by Dennis R. Minano, Vice President, Environment & Energy and Chief Environmental Officer
General Motors Corporation
CSIS conference: The Geopolitics of Energy into the 21st Century
Monarch Hotel, Washington DC, December 8-9, 1999
Thank you. It is an honor and a great opportunity to be part of this distinguished panel. It isn't often that one gets to discuss energy and environmental issues with such a knowledgeable group.
There is, of course, only so much that can be covered in a brief set of remarks. So let me get straight to the point.
The good news is that the world is not running out of oil. The stability this represents, however, puts us in a unique and precarious position. Low-cost and secure supplies of energy are needed to sustain economic growth around the globe. But we also must protect and preserve the environment for today's and future generations -- globally.
So what do we do?
It is not acceptable to despoil the environment to improve human economic conditions at the expense of future generations. But, environmental preservation that sacrifices the economic aspirations of billions -- billions living in or near poverty -- is not the answer.
Our challenge is to achieve balance; that is, to find ways to meet all our needs -- energy, economic and environmental- because we cannot afford to do otherwise. Meeting one goal at the expense of the others will not work. We must, in short, chart and vigorously pursue a sustained long-term path to economic growth and environmental preservation -- one that comprehends the emergence of new technologies, supportive government policy, improved dialogue, and balanced judgments.
But before we go any further, let's briefly take stock of the importance of energy today.
Low-cost energy is essential to economic growth in the US and throughout the developed and developing world, particularly in nations with large and rapidly growing populations.
Today, fossil fuels account for 85% of the world's energy supplies. And they are forecast to account for 87% by 2030.
Demand for energy is growing rapidly. That's a marketplace reality. And global energy use -- provided by fossil fuels -- will likely double over the next thirty years.
In fact, for the foreseeable future, fossil fuels will be in abundant supply and available at a reasonable cost. There is simply much more fossil fuel than many resource or reserve estimates imply. Some claim, for example, that we have approximately 50 years or so of proven reserves. But that may not be a reliable forecast of the amount of oil available. Rather, it measures the amount of oil inventories currently being held, or, put another way, it measures the amount of oil in the warehouse.
The ultimate amount of oil available is actually more a matter of economics -- the price of a barrel of oil -- than of geology. And if the price were to rise, it would become commercially viable to extract new resources.
Moreover, new technologies for finding and recovering oil and gas have added the equivalent of another Saudi Arabia to the world's oil reserves. At the same time, we are learning to use energy more efficiently with each passing year.
That's why gasoline costs less than a bottle of imported drinking water. That's why the real price of oil is forecast to be in the $15 to $20 a barrel range in the near future -- far below the $100 a barrel figure predicted in the 1970s.
Moreover, there is currently in place a vast infrastructure for the discovery, production and distribution of fossil fuels to your home or corner gas station. "The world," as someone once said, "is wired for oil." That means that any competitive substitute for fossil fuels must be abundant, reliable, convenient, supported by a necessary infrastructure, and competitively priced.
Now let's turn back to our topic -- plotting a long-term path to economic growth and environmental preservation- and talk about what it means that the world runs on a large supply of oil.
The production, distribution and combustion of fossil fuels has raised a number of societal and environmental concerns. Oil spills, groundwater contamination and urban air quality -- these have historically been our greatest concerns. More recently, attention has focussed on the incremental levels of carbon dioxide in the atmosphere -- an issue with global implications.
What's the answer?
We all have a sense of what needs to be done, but we all know that there is no complete or easy solution. Meeting this challenge will require new or revised public policies and market incentives. These public policies should spur technological development and help build the needed infrastructure. These policies will also alter lifestyles, which means convincing consumers to drive the advanced technology vehicles of the future. True, many of these technologies are not ready today for the retail consumer market. Technological hurdles need to be overcome and commercial viability needs to be established. But more on that later.
First, let me talk about one key factor to meeting energy and environmental challenges -- the key factor we at GM are committed to addressing. Namely, the development of new automotive technologies.
We believe that promoting the development and large-scale commercialization of existing and new technologies is essential to meeting the environmental and energy needs of the 21st century, whether the issue is local or global air quality.
Delivering existing technologies to developing countries can make important and immediate contributions to both economic and environmental prosperity. For example, back in 1994, when GM was making a significant investment in the Chinese market, we saw an opportunity to use growth as a means to improve the environment.
What did we do? We proposed that the Chinese switch to unleaded fuel. And they did. Why? Not because we said that lead pollutes the air. Instead, we demonstrated why switching to unleaded fuel was an efficient, economic, and environmental choice.
Best practices usually are.
Now back to the subject of new technology. The good news is that the world's leading automakers have already made meaningful advances. GM and others have developed electric and hybrid vehicles as well as alternative fuels. And we are busy working on a very promising technology -- the fuel cell. Similar to the energy system that powers the space shuttle, the fuel cell combines hydrogen and oxygen to charge the battery. The only by-product is water.
The advanced technology we are working on will ultimately revolutionize transportation. While we don't know exactly when that is going to happen, without question, important progress is being made. There is no doubt that automobiles of the future will be as different from the vehicles of today as the internal combustion engine was from the horse and buggy.
We are, however, still a long away from the day when breakthrough technologies, such as the fuel cell, will power most automobiles in the developed countries, let alone in the developing world.
