ACKNOWLEDGEMENTS
To my parents, Jim and Yoko. I’d like to give a special thanks to Dr. Norma Carr-Ruffino, Jordan McCormack and Susan Strehler for editing; Briana Reynolds and Miwa Amano Acheson for design; and Olivier LePord for photography.
I’d like to acknowledge those that contributed interviews, as well as the professors who helped on the project and guided my understanding of business and management: Dr. Baack, Dr. Castaldi, Dr. Gilinski, Dr. Hendrix, Dr. Houwink, Dr. McCline, Dr. Sengupta, Dr. Silverman, Dr. Sullivan, Dr. Verma, Dr. Wardlow, and the late Dr. Jenner. I would like to include a special acknowledgement to Dr. Carr-Ruffino for her guidance and experience writing books. Her idea that this could become a book was probably the most important reason why I finally finished.
Finally, I would like to thank the friends who stood by me throughout my master’s journey. It’s been a challenging mountain: six years of studies at two MBA programs, five different addresses, starting and closing small businesses, two marriages and the coming and going of my first (see Figure 18) and only hybrid.
Finishing this project marks one of the greatest accomplishments of my life. I hope in some way, this body of work helps people make the world a better place through green transportation and sustainable business.
Tuesday, December 12, 2006
The Hybrid Phenomenon PREFACE
PREFACE
The first of three ideas that led to this culminating experience came out of passion and necessity. In 2003, I was faced with a 350 mile move. Somehow, I was going to have to make a 700 mile commute to try and finish grad school. While shopping for a high mileage car, I was immediately drawn to the first hybrid released in America. The Honda Insight was rated at 70 MPG and got better mileage than the Prius at highway speeds.
Hybrid curiosity got me interested in what else was happening in the auto industry. After decades of working on cars and several years of entrepreneurial experience and studies, I realized right away that the hybrid was connected to a larger opportunity. It was preceded by what Dr. McCline, professor of entrepreneurship at San Francisco State University (SFSU), called the three Cs: change, chaos and confusion.
I felt that the industry was ready for new players and technologies. In the months before the move from San Francisco to Los Angeles, I approached several professors with the first idea for my master’s project: a business plan to start a hybrid automaker. Dr. Wardlow, a professor of marketing at SFSU, laughed at the idea due to capital costs. But he referred me to Dr. Silverman, professor of sustainable business at SFSU.
At our first meeting, we agreed that a business plan was not feasible. As a prolific case study author, Dr. Silverman helped develop the second idea for this project with a new outline. Over the next year, the writing evolved from business plan into case study targeted at business strategy textbooks. Isolated in Los Angeles, I wrote and wrote and wrote. Little did I know, case studies weren’t supposed to dive as deep as I did?
In 2004, linking oil, the environment and hybrid consumers sounded feasible, but too much changed in 2005. Detroit hit a brick wall and I moved back to San Francisco and divorced my car and truck. I found new relevant information almost daily, and couldn’t quite decide on when and where to end the project. Another deadline came and went, so I put the project on the shelf for a few months.
I came back to the project in late 2006. The political and business climate had changed. The talk had gone from hydrogen economy to corn and then to plug-in hybrids. I had read thousands of pages of material and rewrote many drafts because of so much changing information. The project had gone beyond the scope of a case study.
At the same time, I had to replace my advisor because he was on a one year sabbatical. I called some professors that were also hybrid drivers. Dr. Carr-Ruffino, author and management professor at SFSU, offered to take over the project right away. With three months to go, we quickly agreed to restructure the huge amount of material into a report about the hybrid phenomenon. Her idea that the culminating experience could become a book changed everything. I started thinking about hybrid stories and weaved some into the chapters that Dr. Silverman outlined a year earlier. The research report was reborn for the third and last time as The Hybrid Phenomenon.
Over the last three months, the project really took off. It was so rewarding to add real life quotes to the data I had collected. With a fresh set of interview questions for hybrid owners, I walked the streets of San Francisco. I’ve been lucky enough on some days to be able to see 20 hybrids and drivers. I must have seen thousands of bumper stickers, license plate frames, colors, types of cars and drivers. During a year of living without a car, I watched the hybrid go from alternative to mainstream.
