taking 140,000 cars off the road for a year. Regarding the communications problem, the Board says let ‘em use antennas.
The new federal fuel standard is going to cause even more problems but, again, with big benefits down the road. Expect lots of opposition from the auto industry. The detnews.com‘s first paragraph makes it pretty clear where they stand:
The Obama administration’s proposed standards for fuel efficiency and tailpipe emissions will raise vehicle price tags by more than $1,000, depress sales by 58,000 and cost more than 5,000 auto industry jobs in 2012, a government analysis said Tuesday.
However, the EPA tells us that fleet standards of 34.1 mpg will be required by 2016, tailpipe emission standards will be fixed for the first time, 950 million fewer metric tons of greenhouse crap will not go into our air, and car owners will save some $3,000 in fuel per vehicle. The big number: $60 billion over five years for the industry to implement these regs.
EPA thinks that the plan
will eventually boost auto sales by 65,480 vehicles through 2016 and add 5,795 auto jobs because [of] stronger consumer demand for fuel-efficient models—especially if fuel prices rise. The agency acknowledged, however, that “the possibility exists that there may be permanent sales losses” because consumers may keep vehicles longer as a result of higher prices.
The jury, of course, is still out, and the industry will have its chance to comment (and soften) the proposals. But you can bet they will be enacted in something like their present form. The problem is, as with the healthcare legislation being proposed, nobody can offer a clear, convincing analysis of the cost/benefit equation. We just don’t know enough.
So it seems to be a question of which side has the more compelling case: controlling big costs in the short run or gambling that the long-run benefits have to be worth it. Where do you come down?