Investment in Energy & Fuel Conservation

Much has been said about the causes and the effects of global warming and about the controversy around whether it is real or not. I don’t have anything new to add EXCEPT the little talked about notion of the risks of a false positive vs a false negative. Imagine, “IF global warming and its effects are real and we DON’T do anything about it … “. Now also imagine the opposite, “IF global warming and its effects are NOT real and we invest in conserving energy/fuel …”.

Is this wasted investment? It turns out that this is a highly beneficial investment anyway, global warming or no global warming. It results in:

1. A diversified energy portfolio (they constantly advise us to diversify our investment portfolio)
2. Reduced dependence on uncertain energy sources
3. Improved balance of payments
4. Reduced congestion on the streets
5. Greatly improved technology in automobiles – you just have to look at what the past 40 years of emissions regulations have done to improve internal combustion engines
6. Economic GROWTH – again the experience of the past 40 years and the growth of industry essentially making a car “a computer on wheels” with much added value can be attributed to the motivation provided by the need for emissions control

Why are we not doing it? The answers to this question are even more speculative than the answers to the question of global warming:

1. Legacy investment in plants and equipment 
2. Intellectual investment - technical and business know-how, a lot of which appears to be geared to “brute force”
3. Emotional investment – careful cultivation of attachment to the vehicle, use of vehicle as an expression of personality etc. 
4. Policies turned on their head (we give up to $3,400 tax credit for the most fuel efficient vehicles and up to $100,000 tax credit for vehicles HEAVIER than EIGHT THOUSAND FIVE HUNDRED pounds)
5. Complexity because most other major investment (housing, infrastructure) is made around the vehicle – our cities are built for automobiles, NOT people

What should we do? This the most difficult question before us. Fortunately, we DON’T have to answer it. The Automotive X PRIZE competition, the way it is designed, is likely to stir up the community of people thinking about this issue and putting their skin in it, to come up with a variety of answers that will create multiple solutions – diversifying our portfolio. Let the competition begin.

Comments

[Manu Sharma]

There really is no debate whether global warming is real. I'm surprised you haven't seen "The Inconvineant Truth" yet because the movie makes it clear that all debate has existed solely in the media whereas the scientific journals have always been united on this. The world's scientists agree that this is real, it's manmade and that we have very little time before we cross the point of no return.

The programs you see on FOX NEWS questioning this are deleberately created by the "powers that be" to misinform the public. One of the biggest sponsors of media cmpanies are automobile companies so it's not surprising that we often see such stories.

[D. F. Linton]

Sorry, but the $100k is an immediate deduction (rather than a scheduled depreciation) not a credit. Its value to a taxpayer depends on the tax rate. All vehicles purchased for business are deductable over some time period so the incentive is the just the higher time value of the immediate deductions compared to the normal multi-year schedule. I haven't done the math but I doubt that the difference in value is more than the $3,400.

[Ed Danzer]

It appears that you have not fully looked at the vehicle tax credit you are complaining about. It is not easy to qualify for this credit, that was designed for small businesses. As with any legislation, people abuse the intent. Maybe you should contact the IRS and find out what percentage of vehicles purchased use this credit and state facts. Making comments like this could be like saying rich people don’t pay taxes, which is not correct. I would like to think AXP would be very concerned about being factually correct.

The same abuse of legislative resources could be said for research on fuel cells and hydrogen vehicles. There have been large sums of money spent, with no viable results available in the near term if ever.
The 20th Century Truck program seems to show poor return on investment also.