This is where governments have a critical role to play. They can provide the needed economic incentives. They can help build the infrastructure. They can eliminate regulatory, tax and trade obstacles to innovation. And they can help educate consumers about environmental concerns. We believe all of these steps would go a long way toward making more environmentally compatible technologies commercially viable -- the only way they will ever make a significant impact.
Let me share some of the important marketplace lessons we at GM have learned from our experiences with new technology -- lessons that will help with the challenge ahead.
Environmental concerns are only one of the factors that go into a consumer's decision to buy an automobile. Consumers are smart. They know that today's automobiles are more fuel efficient -- in fact, approximately twice as efficient as the autos of the 1970s -- so they believe their concerns are, at least to some degree, being addressed.
In other words, consumers seem to recognize the environmental-compatibility and the good fuel performance of the cars and trucks they are buying. But there are cars available today; cars that have even better fuel efficiency, that they are not buying. To illustrate, automobiles that ranked in the top ten in fuel economy accounted for only 1.6% of the 7.4 million, 1998 model-year cars sold in the U.S., and our company for a number of years had the most efficient gasoline-powered vehicle in the survey. Yet the sales of that vehicle were minimal, particularly in comparison to other vehicles offered by GM or any other manufacturer.
That's because fuel efficiency is only one of many factors -- including performance and utility -- that drive the purchase decision, a fact confirmed by market research.
The EV1 is another case in point. Four years ago, GM brought the country's first commercially available mass-produced electric vehicle to market in California and Arizona. Consumers love to test drive it. But, if you've visited California recently, you know that the freeways are not filled with EV1s. And these are real vehicles, loaded with innovation from the ground up in terms of speed (0-60 in 8.5 seconds) safety and convenience features. The EV1 represents a quantum leap in technology. We wish the market had accepted more EV1s.
But consumers simply weren't ready to buy them. Moreover, consumers and government weren't prepared to invest in the infrastructure necessary to make the EV1 viable.
Significant demand will only exist when new technologies are fully competitive with the cost, convenience and reliability of fossil fuel energy. And without this demand, even the most effective new technologies will do little for the environment. In a word, volume is key. Simply put, 400 or so zero emission vehicles have no real air quality impact compared to the impact that will result when 100,000 to 200,000 of the new full-line vehicles of today replace older automobiles.
So what do we do? What sort of government policies and approaches will help speed this process?
Let me give you an example. An example that has been cited as a world model for effective policy and that also happens to come from right here in the U.S.A.
The Partnership for a New Generation of Vehicles, or PNGV, is a collaborative effort between the US government, General Motors, Ford and DaimlerChrysler. The Clinton/Gore administration has given it enormous support. Its goal is to develop technologies for a vehicle to achieve 80 mpg -- three times that of today's comparable family sedans -- without sacrificing safety, performance, quality or cost. In other words, PNGV is a model of how a public-private partnership can encourage the development of technology that the public will accept -- the only way to make a real difference.
In the next few months, you will be seeing the three auto companies display the results of the PNGV work. And the goal of having a production prototype by 2004 will be met.
PNGV also illustrates another important point. Namely, that no company or industry can alone meet the technological challenge posed by the energy and environmental needs of today's global marketplace. That's why we at GM are reaching out to other companies to form unconventional joint ventures.
Take our partnership with Toyota.
Together, we are working on a number of technologies, including fuel cells, advanced batteries and powertrains, and control systems for the next generation of electric hybrids.
We've also looked outside the automobile industry to find answers. In particular, by teaming up with BP Amoco to deliver a hybrid electric bus to New York City's Transit Authority. This bus, which is one of the first placements of hybrid technology in a major US transit system, reduces emissions by 70 percent compared with conventional buses, and it is fueled by a prototype ultra-low sulfur diesel fuel formulated by BP Amoco.
In short, by teaming up with Toyota, BP Amoco and others, we are doing exactly what most people believe large companies should do. That is, using our size and resources to address environmental issues. And at the same time, by combining technological know-how and increased production volume, these partnerships will further benefit consumers by reducing costs.
Businesses, governments, environmental groups and others must work together to promote technology. Particularly its development, rapid commercialization and global dissemination. Every effective solution will depend upon technology. But technology alone will not be enough. Think of the EV1. With the price of gas relatively stable, and likely to remain so because of the relative abundance of fossil fuels, consumers aren't going to change their priorities soon.
So what do we do?
An economist might tell us to tax fuel so that the potential environmental cost of carbon emissions is reflected in the price that consumers pay for gasoline at the `pump. But the public is unlikely to accept this or any similar approach.
This means we must persuade the public why it is important that they consider investing their hard-earned dollars in the advanced technology vehicles of tomorrow.
To do so, legislators, policy makers, environmentalists, journalists and businesses will need to make their collective voice heard around the country. We will need to use every education and communication tool at our disposal to raise awareness, to convince consumers to take action. This effort, combined with effective tax incentives that motivate purchasers, will encourage consumers to use their market pull to speed progress.
Collaboration in the energy and environmental area is essential. Each of us brings a different perspective to environmental questions. But there is no other choice. We must work together to devise smart policies, to encourage the development of advanced technologies and to educate the public.
If we do so, we at GM are confident -- confident that we will meet the environmental and energy challenges of the 21st century. With people like you helping lead this effort, our mutual success is assured.