I’ve also driven several Ford, Toyota and Honda hybrids through family, friends, rentals and events. I’ve read as much as I could about hybrids. I’ve attended green car events (see Appendix A) and talked to dozens of people about hybrids.
I’ve always been fascinated with cars. As a young five-year-old in the 60s, I rode the streets of San Francisco on my own hybrid: a plastic big wheel retrofitted with a solid steel tricycle front wheel. My father had engineered the fastest big wheel around, and by junior high, I graduated to mini-bikes, go-karts and dirt bikes.
In high school, my first job was pumping gas at the closest station to Sears Point, now known as Infineon Raceway. I still remember drag nights and helping kids fill up their muscle cars on leaded premium. While I tinkered on my first car, I never thought that I would have the chance to drive over 50 different models over the next 20 years. In the 80’s gas was cheap and low mileage muscle cars were cool. It was an innocent time before energy, the environment and transportation became major global issues. Horsepower and the open road drove the guilt free American car dream.
Things have changed. Writing this project has given me new hopes for the future. My business hope is that engineers, marketers, accountants and managers work more closely together to develop ideas that can help consumers make greener choices. My strategic hope is that CEOs will grow confident in greener strategies and sustainable business practices. My personal hope is to land a job related to this research and publish.
The first of three ideas that led to this culminating experience came out of passion and necessity. In 2003, I was faced with a 350 mile move. Somehow, I was going to have to make a 700 mile commute to try and finish grad school. While shopping for a high mileage car, I was immediately drawn to the first hybrid released in America. The Honda Insight was rated at 70 MPG and got better mileage than the Prius at highway speeds.
Hybrid curiosity got me interested in what else was happening in the auto industry. After decades of working on cars and several years of entrepreneurial experience and studies, I realized right away that the hybrid was connected to a larger opportunity. It was preceded by what Dr. McCline, professor of entrepreneurship at San Francisco State University (SFSU), called the three Cs: change, chaos and confusion.
I felt that the industry was ready for new players and technologies. In the months before the move from San Francisco to Los Angeles, I approached several professors with the first idea for my master’s project: a business plan to start a hybrid automaker. Dr. Wardlow, a professor of marketing at SFSU, laughed at the idea due to capital costs. But he referred me to Dr. Silverman, professor of sustainable business at SFSU.
At our first meeting, we agreed that a business plan was not feasible. As a prolific case study author, Dr. Silverman helped develop the second idea for this project with a new outline. Over the next year, the writing evolved from business plan into case study targeted at business strategy textbooks. Isolated in Los Angeles, I wrote and wrote and wrote. Little did I know, case studies weren’t supposed to dive as deep as I did?
In 2004, linking oil, the environment and hybrid consumers sounded feasible, but too much changed in 2005. Detroit hit a brick wall and I moved back to San Francisco and divorced my car and truck. I found new relevant information almost daily, and couldn’t quite decide on when and where to end the project. Another deadline came and went, so I put the project on the shelf for a few months.
I came back to the project in late 2006. The political and business climate had changed. The talk had gone from hydrogen economy to corn and then to plug-in hybrids. I had read thousands of pages of material and rewrote many drafts because of so much changing information. The project had gone beyond the scope of a case study.
At the same time, I had to replace my advisor because he was on a one year sabbatical. I called some professors that were also hybrid drivers. Dr. Carr-Ruffino, author and management professor at SFSU, offered to take over the project right away. With three months to go, we quickly agreed to restructure the huge amount of material into a report about the hybrid phenomenon. Her idea that the culminating experience could become a book changed everything. I started thinking about hybrid stories and weaved some into the chapters that Dr. Silverman outlined a year earlier. The research report was reborn for the third and last time as The Hybrid Phenomenon.
Over the last three months, the project really took off. It was so rewarding to add real life quotes to the data I had collected. With a fresh set of interview questions for hybrid owners, I walked the streets of San Francisco. I’ve been lucky enough on some days to be able to see 20 hybrids and drivers. I must have seen thousands of bumper stickers, license plate frames, colors, types of cars and drivers. During a year of living without a car, I watched the hybrid go from alternative to mainstream.
