US coal is dead. Coal use for electricity generation in the US has plummeted and in turn so have electricity CO2 emissions.

In fact, electricity CO2 emissions have fallen sufficiently that America has a new pollution king! Transport is now America’s largest source of CO2 (as of 2016 data, the most up-to-date available).

“Look over there! It’s coal that’s the problem”. So said the oil industry. But that argument is beginning to look less beguiling, especially since 71% of petrol is used for transportation in the US. But we’ve done a Soapbox on that already

What about the US auto industry then? Well in a ‘nice’ confluence of data points, the US Environmental Protection Agency (EPA) recently released the US car industry’s CO2 performance for 2016. (Like the equivalent European scheme, the US National Program is designed to increase fleet efficiency/reduce emissions year-on-year). And for the first time ever in the history of the National Program, the US auto industry ‘missed’ its EPA targets.

This isn’t an immediate problem, because the Program participants have EPA credits that they can (for now) use to offset non-compliance. But longer-term, based on the historical rate US auto manufacturers have cut their tailpipe emissions (slower than Europe), by 2020 the market in EPA credits begins to look very tight.

To remain internationally competitive, Ford recently announced it is going ‘all in’ on electric vehicles, with $1bn of investment and 40 electric vehicles by 2022. US auto manufacturers must either start to invest more in technologies that reduce CO2 emissions faster or potentially leave their fate in the hands of their competitors (assuming no regulatory changes). A rapid rise in the price of EPA credits could reduce profits by greater than $1 billion per annum for the big three US manufacturers by 2020*.

Coal demise is a consequence of its environmental impact and technological change. The same dynamics are now at play in the auto sector.

*Source: Redburn


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