Don’t get too worked up over the President’s actions against the environment

Every week seems to bring another attack by the Trump Administration against laws and regulations that have been instituted by prior administrations to protect the environment and fight climate change. The most recent is the campaign to deny California the right to set stricter automobile emissions standards than federal limits. It has caused yet another uproar among environmentalists and liberals and glee among climate change deniers and conservatives and will undoubtedly lead to many years of legal battles. But what is reality? In fact, this move, and all the others, are just meaningless actions that do little more than pander to the Administration’s fossil fuel campaign contributors and excite the hardcore Republican base ahead of the upcoming elections. The reality is that technology and market forces are driving the world inexorably and at an increasing pace toward a renewable energy future, despite the last-ditch efforts of the President and his supporters. Let’s look at some of the higher profile actions.


Denying California’s waiver on automobile emissions goes hand-in-hand with the prior announcement that the administration would rollback automobile mileage requirements set by the Obama Administration. On the surface, this appears to be an extremely serious setback for consumers, the environment and climate. Depending upon the outcome of the various legal challenges, there could certainly be a short term impact. But the transition to Electric Vehicles (EVs) is underway and picking up steam. Looking at California trends as a precursor to what is likely to happen nationwide, the state is experiencing falling total car sales for the third straight year (Fig. 1).

Fig. 1 – California New Vehicle Registrations (Source: California Auto Outlook/IHS Markit)

In contrast, EV sales have been increasing rapidly, and by mid-2019 EVs, including hybrid non-plug-in vehicles, represented 13% of new car sales (Fig. 2).

Fig. 2: California EV Market Share (Source: California Auto Outlook/IHS Markit)

The big question is how quickly that 13% will grow and continue to displace Internal Combustion Engine (ICE) vehicles.

Historically, EVs have been quite expensive compared to their ICE counterparts; however, as the cost of batteries has dropped dramatically over the last few years, so has the cost to build an EV. Nevertheless, the purchase price of an EV such as the Tesla Model 3 is still higher than a similarly sized ICE vehicle, and purchase cost is the primary driver for US car buyers. But the real economic comparison should be on what is called the total cost of ownership (TCO), which includes purchase price, fuel, maintenance and insurance costs over the life of the vehicle, and resale value. There have been a number of TCO comparisons between the Tesla Model 3 and competing ICE vehicles over the past few years. The general consensus has been that the Model 3 TCO is less than other premium sedans from Audi, BMW, etc, but slightly more than mass market sedans such as the Toyota Camry. However, LoupVentures just updated its comparison with recent data on insurance and resale value, plus the latest purchase cost.  In particular, resale data shows that the Model 3 holds its value much better than its competitors. As a result, the TCO for a Model 3 is now less than the best selling sedan in the US, the Toyota Camry (Fig. 3).

Fig. 3: Total Cost of Ownership – EV vs. ICE (Source: LoupVentures)

So the answer to “how quickly” depends on when consumers start to think beyond initial purchase price to the total costs of ownership (TCO). Once consumers realize that they will get a superior product at a lower total cost over time, the transition will begin to accelerate dramatically. Throw in the continued drop in price for batteries and the expanding options as other auto makers begin to offer new EV models, and a date around 2025 for California EV sales to reach parity with ICEs is not unreasonable. In such a scenario, auto mileage standards are pretty much immaterial. In fact, reducing standards makes the TCO of ICE vehicles less competitive and will likely drive the rest of the country to more quickly follow California’s lead.

Light Bulbs

How about the uproar over light bulbs? Several weeks ago the administration issued a decree to roll back the Bush and Obama era attempts to improve lighting efficiency by phasing out incandescent light bulbs. But, here, we are well beyond the early adoption stage of new technology, i.e., light–emitting diode (LED) bulbs. The energy required to power an LED bulb for the same illumination is about 90% less than that of an incandescent bulb. The life of an LED bulb is about 20 times that of an incandescent, and the initial cost of LED bulbs has dropped dramatically and is approaching the cost of incandescent bulbs (you can now buy a 4-pack of off-brand 60W LED bulbs at Home Depot for about $6 or $1.50 apiece). Figure 4 compares today’s common bulb types and illustrates the dramatic savings possible for LED over incandescent bulbs.

Fig. 4: Total Cost of Ownership – Lightbulbs (Source:

In fact, the cost savings in electricity will pay for the initial cost of the bulb in less than one year of use. Manufacturers could give their incandescent bulbs away, and it wouldn’t stop the transition. For more information, see the The Little Bulb That Is Killing Coal for more insight into the transition to LED lighting.

Coal Power

President Trump made saving the coal industry a cornerstone of his election campaign and his administration. How has that worked out so far? In June 2019 the EPA issued the Affordable Clean Energy (ACE) rule, an amendment to the Clean Power Plan, with intent to extend the life of the US fleet of aging coal power plants. Shortly thereafter, in July 2019, Blackhawk Mining filed for Chapter 11 bankruptcy, making it the eighth major U.S. coal producer to file bankruptcy since November 2017 and the fifth so far in 2019.