I’ve also driven several Ford, Toyota and Honda hybrids through family, friends, rentals and events. I’ve read as much as I could about hybrids. I’ve attended green car events (see Appendix A) and talked to dozens of people about hybrids.
I’ve always been fascinated with cars. As a young five-year-old in the 60s, I rode the streets of San Francisco on my own hybrid: a plastic big wheel retrofitted with a solid steel tricycle front wheel. My father had engineered the fastest big wheel around, and by junior high, I graduated to mini-bikes, go-karts and dirt bikes.
In high school, my first job was pumping gas at the closest station to Sears Point, now known as Infineon Raceway. I still remember drag nights and helping kids fill up their muscle cars on leaded premium. While I tinkered on my first car, I never thought that I would have the chance to drive over 50 different models over the next 20 years. In the 80’s gas was cheap and low mileage muscle cars were cool. It was an innocent time before energy, the environment and transportation became major global issues. Horsepower and the open road drove the guilt free American car dream.
Things have changed. Writing this project has given me new hopes for the future. My business hope is that engineers, marketers, accountants and managers work more closely together to develop ideas that can help consumers make greener choices. My strategic hope is that CEOs will grow confident in greener strategies and sustainable business practices. My personal hope is to land a job related to this research and publish.
APPENDIX B: INTERVIEWS
The research included the following ten interviews. Two different sets of questions were asked to professionals and hybrid owners. Four professionals were interviewed from different industries to give a rounded view. The second set of interviews with six hybrid owners took place in late 2006.
List of Interviews:
B1. Professionals Interview Template
B2. Management Consultant (Booz Allen Hamilton)
B3. Sales Consultant (San Francisco Honda)
B4. Research Engineer (Chevron)
B5. General Manager (Yellow Cab Cooperative of San Francisco)
B6. Consumers Interview Template
B7. David Simoni (Civic owner)
B8. James Acheson (Insight owner)
B9. Dr. Sanjit Sengupta (Prius owner)
B10. L.L. (Prius owner)
B11. Susan (Lexus SUV owner)
B12. Dr. Norma Carr-Ruffino (Prius owner)
The interviews were conducted via email, telephone and in person. The names of the participants remained confidential or disclosed with permission. The relevant content was weaved into the text as “oral history” and cited as “interview with author.”
APPENDIX B1: PROFESSIONALS INTERVIEW TEMPLATE
San Francisco State University
John Acheson
895: Interview Questions
1. Where are you from?
2. What is your profession?
3. Do you own a hybrid electric vehicle?
4. Can you give your definition of a hybrid electric vehicle?
5. What do you think about hybrids?
6. What do you think is motivating consumers to buy hybrids?
7. What do you think are some unmet needs of hybrid consumers?
8. What do you think is causing the shortage of hybrids?
9. What companies do you think will lead hybrid manufacturing?
10. What strategic moves would you make to lead hybrid manufacturing?
11. What do you think are the key factors for success in making hybrids?
12. How do you think making hybrids can achieve above average profits?
13. Could you name some companies that have strong hybrid producing strategies?
14. What are some strengths and weaknesses among the companies you mentioned?
15. How do you feel about those companies’ prices and costs?
16. What strategic issues do those companies face?
17. How do you think the hybrid niche will evolve?
18. How do you think hybrids will affect the global automobile industry?
19. What do you think about the technology required to make hybrids?
20. What technologies do you think will come from hybrids?
21. What do you think would be the most competitive hybrid strategy?
22. How do you think automakers can lower the costs of making hybrids?
23. How do you think automakers can increase hybrid quality and performance?
24. What do you think are some issues that the automobile industry is facing?
APPENDIX B6: CONSUMERS INTERVIEW TEMPLATE
San Francisco State University
Master of Business Administration
John Acheson
1471 Jackson St Apt 4
San Francisco, CA 94109
(415) 290-7767
johnmba@sbcglobal.net
895: INTERVIEW QUESTIONS
The author, John Acheson, will interview five to ten “content experts” to “report oral history”[186] in a research project titled “The Hybrid Phenomenon.” Paraphrasing or direct quotes will appear in the body of the text with footnotes. The outcome of this project will be a research report to be filed in the graduate office of San Francisco State University’s College of Business.
