Are U.S. Auto Companies Driving Backward?
The automotive sector has a key role to play in helping to moderate climate change. Transportation accounts for more than 27 percent of U.S. greenhouse emissions. Given the accelerating pace of climate change and its devastating impacts, greenhouse gas emission reductions by the auto sector-a key contributor of these gases-must accelerate and must occur in the short term.
Unfortunately, the U.S. auto industry is driving in the wrong direction. Shareholders are highly concerned about the automotive industry’s recent attempts to weaken U.S. Corporate Average Fuel Economy (CAFE) standards for the critical years of 2021 to 2025 – years in which forward progress in greenhouse gas reductions is absolutely crucial.
This concern is underscored by a recent University of Michigan study finding that the window for climate action by automakers could close as early as 2025, after which it may be too late to stave off a global climate tipping point. The study further finds that abatement costs for emissions reduction action by automakers are likely to increase sharply with every year of delay beyond 2020.
While the administration and certain lawmakers are willing to give U.S. automakers a break in their greenhouse gas reduction obligations, this does not serve shareholders well. A warming globe is costly for the economy and a drag on shareholder portfolios; U.S. auto companies are increasingly subject to reputational damage for seeking weakened standards; and U.S. auto companies risk becoming globally uncompetitive by slowing their focus on near term, fleetwide greenhouse gas reductions.
Lost competitiveness is a crucial issue for company success. Developing nations such as China and India offer large markets, but are tightening fuel efficiency requirements and supporting low carbon vehicle technologies. Many international automakers are announcing plans in line with this decarbonizing vehicle market. In contrast, both General Motors and Ford Motor appear to be slowing their progress on fleetwide greenhouse gas emissions reductions. Ford has announced a significant reallocation of capital from cars to trucks and sport utility vehicles, a move that will likely increase fleetwide greenhouse gas emissions, while GM has also been growing its large vehicle lines. Both companies have announced plans to expand future electric vehicle development, but have failed to give specific targets and timelines, or indicate the percentage of planned electric drive vehicles. Currently electric vehicles make up a small portion of both company’s fleet sales.
Coupled with lobbying to weaken CAFE standards, Ford and GM’s actions raise serious questions about whether these companies will retreat in reducing fleet greenhouse emissions, especially through 2025, the critical window of opportunity for the industry to meet climate goals. This uncertainty exposes the companies to reputational harm, public controversy and the potential to quickly lose global competitiveness.
Given the importance of these issues, As You Sow and other shareholders are seeking clarity on the companies’ greenhouse gas emissions under weakened CAFE standards, including whether the companies plan to retain emissions consistent with, or better than, existing CAFE standards to ensure their products are sustainable in a rapidly decarbonizing global vehicle market.
President, As You Sow