Home > Environment, EU, World Politics > Yes I care – US goes green

Yes I care – US goes green


At one point last year when the financial crisis transformed into an economic one I was discussing with my environmentalist friends the possible effects over the environment. We split between the following three – the drop of industrial production will have a beneficial effect; the lack of resources will discourage scientific research and this will damage the pro-green efforts in the long run; politicians will be preoccupied with bailing out companies and saving jobs and will lack the time and will to deal with climate change. What is unfolding now is a combination of the three, but the recent news make me think the efforts to reverse climate change are still on top of the agenda.

GP0X1GYesterday president Obama announced an ambitions plan for car emission cuts in the US. The plan will make car-manufacturers produce vehicles that run at least 35 miles per gallon  on average with current standards being 25 miles per gallon. This means that all SUVs, ATVs, cars and motorbikes will run at an average cost of around 6,7 liters per km. This is indeed a major step in the US legislation, especially considering that it took 30 years for the US to adopt its first car efficiency bill 18 months ago. Only half a year later we see a significant improvement in standards and also a requirement for increase of car efficiency by 5% annually.  This is good for three reasons

  1. Manufacturers have clear standards and know what their limitations are in the long run
  2. Drivers will use more efficient cars and spend less on oil, which they certainly look forward to after the record prices of 4 USD per gallon from 2007
  3. Less fuel will be spent and the car emissions will be cut by 1/3 by 2016.

The so called California standards introduced long ago by the Governor Schwarzenegger are now embraced by the biggest economy in the world. As we can see the new American president keeps the environment high on the agenda, as he pledged in his election campaign So far car manufacturers such as Ford have been producing energy efficient cars for Europe and Japan but still have not applied green standards for the US market. Now such companies will have the opportunity to be leaders, while others will start new investment programs. In fact it is the US government that starts these programs, as it already has a lot of control over the car-manufacturing industry in the US because of the crisis.

The US president was really quick to announce this plan only 4 months after he entered office.It is indeed a step that smartwe should all welcome, but it is still far from what the biggest economy in the world can do for the planet. I think the US needs a strategic paper that outlines its goals in energy efficiency, green house gas emissions, conservation and other measures tackling environmental degradation. In this respect the Americans have a lot to learn from the EU which has extensive legislation and is at the lead lead of fighting climate change.

Consider last year’s strategy EU 2020 It exceeds the ambitions of the US administration by a large margin and sets a high goal to achieve formore than a decade ahead. In short it does the following:

  1. cuts the greenhouse gases with 20% from their level in 1990
  2. increases the renewables’ share in the  EU economy to 20% of all energy used
  3. Cuts energy consumption by 20% by 2020

I will be really happy to see a similar plan in the US. What is more in the case of the EU is that neighboring countries have also joined the EU-led efforts. The US can also learn from the Emission Trading System  (ETS) of the EU, which apushes companies to seek ways of low-carbon production and stimulates those ones who have efficient investments in green technologies. explain

Thus the positive effects are both on the environment and the economy. This is hugely important as it shows the link between green thinking and profit thinking. In traditional terms these are two opposing concepts, but the ETS is a good example that it is not longer so. It even created its own carbon market with carbon auditing and a huge turnover, which at the end of 2008 reached over 4 bil. Euro per month. The psychological element here also should not be underestimated. Paying for CO2 emissions really brings it close to mind that the air is not for free and it is also a resource you should pay for if you pollute it. Just like other resources like coal, water, gas and so on. Such measures, I believe, have very far-reaching effects for the new school of thinking about the environment and making it part of our daily business. A positive part.

More about the new school of thinking you can see here .A dramatic story about the world we live in.

  1. Lyubomir Minkov
    May 26, 2009 at 16:56

    Vanka, I am afraid I am much more skeptical about US going green these days.

    I think that the current financial and economic downturn will delay the signing of any environment legislation in the US. A good example for that is Australia where the long time planned ETS was postponed from 2009 to mid 2011 as the industry demands for relief since Australian businesses are already suffering from the recession and these restrictions will worsen their situation as their competitors in other countries don’t face similar burden.

    Regarding Obama’s plans to reduce car GHG emissions – how can the government set legislations for US car-manufacturers and at the same time supervise and force the restructuring of Chrysler and practically takeover General Motors? The US government will run majority in GM and the Treasury Department will have the power to elect all of GM’s directors and control the vote on matters brought before the stockholders. I see a serious conflict of interest as the one setting the rules will practically be the one that implement them. This reminds me of central planned economy rather than free market.

    The EU ETS is indeed a positive example and sets a benchmark for all countries around the world. However, in some EU countries like the Czech Republic, the European allowances are so high that when local governments allocate them – beneficiary companies can continue their “business as usual” politics and in some cases even generate cash from sale of allowances that they don’t even need. The EU ETS will be efficient as long as the price of carbon credits is high. In February one allowance was sold for 8 EUR from its peak of 40- 45 EUR in the beginning of 2008. I read somewhere that price less than 20 EUR practically leave no financial incentives for companies to invest in technologies for reduction of their GHG emissions.

    However, the positive trend is that since February the EU carbon credit price reached 15 EUR and rising. As more sophisticated financial instruments to hedge risks appear on the European Climate Change and the third phase of the scheme is on its way – financiers project the ETS will become the fastest growing financial segment. I really hope so as it will indeed prove that profitable industry and strict climate policies can exist together in free market economies and Al Gore’s scaring projections won’t become reality 🙂

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