1. What do you do for a living?
2. Why do you think hybrids have become so popular?
3. Could you tell your story about why you decided to buy a hybrid?
4. How did the supply and demand of oil affect your decision?
5. How did environmental considerations such as emissions, smog and air pollution affect your decision?
6. How did political tensions over oil, war and the Middle East affect your decision?
7. How did education, knowledge and intelligence about hybrids affect your decision?
8. How did the influence of popular culture affect your decision?
9. How did the price of gas affect your decision?
10. Did other costs and benefits such as taxes, parking and tolls matter?
11. How did the different hybrid technologies affect your decision?
12. How did the strengths and weaknesses of the different car companies affect your decision?
The following closing questions will be asked on a voluntary basis:
• How would you like your identity to be acknowledged (i.e. name, occupation, “consumer,” “hybrid driver,” anonymous etc.) in the report?
• Would like to a final copy of the report? (If so, please provide an email address that can accept a large PDF electronic document.)
[186] Mary Richards, SFSU IRB Human Subjects Protection Office, key phrases “content experts,” “reporting” and “oral history” provided and approved as protocols that DO NOT involve Human Subjects, via phone conversation on October 17, 2006.
List of Interviews:
B1. Professionals Interview Template
B2. Management Consultant (Booz Allen Hamilton)
B3. Sales Consultant (San Francisco Honda)
B4. Research Engineer (Chevron)
B5. General Manager (Yellow Cab Cooperative of San Francisco)
B6. Consumers Interview Template
B7. David Simoni (Civic owner)
B8. James Acheson (Insight owner)
B9. Dr. Sanjit Sengupta (Prius owner)
B10. L.L. (Prius owner)
B11. Susan (Lexus SUV owner)
B12. Dr. Norma Carr-Ruffino (Prius owner)
The interviews were conducted via email, telephone and in person. The names of the participants remained confidential or disclosed with permission. The relevant content was weaved into the text as “oral history” and cited as “interview with author.”
APPENDIX B1: PROFESSIONALS INTERVIEW TEMPLATE
San Francisco State University
John Acheson
895: Interview Questions
1. Where are you from?
2. What is your profession?
3. Do you own a hybrid electric vehicle?
4. Can you give your definition of a hybrid electric vehicle?
5. What do you think about hybrids?
6. What do you think is motivating consumers to buy hybrids?
7. What do you think are some unmet needs of hybrid consumers?
8. What do you think is causing the shortage of hybrids?
9. What companies do you think will lead hybrid manufacturing?
10. What strategic moves would you make to lead hybrid manufacturing?
11. What do you think are the key factors for success in making hybrids?
12. How do you think making hybrids can achieve above average profits?
13. Could you name some companies that have strong hybrid producing strategies?
14. What are some strengths and weaknesses among the companies you mentioned?
15. How do you feel about those companies’ prices and costs?
16. What strategic issues do those companies face?
17. How do you think the hybrid niche will evolve?
18. How do you think hybrids will affect the global automobile industry?
19. What do you think about the technology required to make hybrids?
20. What technologies do you think will come from hybrids?
21. What do you think would be the most competitive hybrid strategy?
22. How do you think automakers can lower the costs of making hybrids?
23. How do you think automakers can increase hybrid quality and performance?
24. What do you think are some issues that the automobile industry is facing?
APPENDIX B6: CONSUMERS INTERVIEW TEMPLATE
San Francisco State University
Master of Business Administration
John Acheson
1471 Jackson St Apt 4
San Francisco, CA 94109
(415) 290-7767
johnmba@sbcglobal.net
895: INTERVIEW QUESTIONS
The author, John Acheson, will interview five to ten “content experts” to “report oral history”[186] in a research project titled “The Hybrid Phenomenon.” Paraphrasing or direct quotes will appear in the body of the text with footnotes. The outcome of this project will be a research report to be filed in the graduate office of San Francisco State University’s College of Business.
