Happy times in Boston this week, with the Red Sox winning their second baseball World Series championship in four years. I'm not much of a baseball fan, but I did note that Mike Lowell, the team's third baseman, won a hybrid Chevy Tahoe for being named the Most Valuable Playerin the series. Lowell, like most Americans on most days, probably won't often need the capacity to transport seven passengers or tow three tons of cargo, but I bet he'll appreciate the hybrid Tahoe's fuel economy -- which is, shockingly, roughly on par with a non-hybrid Toyota Camry, at least for city driving.
Fuel economy has become increasingly important to consumers in recent years. Last week, The Wall Street Journal reported that "as gas prices keep rising, consumer tastes around the world are shifting toward smaller, more fuel-efficient cars," and that global demand for small cars is expected to grow by 30 percent by 2013. Demand for big SUVs over the same period is expected to drop four percent. U.S. automakers must be jumping at this opportunity, right?
Unfortunately, no -- or at least, not enough. Instead of innovating, Big Auto firms and their lobbyists still fall back on the tired refrain that improving fuel economy will lower profits, hurt competitiveness, even "undermine the economic health and stability of automakers" altogether. (That's taken from congressional testimony by the Alliance of Automobile Manufacturers, the U.S. auto industry trade group, in June 2007.)
The good news is that the U.S. business establishment is starting to get it, even if automakers aren't. Last week, Citigroup and the Investor Network on Climate Risk (a project of my own group CERES) issued a report concluding that improving fleet-wide fuel economy standards by 40 percent, a mandate currently under consideration in the U.S. Congress, would be eminently achievable by automakers and could well result in additional profits.
Importantly, the report points out that since "financial markets can often move rapidly and ahead of regulatory enactment, understanding the competitive and profitability impacts of [proposed new fuel economy standards] is critical to our valuation of automakers." In other words, can you, Car Company X, turn out attractive, fuel-efficient products? Because that's where the market is headed, and investors are paying attention.
It's often observed that the conversation about climate change is really a conversation about energy, insofar as we'll have to transform the ways we make and use energy in order to stand a chance of getting the problem under control. We've always known that improving vehicle fuel efficiency would be an important piece of that puzzle. Now it's becoming clear that those same improvements will help car companies build long-term shareholder value as well.
Mindy S. Lubber is president of Ceres, a leading coalition of investors and environmental groups working with US companies to address sustainability challenges such as global climate change.
Image: Baffin Bay icebergs at sunset. Credit: Mila Zinkova, via Wikimedia Commons
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