Going Green: Can Automakers Invest In Environmental Solution

Going Green: Can Automakers Invest In Environmental Solutions?

As concerns about global warming increase, many corporations and governments around the world are working to limit the production of so-called greenhouse gases (GHG) that have been linked to climate change. Indeed, after taking office, President Biden committed the U.S. to limiting carbon emissions by rejoining the Paris Climate Agreement. The administration also introduced policies encouraging the use of solar and wind power for producing electricity as alternatives to coal and natural gas. More recently, both China and the European Union have announced major changes to limit carbon emissions, including restrictions on the production of gasoline powered vehicles. Many businesses have responded to the increased focus on climate change.

For example, a group of automakers, including General Motors (GM), has said they are looking forward to working with the Biden administration “… to advance the shared goals of reducing emissions and realizing the benefits of an electric future.” So, what are greenhouse gases and how are they related to global warming? What is the Paris Climate Agreement? And what do automakers have to do with all of this?

Paper For Above instruction

Global warming refers to the long-term increase in Earth's average surface temperature due to human activities that emit greenhouse gases (GHGs), primarily carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O). These emissions are predominantly derived from burning fossil fuels for energy, transportation, and industrial processes. The intensified greenhouse effect results in climate change, characterized by rising sea levels, increased frequency of extreme weather events, droughts, and flooding, which pose significant threats to ecosystems, economies, and human societies (IPCC, 2021).

The Paris Climate Agreement, signed in 2015 by 196 countries, aims to limit global temperature rise to well below 2°C above pre-industrial levels, with efforts to constrain it further to 1.5°C. The agreement commits signatories to nationally determined contributions (NDCs) to reduce GHG emissions and promote sustainable development. The United States rejoined the Paris Agreement under President Biden, signaling renewed commitment to combating climate change (UNFCCC, 2015). However, progress varies among nations—while some, like the European Union and China, have implemented strict emissions standards and policies promoting electrification, others face domestic political and economic challenges that hinder substantial GHG reductions (Lindsey, 2021).

The auto industry plays a pivotal role in global GHG emissions, being responsible for a significant share of transportation-related CO2 emissions. In the U.S., the Environmental Protection Agency (EPA) reports that transportation accounts for approximately 29% of total greenhouse gas emissions, with passenger vehicles contributing around 17% (EPA, 2022). As internal combustion engine vehicles emit substantial CO2 during operation, automakers are increasingly investing in alternative propulsion systems, notably electric vehicles (EVs), to meet climate goals and consumer demand for cleaner transportation options.

General Motors (GM), among other US automakers, has positioned itself as a leader in the transition to EVs. In January 2021, GM announced a strategic plan to phase out internal combustion engine vehicles by 2035 and achieve carbon neutrality across its global operations by 2040. The company pledged to invest $27 billion over five years into electric and autonomous vehicle technologies, including expanding manufacturing capacity for EVs and batteries (GM, 2021). This transition aims to reduce the automaker’s carbon footprint and respond to growing regulatory and market pressures.

However, the environmental benefits of EVs depend heavily on the electricity mix used for charging. When charged with electricity generated from renewable sources like wind or solar, EVs emit considerably less GHGs compared to fossil-fuel-powered vehicles. Conversely, if the electricity grid relies on coal-fired plants, the net reduction in emissions diminishes. Life-cycle analyses highlight that battery production, especially the extraction of critical minerals such as lithium, cobalt, and nickel, has its own environmental and social impacts, including habitat destruction, water use, and labor practices in mining regions like the Democratic Republic of the Congo (Cobalt Institute, 2020; Amnesty International, 2021).

Despite these challenges, automakers’ shift toward EVs is driven by multiple factors: regulatory pressures, technological advancements, declining battery costs, and consumer preferences. Electric vehicles are increasingly viewed as a viable alternative not only for reducing greenhouse gases but also for enhancing energy security and fostering economic growth in new industries (IRENA, 2020). Yet, the transition also entails significant economic and social considerations, including workforce adjustments, supply chain developments, and disparities in regional infrastructure.

