American Auto Upheaval Radically Changes GHG Outlook

Jim Hansen, the GISS/Columbia University modeler who has had such a huge influence on climate policy, often observes that action plans habitually fail to keep pace with the latest developments, sometimes to their detriment. A case in point he mentioned a few years ago when I was interviewing him for a book: the near-elimination of CFCs pursuant to the Montreal Protocol had a positive implication for climate, because CFCs--besides being ozone eaters--also are potent greenhouse gases. A similar case in point from today's news--the precipitous drop in U.S. large car sales.

By the end of April, as noted in an earlier blog post (below), record-high gasoline prices were beginning to have a discernible effect on U.S. driving habits. Now, with the publication of May auto sales data, industry leaders and analysts see a profound "structural shift" or "watershed" that is likely "permanent" and "irreversible." Among the dramatic developments noted in the press, starting with a report and commentary in today's New York Times:

â''Ã'¢ For the first time since 1992, the vehicle most sold in the United States in May was not an SUV or light truck

â''Ã'¢ the two most popular cars were the Honda Civic and Toyota Corolla, which helped Asian auto makers surpass the top three U.S. automakers in the U.S. market for the first time ever

â''Ã'¢ sales of SUVs and trucks having dipped below car sales in March and April, the May ratio of cars to trucks was 57:43

â''Ã'¢ U.S. auto sales fell 30 percent in May, and total 2008 sales may be below 15 million vehicles, compared to 17.4 in 2000

If Americans are starting to stop buying SUVs, with it costing up to $30,000 a year to fuel a top-end model, could their next step be to junk the SUVs they already own and switch to more fuel-efficient cars? If that happens, the impact on U.S. greenhouse gas emissions could be dramatic.

That's worth noting this week, as the Senate opens debate on legislation to cap and trade carbon emissions. The Warner-Lieberman draft bill would impose a federal tax on gasoline that would reach 40 cents a gallon by 2030. But with gasoline prices closing in on $4/gallon and likely to go even higher, the question of a federal tax could be moot. In fact, as noted in the earlier post, the higher prices could give the United States a mighty push toward carbon reduction, helping it get into step with international efforts to cut greenhouse gas emissions.

High Gasoline Prices Start to Bite into Driving, SUV Ownership

(May 7 post)

With U.S. gasoline prices now at an all-time record high, having climbed in fits and starts for five years, the logical results appear to be finally showing up in lower gasoline consumption and a distaste for large cars and light trucks. According to a report in the May 5 issue of Business Week, the number of vehicles on the roads dropped 1.4 percent last year, and gasoline consumption is expected to dip 0.7 percent this year. Sales of SUVs and pickup trucks plummeted 27 percent in the first quarter of 2008, with total auto sales down 8 percent.

The fundamental question, for consumers, business leaders, and policymakers, is whether oil and gasoline prices will continue to trend upward and stay there, or whether the current situation is just a blip. If high prices are here to stay, then of course those who replace their big cars with smaller ones sooner will come out ahead of the game, and those automakers who anticipate that behavior will be the winners. Ford Motor, which reported a surprisingly large first-quarter profit last week, is reported to be among those betting that high prices are here to stay [and General Motors has now adopted the same philosophy].

Ironically, if gasoline prices stay in the stratosphere, the United States may be off the hook when it comes to the atmosphere. Back-of-the-envelope calculations suggest that if one wanted to halve carbon emissions from the U.S. automotive sector--enough to get the country into step with international efforts to reduce greenhouse gases [without doing anything else]--gasoline prices would have to double from their average levels in the early part of this decade, which have been around $2.50. That calculus underlay a blue-ribbon report sponsored by Princeton's Woodrow Wilson School last year, which recommended increasing gasoline prices by $2.50 per gallon over a period of 10 years, as a matter of policy.

If the global oil market were to drive prices to $5 anyway, and American consumers start to believe they're really gong to stay there, then--arguably!--policy won't be necessary. [Would not be necessary, that is, to get the United States into step with the Kyoto regime, which it first embraced but then repudiated.] Over time, if econometric studies are to be believed, American drivers [at $5/gallon] will spontaneously use half as much gasoline and emit half as much carbon.

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