1. What do you do for a living?
2. Why do you think hybrids have become so popular?
3. Could you tell your story about why you decided to buy a hybrid?
4. How did the supply and demand of oil affect your decision?
5. How did environmental considerations such as emissions, smog and air pollution affect your decision?
6. How did political tensions over oil, war and the Middle East affect your decision?
7. How did education, knowledge and intelligence about hybrids affect your decision?
8. How did the influence of popular culture affect your decision?
9. How did the price of gas affect your decision?
10. Did other costs and benefits such as taxes, parking and tolls matter?
11. How did the different hybrid technologies affect your decision?
12. How did the strengths and weaknesses of the different car companies affect your decision?
The following closing questions will be asked on a voluntary basis:
• How would you like your identity to be acknowledged (i.e. name, occupation, “consumer,” “hybrid driver,” anonymous etc.) in the report?
• Would like to a final copy of the report? (If so, please provide an email address that can accept a large PDF electronic document.)
[186] Mary Richards, SFSU IRB Human Subjects Protection Office, key phrases “content experts,” “reporting” and “oral history” provided and approved as protocols that DO NOT involve Human Subjects, via phone conversation on October 17, 2006.
REFERENCES
REFERENCES
An, Feng and Sauer, Amanda. “Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World,” PEW Center on Global Climate Change Paper, http://www.pewclimate.org/document.cfm?documentID=412, accessed November 2006.
Christensen, Clayton M. The Innovator’s Dilemma, Boston, MA: HarperCollins, 1997, 2000.
Cogan, Ron, Green Car Journal. San Luis Obispo, CA: Green Car Journal, 2006.
Ford, 2001-2006 Annual Reports. Detroit: Ford Motor Company, 2001-2006.
GM, 2001-2006 Annual Reports. Detroit: General Motors Corporation, 2001-2006, http://world.honda.com/investors/reports/, accessed 2002-2006.
Greenlight Initiative, AAA Greenlight Initiative Hybrid Driver Training Seminar booklet. San Francisco, CA: CSAA, November 2006.
Hawken, Amory Lovins, and L. H. Lovins. Natural Capitalism, Boston, New York, London: Little Brown and Company, 1999.
Heffner, Reid, Kenneth Kurani, and Thomas Turrentine, “Effects of Vehicle Image in Hybrid Electric Vehicles,” Institute of Transportation Studies, University of California Davis, http://www.its.ucdavis.edu/publications/2005/UCD-ITS-RR-05-08.pdf, accessed 2005 and 2006.
Honda, 2001-2006 Annual Reports. Tokyo: Honda Motor Co., Ltd., 2001-2006, http://world.honda.com/investors/reports/, accessed 2002-2006.
Kittell, Matt. ““Communities with Hybrids Chart,” New American Dream, http://www.newdream.org/hev/Current_fleet_data.pdf, accessed November 2006.
Kreith, Frank, and R.E. West, “Gauging Efficiency, Well to Wheel,” Transportation Quarterly, Vol.56, No. 1 (Winter 2002): 51-73.
Lovins, Amory. “Technology Integration for Radical and Profitable Transport Efficiency,” Keynote Address presented at Advanced Transportation Workshop under the Global Climate & Energy Project, Stanford University, Stanford, CA, http://gcep.stanford.edu/pdfs/ChEHeXOTnf3dHH5qjYRXMA/11_Lovins_10_11_trans.pdf, accessed November 2006.
Magee, David. Ford Tough, Hoboken, NJ: John Wiley & Sons, 2005.
Moore, Geoffrey A. Crossing the Chasm, New York, NY: HarperCollins, 1991, 1999, 2002.
Motavalli, Jim. Forward Drive. San Francisco: Sierra Club Books, 2000, 2001.
Porter, Michael, E. Competitive Strategy, New York, NY: The Free Press, 1980, 1998.
Raskin, Amy and Saurin Shah, “The Emergence of Hybrid Vehicles,” AllianceBernstein White Paper, http://www.alliancebernstein.com/CmsObjectABD/PDF/Research_WhitePaper/R37755_Hybrid.pdf, accessed November 2006.