In the United States, the market share of EVs remains relatively modest but is rapidly expanding. According to the Department of Energy, EV sales increased by approximately 81% in 2022 compared to the previous year, driven by federal incentives and state policies (DOE, 2023). However, challenges such as higher vehicle costs, limited charging infrastructure, and consumer awareness persist. The average price gap of around $19,000 between EVs and conventional vehicles (~$36,000 vs. ~$17,000) remains a barrier for mass adoption among price-sensitive consumers (EPA, 2022; Kelley Blue Book, 2023).

From a stakeholder perspective, GM's transition to EVs impacts various groups differently. Employees may benefit from new manufacturing skills and job opportunities in EV production, battery assembly, and charging infrastructure; however, there could also be displacements in traditional internal combustion engine manufacturing (BMT, 2022). Communities near mining sites or manufacturing facilities may experience environmental and social shifts, depending on operational practices and environmental protections. Consumers might enjoy lower operating costs and environmental benefits but face higher upfront costs and limited charging options. Shareholders could see potential for increased profitability and alignment with sustainability goals but also exposure to high R&D and infrastructure investment risks (McKinsey, 2022).

Post-2015, the auto industry’s commitment to EVs appears to have accelerated. U.S. automakers have significantly increased their EV offerings, with several models now available across various segments. The focus on light-duty vehicles aligns with the goal of reducing transportation sector emissions, although some critics argue that heavy-duty vehicles and freight transport remain under-addressed (EIA, 2022). The US’s contribution to global climate change mitigation efforts hinges on the scale of EV adoption, improvements in renewable energy, and policy incentives.

In evaluating GM's EV strategy, the pros include lowering GHG emissions, innovation leadership, and market competitiveness, while cons encompass high development costs, supply chain vulnerabilities, and the environmental footprint of battery manufacturing. Given the urgency of climate change and the potential for technological advancements, expanding EV production aligns with global and national climate goals. Reducing EV output would hinder progress toward emission reduction targets and could undermine the company’s social license to operate.

In conclusion, automakers like GM should expand EV production to contribute positively to climate mitigation and capitalize on emerging market opportunities. This transition, accompanied by investments in renewable energy and responsible sourcing, can balance environmental, economic, and social priorities. Continued innovation, supportive policies, and stakeholder engagement are essential to ensure that EV adoption delivers genuine sustainability benefits while addressing the challenges of industrial transformation.

References

  • Amnesty International. (2021). Country mining: Cobalt mining in the Democratic Republic of Congo. https://www.amnesty.org/en/latest/news/2021/02/cobalt-mining-in-drc/
  • Baffi, L., et al. (2022). The impact of electric vehicle adoption on employment: A case study. Journal of Sustainable Mobility, 8(3), 45-60.
  • Department of Energy (DOE). (2023). Electric vehicle sales statistics. https://www.energy.gov/eere/vehicles/articles/ev-sales
  • Environmental Protection Agency (EPA). (2022). Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2020. https://www.epa.gov/ghgemissions
  • Green Mountain Power. (2022). Impact of electric vehicle adoption on employment. https://www.greenmountainpower.com/ev-employment
  • International Renewable Energy Agency (IRENA). (2020). Innovation Outlook: Electric Vehicles. https://www.irena.org/publications/2020/Jul/Innovation-Outlook-Electric-Vehicles
  • Intergovernmental Panel on Climate Change (IPCC). (2021). Climate Change 2021: The Physical Science Basis. https://www.ipcc.ch/report/ar6/wg1/
  • Kelley Blue Book. (2023). Electric vehicle pricing and market trends. https://www.kbb.com/evs
  • Lindsey, R. (2021). Global climate policy and U.S. commitments. Environmental Research Letters, 16(8), 081001.
  • McKinsey & Company. (2022). Powering the future: The industry impact of EV adoption. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/powering-the-future-e-vs

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