Obama to allow states to determine green house gas standards for automotive

In his first few days of being in Office, President Obama has already started to show signs of being progressive in his thinking around energy and environmental issues. We have seen early discussions on the potential stimulus bill (which could include significant monies for energy efficiency related projects), there are signs that an energy bill may get a new life, and now this news from his office: EPA is being instructed to move rapidly towards determining the future of Pavley waiver. This waiver would allow states like California to manage (and control) green house gas emissions from new light duty vehicles. This waiver was earlier disallowed by the EPA under the Bush administration.

If states are able to control greenhouse gases (i.e. if CO2 is considered a dangerous gas like the criteria pollutants NOx, SOx, CO etc), then automakers will be forced to not only sell smaller more fuel efficiency cars in these markets, but to also invest heavily in fuel efficient technologies to achieve profitability on smaller vehicles. If this waiver is allowed, there will certainly be a shift  in some states to smaller gasoline and diesel vehicles, natural gas engines, and increased  sales of hybrids. But this may also promote earlier commercialization of plug-in hybrids and full electric cars. Would the big car companies buy up VC funded smaller electric car manufacturers to put their vehicles on the road and capture CAFE benefits?

Report: Obama to Direct EPA to Move Swiftly on Pavley Waiver

(source: Green Car Congress)

Citing two unnamed Administration officials, the New York Times reported Sunday that President Obama will on Monday direct the EPA to move swiftly to reconsider an application by California and, by extension, 13 other states for a waiver to implement greenhouse gas standards on new light-duty vehicles (California AB 1493, the Pavley regulations).

Mr. Obama’s presidential memorandum will order the Environmental Protection Agency to reconsider the Bush administration’s past rejection of the California application. While it stops short of flatly ordering the Bush decision reversed, the agency’s regulators are now widely expected to do so after completing a formal review process.

In May, the California Air Resources Board issued an addendum to an earlier technical study that shows that California’s clean cars law (the Pavley regulations) could achieve 41% greater total reductions of greenhouse gases nationwide if implemented nationally compared to the recently proposed federal fuel economy standards by 2020. (Earlier post.)

The NY Times report also said that Obama will direct the Department of Transportation to finalize the rulemaking on Corporate Fuel Economy Standards for model years 2011-2015. Although DOT’s National Highway Traffic Safety Administration (NHTSA) had originally anticipated issuing the final rule prior to the end of year, the Bush Administration left office without finalizing the rulemaking. (Earlier post.)

Biofuels/biochemicals, automotive, Green Tie Gala

A few articles that focused on some of the sectors that I am looking at these days. Check them out…

Xconomy:
Never Mind That Bailout: Venture Funding for Auto Innovation Accelerates As Startups Race to Leave Detroit in its Own Dust by Bruce Bigelow
Plunging Oil Prices Require Alternative Fuel Startups to Take a Long View by Bruce Bigelow

C|NET
Eyes turn to auto start-ups’ funding, aid requests by Martin LaMonica

with Governor Duval Patrick (MA) at the annual NECEC Gala

And finally, a nod of thanks to the New England Clean Energy Council for inviting me to their first annual Green Tie Gala. It was a great event, a celebration of the ‘energy’ present in the New England area to promote and commercialize clean energy technologies. New England has certainly become the hot bed of cleantech startups, but more importantly, the Massachusetts government has shown its leadeship by staying way ahead of the everyone else in sponsoring, promoting and providing support to clean energyand energy efficency initiatives in the region.  Kudos to Nick D’Arbeloff, Trish Fields,  and the rest of the NECEC team.

What should happen to the US Automotive Companies?

Given my previous professional experience in the automotive industry, I get asked about the current state of the automotive industry a lot. It is usually in the form of a 2-part question:

(1) Should the US automotive industry be allowed to fail, i.e. declare bankruptcy?

(2) Is there an opportunity for new startups to make money in this industry, given the upheavel?

The first question is targeted towards my past experience in the long tail of the automotive supply chain, and the second at my new career as a venture capitalist in the cleantech space. I was planning to write a short post to highlight my point of view, but Michael Cusumano of MIT basically did a fabulous job of answering the first question for me. His answers reflect my thought on the potential bankruptcy of the US big 3 automotive companies. I post his answers below (Source: MIT News).

On the second question, I am still formulating a thesis. My gut instincts say there is certainly potential for venture type opportunities in the automotive space. Its a large industry, growing internationally, an incumbent set of players that are not innovating as fast as they should, an industry burdened by high capital investments so hard to re-tool, and sea-changes related to oil security, fuel efficiency and climate change hitting it straight in the face. Not a bad place to innovate and solve problems that have basically been ignored in the past few decades. Innovation and expediency is badly needed – which happen o=to be trademarks ofstartup  ventures. However, how does one make money in such a capital-intensive, structually complex, and relatively low margin industry, and where in the supply chain should a startup play? I am still answering those questions for myself.

But here is Michael’s answers to the bankruptcy related questions:

3 Questions: Michael Cusumano on letting U.S. automakers fail

November 21, 2008

“3 Questions” is a new series from the MIT News Office that gives members of the community the opportunity to sound off on current events in their field of expertise. In this, the first installment, Michael Cusumano, the Sloan Management Review Professor in Management in the MIT Sloan School of Management, discusses why U.S. automakers should be allowed to fail and what it will take for them to become viable again.

We want to hear your feedback and suggestions. Please contact the News Office at newsoffice@mit.edu, and be sure to write “3 Questions” in the subject line.

Q. Do you think that U.S. automakers should be allowed to fail?

A. Yes, I think they should file for Chapter 11 bankruptcy protection under the U.S. courts and reorganize. The reason is that the decline in competitiveness of General Motors, Ford and Chrysler is a long-term problem, going back to the 1970s and 1980s, beginning with lagging physical productivity in assembling automobiles compared to the leading Japanese companies, and then in quality and also in engineering productivity for product development. I myself have done research documenting this gap (Michael A. Cusumano, The Japanese Automobile Industry, Harvard, 1985) and was involved for many years in other research undertaken by researchers affiliated with the International Motor Vehicle Program (IMVP), based at MIT and Wharton but with a research network all over the world. IMVP produced the bestseller book by James Womack, Daniel Roos and Daniel Jones, “The Machine that Changed the World” (Lawson, 1991), which documents the state of the world auto industry circa 1990 and the mounting problems of the U.S. automakers. But things have gone from bad to worse.

HAUL: Green Transportation Exchange Traded Fund

The launch of the first Green Transportation Exchange Traded Fund is an interesting development. I am sure the fund’s ability to pick green companies for their “green value” will improve, and hopefully a new set of succesful companies that are using innovative technologies along the automotive supply chain (and powertrain) will join as they go public. In the meantime, this is an interesting development that highlights not just a growing interest in sustainable/clean/low carbon transport sector, but also in finding ways to track the progress of innovations and companies that hold promise.

Source: Greentech Media

by: Jeff St. John

September 10, 2008

A new exchange-traded fund that invests in “progressive” transportation companies – ranging from makers of electric-vehicle batteries and drive systems to bicycle makers and railroad and shipping giants – will soon add its name to the a growing roster of ETFs focused on green businesses.

Invesco PowerShares is set to open its Global Progressive Transportation ETF to investors on Sept. 18. The fund will track the Global Energy Efficient Transport Index, or HAUL, from Encinitas, Calif.-based WilderShares, the creator of several green-energy exchange-traded indices that have seen assets grow with the rising price of oil and increasing interest in greener investment opportunities.

But are there enough public green-transportation companies to make up a whole index?