Since 2010, 289 coal-fired power plants have closed, representing over 50% of the plants and 40% percent of US coal generating capacity, with 50 of those closures coming after November 2016. And that trend isn’t slowing with an additional 51 pending closures having been announced by utility companies.  As a result, and for the first time in history, in April 2019 US electrical power generation from renewable sources exceeded generation from coal (Fig. 5).

Fig. 5: US Electrical Power Generation – Coal vs Renewables

Although this was a temporary occurrence due to the cyclical nature of both forms of generation, the long term trend illustrated in Fig. 4 points to a time in the not-too-distant future when yearly coal generation will forever be less than renewables. Again, technology and market forces are driving the change as the cost of new solar and wind power generation facilities continues to drop rapidly. A March 2019 report by Energy Innovation concluded that “America has officially entered the ‘coal cost crossover’…Today, local wind and solar could replace approximately 74 percent of the U.S. coal fleet at an immediate savings to customers. By 2025, this number grows to 86 percent of the coal fleet” The result: no new coal plants will be built in the US, and the existing plants will continue to be shut down.

Oil Drilling in the Arctic

Another focus of the Administration has been to open up the Arctic National Wildlife Reserve (ANWR) in Alaska to drilling and eventual production of oil (Fig. 6).

Fig. 6: ANWR Drilling Location (Source: USGS)

But again, what is the true risk of extensive development of ANWR?  There have been several recent actions in Congress to try to block the drilling, there is the likelihood of lawsuits in the near future, and there is the chance that significant oil reserves don’t even exist in the region. But the greatest risk, again, is the impact of technology. With the world inexorably moving to replace fossil fuel based energy with renewables, the oil industry is facing a point of peak oil demand in the next 5-10 years. In the meantime, it’s all about low-cost, quick turnaround production. In the US, that means shale oil which has boomed due to technology advancements in horizontal drilling and hydraulic fracturing (fracking). Why would oil companies invest many billions of dollars exploring for and producing oil in ANWR in hopes of (maybe) generating profits in 10 years, when they can invest a fraction of that and start making money almost immediately? ANWR development isn’t going to happen, but it makes good headlines.

The US may go kicking and screaming into this renewable energy future, but go it will.


2 thoughts on “Don’t get too worked up over the President’s actions against the environment”

  1. Very good article! Although the economics for the case for EV’s are nearly there, I wouldn’t put it beyond this administration slapping a 1000% duty on lithium batteries ‘to protect our national industries from unfair Chinese pracices’ and the God-given right to his base to drive 7.2 lt trucks…

    We got some ways to go…

  2. Every great transformation in history has been sudden and occurred quicker than expected. This is the case in life, arts, culture, gender and politics, but especially so in technology and business. America was great at reinventing itself, of cleaning out old industries and letting new ones grow. Europe, not so much and China is still trying to learn about creative destruction. In America, there were stalwarts of industry, such as GM, GE and IBM that in the middle of the last century were unrivalled by anyone, not Siemens nor Phillips in Europe, not Toyota in Japan. But things changed. GE is but a small shell of its once conglomerate behemoth, what GM once produced en masse the world wants less and fewer of, and IBM has become insignificant in the realm of IT, networks, computer and software.
    In the 20th century, huge integrated business empires were built, culminating with the mighty Sears Tower in Chicago. By the turn of this century, Sears had succumbed to an onslaught by a more logistically nimble, widespread and laterally connected foe. That foe in turn is now being chased by a digital champion of retail.
    When it comes to finance, it was Mellon, Lloyds, Barings, Deutsche Bank and the like greasing the wheels of commerce. But with one quick rogue trade, Barings died. With another crisis, Mellon was consumed. Lloyds foundered and Deutsche Bank dithered. Size was no guarantor for life in this new era. Micro-finance and peer-to-peer banking now generates better returns than institutionalized investing.
    In oil the history is just as interesting. From the earliest wildcatters betting it all on one well in Pennsylvania, California or Texas, the industry grew from thousands, to hundreds to a few dozen firms. Gut feel and whisky lubricated wildcatting was replaced by deliberate scientific inquiry: Investment decisions by were made based upon the rational and sage guidance of the graduates of the best business schools, the same schools that sent their graduates to GM, GE, Sears and IBM….
    When transformations happen, they always catch the incumbent industries and business by surprise because those industries don’t want to or cannot look outside of their own bubbles.
    Where is the courageous board chair that will go to the shareholder meeting and announce, “Thank you for your $billions invested with us, but technology and the business environment has shifted and we cannot guarantee that your faith in us will still have value in 20, 10 or 5 more years.”
    Where is the courageous board chair that will go to the shareholders and explain that after overpaying for an engineering firm and laying off 95% of the engineering staff that there is no way the money invested will be recouped”?
    Where is the brave politician who espouses clean energy for all, without money or a plan, then slinks away his face blackened by privilege?

    It is not America that will go kicking and screaming into the renewable energy age, it is the myopic, large legacy firms that will go kicking and screaming into bankruptcy. When they do, America will be fortunate if they don’t drag down too many people with them…

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