Changes in Detroit show the Next Economy is beginning to emerge even in traditionally moribund places. The Detroit News reported last Sunday that GM (not a Green Alpha holding), planning for $120 per barrel oil, is doubling its planned 2012 production of the Chevy Volt EV from 60,000 to 120,000 units. The article provides a nice exhibit to our position on oil and to our ideas about green transportation.
Briefly, we believe that 1) the world economy must replace oil everywhere possible in order to be free of the current, oil based, bust-recover-repeat economic cycle, 2) improving transportation is a critical element in reducing oil demand, and 3) modernizing car fleets will both minimize the global carbon footprint and make America and other nations far more energy and politically secure.
For GM to launch a business plan based on a realistic price of the stuff that makes their products work (as opposed to upon a blithe belief in eternally cheap gasoline) just makes sense. It’s the kind of progress that will help GM recover its leadership role in the automotive industry. Even with the Volt, GM will still have a total fleet average of around 22-23 MPG, so the company is by no means a candidate for a Green Alpha portfolio, but these developments are encouraging nevertheless.
Finally, it’s important to note that GM, a company that I would firmly label as ‘legacy economy’ and that traditionally has not been responsive to exogenous events such as oil price spikes, has shown that it’s getting the message. This is what we mean by “capital will flow towards solving civilization’s pressing issues.” GM’s not changing because they’re green, they’re doing it because it makes sense in a warming, resource constrained world.
Garvin Jabusch is the cofounder of Green Alpha Advisors, LLC and manages The Sierra Club Green Alpha Portfolio -- a unique blend of Green Alpha Advisors' Next Economy universe and the Sierra Club's proprietary green-investment guidelines.
Photo courtesy GM.