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        All Those Green New Deals: Good intentions collide with unintended consequences

        September 25, 2019 By Beth Davis-Sramek

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        new climate The leading 2020 Democratic presidential candidates cite climate change as the biggest existential threat to humanity. The issue is so crucial to their respective campaigns that CNN recently devoted seven hours of primetime programming to this single topic, during which all candidates confirmed their support for some version of a Green New Deal.

        If climate change is such a critical issue, why do all these proposals rely so heavily on theoretical initiatives that remain woefully light on details? And why did these proposals fail to warrant even a mention in the most recent debate?

        For those of us who study climate policy in the context of supply chain systems, the answer is simple: these well-intentioned theories fail in practice. The cost of implementing these GND policies inevitably falls heavily on key participants in core supply chains least able to absorb it. In the end, these good intentions run smack dab into the economic realities of unintended consequences.  

        Case in Point: The Trucking Industry

        truckingProponents of a Green New Deal have promised a net zero emissions economy centered in part around transportation “electrification.” In Green New Deal language, that means rapidly transitioning to a transportation system that quickly phases out vehicles powered by fossil fuels (i.e., gas and diesel) and replaces them with plug-in electric vehicles (PEVs). In this overhaul, the focus centers almost exclusively on passenger vehicles like cars or SUVs. Reaching a net zero emissions goal, however, would absolutely require addressing another significant contributor to greenhouse gas emissions: Class 8 (semi) trucks.

        According to the American Trucking Association, the $700 billion U.S. trucking industry is comprised of 3.7 million semi-trucks – 99% of which are powered by diesel engines. Over 300,000 diesel-powered engines were produced in 2018 alone, with strong sales projected for 2019. There are 777,000 for-hire trucking companies registered in the U.S., and 91 percent of them are small businesses or independent owner-operators. Many of these small operators struggle to survive, as costs of maintenance, insurance, and safety compliance keep profit margins razor thin.

        Whether the Green New Deal proponents have considered it, they have a difficult conundrum. We depend heavily on the trucking industry, which employs nearly eight million people, to deliver 70 percent of the goods we buy. The U.S. economy would literally collapse without them. Today’s booming e-commerce markets continue to stretch the ability of delivery systems to meet demand, creating the need for even more capacity while operators struggle to recruit and retain drivers.  

        If the economy depends on these semi-trucks, and reaching a net zero emissions goal depends on electrifying them, how will GND proponents legislate the aggressive mandates their climate policy agenda dictates? Senator Bernie Sanders’ plan is the most specific, calling for all semi-trucks to be replaced with electric trucks. Yet, even the $216 billion he has earmarked would not come close to covering the cost of vehicle replacement, and a national infrastructure network of charging stations specifically for semi-trucks remains unaddressed. Although technology is progressing, it is far from being viable for long haul operations, rendering this a non-starter. 

        Net Zero Emissions Makes Good Sense

        emissionPolitics aside, those who study climate policy in the context of supply chain systems recognize that a net zero emissions economy makes good business sense in both the short- and long-term. For the trucking industry, diesel fuel is the single largest operating cost, so electrification offers significant benefits. With proper incentives, investment will flow to develop the needed technology. Profitability and scale will increase volume and lower costs, which is key to keep the economy moving (literally!) while progressing toward the net zero emissions goal. An aggressive climate policy mandate that harms the industry, however, will have wide-ranging and severe economic consequences. 

        The bottom line is this: applying a basic level of scrutiny, none of the well-intended Green New Deal proposals adequately consider how costs will be absorbed across a wide range of industry sectors. The trucking industry is just one glaring example. Green New Deal proponents should be required to answer some fundamental questions about their plans. Are they willing to put demands on small companies that would drive many out of business, wipe out capacity and drastically drive up prices? Their seemingly single-minded focus on climate change without careful analysis of unintended consequences created by policy mandates could prove disastrous for the economy. Market forces – as well as constraints – cannot be ignored.

        Next: The impact of Green New Deal legislation on the supply chain for developing and manufacturing PEVs. Once again, the law of unintended consequences applies to climate policy. Look for this soon.

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        beth davis head shot

        Beth Davis-Sramek serves as the Gayle Parks Forehand Professor in Supply Chain Management at Auburn University’s Harbert College of Business where she teaches classes on sustainable supply chain management. She is a co-editor of the Journal of Business Logistics and her research on logistics and global supply chains has been published in the field’s top academic journals. She has been interviewed by the New York Times, Axios and NPR and has given talks and written commentary on the business case for social and environmental sustainability.

         

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