The Price of Global Climate Change Regulations

We can assume that most government regulations are instituted for benevolent reasons: to right a wrong, fix a problem or just generally improve conditions.

But the sad fact is that many regulations have unintended, often-negative consequences. Could this apply to the set of regulations created around the world to address “global climate change”?

The Cost of Global Climate Change Regulations

There is little doubt that the institution of regulations to avert a potential disaster is being done (largely) for benevolent reasons. And if these regulations enable mankind to avoid toasting the planet, melting down the polar ice caps and inviting the oceans to overflow into our backyards, that is a major benefit. But the regulations are also causing changes that will undoubtedly affect the cars we can buy and how much they will cost in the future. 

Typically, there is nothing wrong and a lot of things right about giving consumers more choice. In a market-based economy, competition is good, and it results in consumer benefits like better products and lower prices. But today’s worldwide geopolitical realities have prompted some to question the wide variety of choices auto manufacturers are being forced to make now -- and very likely, the wide variety of choices consumers will have to make in the next decade.

What the relatively new and ever-more-stringent global climate change regulations have put in play in the auto industry is the entire concept of the “conventional power train.”

Is Change Really What We Need?

After Charles F. Kettering’s invention of the electric self-starter in 1912, the auto industry rapidly adopted the spark-ignition gasoline-fueled engine as the engine of choice for passenger cars. Over the course of the next 80 years, four-stroke gasoline engines were the predominant engine for consumer vehicles.

Yes, diesels made some inroads in Europe where tax policies of the various European governments favored diesels over gasoline engines, but in the grand scheme of things, gasoline engines became the de facto standard. Development of automotive power plants largely centered on that type of engine, supplemented by diesel engines here and there. Auto manufacturers and backyard inventors experimented with other forms of propulsion -- steam, gas turbines, battery electrics, gasoline-electric hybrids, etc. -- but gasoline engines reigned supreme.

Now, however, the specter of global warming and the rules and regs it has spawned have influenced (some would say required) automakers to develop alternative power plants. In the short run, this has brought -- and will continue to bring -- consumers much more choice in power train. We have already seen an influx of gasoline-electric hybrids, and we are on the verge of seeing the introduction of plug-in hybrids (notably a Toyota Prius plug-in), electrically driven vehicles like the imminent Chevrolet Volt and full-battery electrics like the Nissan LEAF. Specialty makers like Tesla Motors and Fisker have already fielded their first entrants, and more vehicles in each of these categories will undoubtedly come to market. 

We will also see diesel-electric hybrids and potentially even fuel cell-powered vehicles available for consumer purchase before the decade ends. So consumer choice regarding vehicle power train will increase markedly. 

Debatable Consumer Benefit

If the new technologies really do help us avoid cooking planet Earth, one might conclude they are worth whatever costs they engender. But whether there is a genuine climate change problem and whether switching from gasoline engines to hybrids can solve it are debatable points.

What we cannot debate is the fact that government regulations, both here and abroad, are driving these changes in power train technology. The hybrids, electrically driven vehicles and pure electrics are not answers to consumer-asked questions. Instead, they are driven largely by government regulations, and this puts the industry in a very difficult position.

What the regulators might not understand is that developing all these technologies comes at a great price. In fact, a very high-ranking executive in charge of global engineering for a giant automaker has referred to the costs of the simultaneous development of so many different technologies as “unsustainable.”

Rather than concentrating on one or two key power train types, the world’s car companies are now forced to investigate and develop many because they don’t know which ones the public will favor -- and perhaps more important in the current political climate worldwide, they don’t know which ones the next set of regulations will favor. 

It is a squeeze that will undoubtedly result in higher vehicle prices, fewer new-vehicle sales and potentially less overall economic growth. Despite the brave talk of a new, vibrant green economy, these regulations are a drag on the consumer and a drag on the economy, and all the rhetoric in the world will not change that fact.