Sperling, Daniel. Future Drive. Washington, DC: Island Press, 1995.
Survey of Oregon Hybrid Gas-Electric Car Owners, Portland, OR: Oregon Environmental Council, July 2003.
Sullivan, Paul, Ph.D., Andy Tan, Ahmed Shebe, Dai Wakahoi, Kazumaza Hirasawa, and George Luna, “The Creed Project: 1003 Toyota Prius Ethanol - Hybrid,” technical paper, Automotive Engineering Technology, Minnesota State University, April 14, 2004, http://www.creedproject.org/e85%20hybrid%20report.doc, accessed November 18, 2006.
Toyota, 2001-2006 Annual Reports. Toyota City: Toyota Motor Corporation, 2001-2006, http://www.toyota.co.jp/en/ir/library/annual/index.html, accessed 2002-2006.
Traister, Robert. All About Electric & Hybrid Cars. Blue Ridge Summit, PA: TAB Books, 1982.
Turrentine, Thomas, Mark Delucchi, Rusty Heffner, Kenneth Kurani, and Yongling Sun, “Quantifying the Benefits of Hybrid Vehicles,” Institute of Transportation Studies, University of California Davis, http://pubs.its.ucdavis.edu/download_pdf.php?id=1055, accessed November 21, 2006.
Wang, Michael. “Well-to-Wheels Results of Advanced Vehicle Systems with New Transportation Fuels,” Keynote Address presented at Keynote Address presented at Advanced Transportation Workshop under the Global Climate & Energy Project, http://gcep.stanford.edu/pdfs/ChEHeXOTnf3dHH5qjYRXMA/03_Wang_10_11_trans.pdf, Stanford University, Stanford, CA, accessed November 2006.
An, Feng and Sauer, Amanda. “Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World,” PEW Center on Global Climate Change Paper, http://www.pewclimate.org/document.cfm?documentID=412, accessed November 2006.
Christensen, Clayton M. The Innovator’s Dilemma, Boston, MA: HarperCollins, 1997, 2000.
Cogan, Ron, Green Car Journal. San Luis Obispo, CA: Green Car Journal, 2006.
Ford, 2001-2006 Annual Reports. Detroit: Ford Motor Company, 2001-2006.
GM, 2001-2006 Annual Reports. Detroit: General Motors Corporation, 2001-2006, http://world.honda.com/investors/reports/, accessed 2002-2006.
Greenlight Initiative, AAA Greenlight Initiative Hybrid Driver Training Seminar booklet. San Francisco, CA: CSAA, November 2006.
Hawken, Amory Lovins, and L. H. Lovins. Natural Capitalism, Boston, New York, London: Little Brown and Company, 1999.
Heffner, Reid, Kenneth Kurani, and Thomas Turrentine, “Effects of Vehicle Image in Hybrid Electric Vehicles,” Institute of Transportation Studies, University of California Davis, http://www.its.ucdavis.edu/publications/2005/UCD-ITS-RR-05-08.pdf, accessed 2005 and 2006.
Honda, 2001-2006 Annual Reports. Tokyo: Honda Motor Co., Ltd., 2001-2006, http://world.honda.com/investors/reports/, accessed 2002-2006.
Kittell, Matt. ““Communities with Hybrids Chart,” New American Dream, http://www.newdream.org/hev/Current_fleet_data.pdf, accessed November 2006.
Kreith, Frank, and R.E. West, “Gauging Efficiency, Well to Wheel,” Transportation Quarterly, Vol.56, No. 1 (Winter 2002): 51-73.
Lovins, Amory. “Technology Integration for Radical and Profitable Transport Efficiency,” Keynote Address presented at Advanced Transportation Workshop under the Global Climate & Energy Project, Stanford University, Stanford, CA, http://gcep.stanford.edu/pdfs/ChEHeXOTnf3dHH5qjYRXMA/11_Lovins_10_11_trans.pdf, accessed November 2006.
Magee, David. Ford Tough, Hoboken, NJ: John Wiley & Sons, 2005.
Moore, Geoffrey A. Crossing the Chasm, New York, NY: HarperCollins, 1991, 1999, 2002.
