“California’s Cap-and-Trade Revolt” – Wall Street Journal, 30 June 2014

While West Virginia and Kentucky Democrats are bucking Obama’s climate policy, California Democrats are also fighting similar policy in California, the state’s cap-and-trade program, which is directly effecting the poorest Californians.

Recently, 16 of members of California’s Democratic Assembly wrote a letter to the California Air Resources Board, encouraging the board to revise or postpone California’s cap-and-trade program. The program calls for big manufacturers and power plants to adhere to a state-ordered carbon cap by buying carbon permits or limiting emissions. Transportation fuel suppliers will also have to acquiesce to permits in 2015.

via SF Public Press

via SF Public Press

Assembly Democrats’ minds are on gas prices, which could surge anywhere from 15 to 40 cents per gallon. California has the highest gas prices in the country, in large part due to fuel blending obligations and taxes. In 2012, the Boston Consulting Group anticipated that gas prices would rise anywhere between $0.49 and $1.83 per gallon by 2020. While the program’s objectives are pure—boosting gas prices is supposed to persuade people to drive less, carpool, or purchase electric cars—California’s cap-and-trade is invariably hurting those who cannot afford it. A majority of the 16 Democratic Assembly Members represent minorities and low-income populations.

The Air Resources Board maintains that the objective of the program isn’t to finance new state governmental programs, though California’s 2014 budget does allocate $250 million from carbon permit auctions, as well as 25 percent of future yields, to fund a high-speed rail. The auctions will bring in anywhere between $12 billion to $45 billion by 2020.

Assembly Democrats are in agreement with the California Chamber of Commerce, which is suing the Air Resources Board to invalidate California’s program.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

June 30, 2014

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“Fuel-Efficiency Rules Are Already Raising Costs in Detroit” – Wall Street Journal, 22 January 2014

Even though GM and Chrysler have paid off their auto-bailout loans, they are still under the thumb of Uncle Sam; elements of Obama’s Climate Action Plan do not only extend towards power plants, but automakers as well. According to the Climate Action Plan, car companies’ products have to average 54.5 miles per gallon by 2025. This, however, requires huge design changes that are going to be a big blow to profit margins.

America’s best-selling vehicle, the Ford F150, is getting a complete redesign. from the inside out. It will be the first truck and large-volume vehicle to have an all-aluminum body, which will lower its weight and increase its fuel efficiency. Obama’s Climate Action Plan requires full-size trucks to have a better fuel efficiency, up to 30 mpg from the current 20 mpg.

Switching to aluminum, though better for the environment, is an expensive move. As we reported last month, converting to aluminum means higher material costs and new manufacturing machinery. While the price tag is high, Ford can’t fight the new regulations, and is instead doing all it can to effectively market the innovation behind its newly redesigned products, the F150 and Mustang—the latter redesign offers a never-before-seen turbocharged four-cylinder engine. Each sale of the redesigned F150 contributes an additional $10,000 to Ford’s bottom line.

GM, on the other hand, is creating a whole new midsize truck to meet Obama’s requirements, which they believe will be less costly. Chrysler, instead, is spending more on nine-speed transmissions and diesel engines.

Obama had hoped that the market for electric cars would increase; as a bid in that direction, an element of the Climate Action Plan allows automakers to acquire mpg credits for manufacturing zero-emission vehicles. However, the demand for electric vehicles is still low, proving that that kind of car is still a niche product. Pricing for electric cars start at $40,000 and only increase from there.

While it is always painful to have a winner and loser, the “materials selection war” (steel vs. aluminum) is a long-term societal consideration and climate change mitigation, where aluminum is the ultimate winner. These trends will force America to increase the recycling of post-consumer aluminum products—as opposed to landfill and scrap export—and to also increase the design and manufacturing of recycle-friendly alloys.

There is simply not enough expensive and energy-intensive primary aluminum capacity available to meet higher aluminum demand of 100 million, and growing, cars per year.

See also:
Will All-Aluminum Cars Drive Metals Industry?
A Clean Car Boom
GM Planning Strict Diet for New Pickup Trucks

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 12, 2014

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Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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