Motavalli, Jim. Forward Drive. San Francisco: Sierra Club Books, 2000, 2001.
Porter, Michael, E. Competitive Strategy, New York, NY: The Free Press, 1980, 1998.
Raskin, Amy and Saurin Shah, “The Emergence of Hybrid Vehicles,” AllianceBernstein White Paper, http://www.alliancebernstein.com/CmsObjectABD/PDF/Research_WhitePaper/R37755_Hybrid.pdf, accessed November 2006.
Sperling, Daniel. Future Drive. Washington, DC: Island Press, 1995.
Survey of Oregon Hybrid Gas-Electric Car Owners, Portland, OR: Oregon Environmental Council, July 2003.
Sullivan, Paul, Ph.D., Andy Tan, Ahmed Shebe, Dai Wakahoi, Kazumaza Hirasawa, and George Luna, “The Creed Project: 1003 Toyota Prius Ethanol - Hybrid,” technical paper, Automotive Engineering Technology, Minnesota State University, April 14, 2004, http://www.creedproject.org/e85%20hybrid%20report.doc, accessed November 18, 2006.
Toyota, 2001-2006 Annual Reports. Toyota City: Toyota Motor Corporation, 2001-2006, http://www.toyota.co.jp/en/ir/library/annual/index.html, accessed 2002-2006.
Traister, Robert. All About Electric & Hybrid Cars. Blue Ridge Summit, PA: TAB Books, 1982.
Turrentine, Thomas, Mark Delucchi, Rusty Heffner, Kenneth Kurani, and Yongling Sun, “Quantifying the Benefits of Hybrid Vehicles,” Institute of Transportation Studies, University of California Davis, http://pubs.its.ucdavis.edu/download_pdf.php?id=1055, accessed November 21, 2006.
Wang, Michael. “Well-to-Wheels Results of Advanced Vehicle Systems with New Transportation Fuels,” Keynote Address presented at Keynote Address presented at Advanced Transportation Workshop under the Global Climate & Energy Project, http://gcep.stanford.edu/pdfs/ChEHeXOTnf3dHH5qjYRXMA/03_Wang_10_11_trans.pdf, Stanford University, Stanford, CA, accessed November 2006.
The Hybrid Phenomenon TITLE
THE HYBRID PHENOMENON
A research project submitted to the faculty of
San Francisco State University
in partial fulfillment of
the requirements for
the degree
Master of Business Administration
by
John Edward Acheson
San Francisco, California
December 12, 2006
A research project submitted to the faculty of
San Francisco State University
in partial fulfillment of
the requirements for
the degree
Master of Business Administration
by
John Edward Acheson
San Francisco, California
December 12, 2006
The Hybrid Phenomenon HYBRID HISTORY 101
HYBRID HISTORY 101
At the turn of the last century, Dr. Ferdinand Porsche, a young engineer at the time, was asked to build a new kind of horseless carriage. During a time when electric grids were few and far between, oil was cheap, and the environment lush with natural resources, Porsche’s boss Jacob Lohner, asked his employee to design a better electric car.
Lohner-Porsche had successfully offered a hybrid alternative as early as the late 1890’s. The hybrid solved the limited speed and range of popular electrics. Although electric cars were more efficient, their world’s first hybrid was twice as efficient as the Prius and four times more efficient as conventional cars. Modern internal combustion engine (ICE) vehicles have put out enough horsepower to help warm
the Earth, but have only improved efficiency an estimated 1/10 of a percent per year.
The Lohner-Porsche was a runaway success. It won several races and the carriage maker produced 300 units by hand. It still filled up on gasoline, but electric motors turned the wheels. Compared to a background of a horse pulling a carriage, most vehicles were based on linear horsepower. Energy or food fed the horse or engine which in turn converted movement into propulsion. It was a one-way street! Most of the energy was lost through heat. Grills, body designs, tires, wheels, engine and transmission oils, pumps, brakes, radiators, fans, sensors and many parts were focused on this task. Unfortunately, the cheaper and easier fix for lost efficiency was to eat more energy: engines got bigger, cars went faster and trucks drove trade. We spent the last century focused on only one way to make the horse better: add more horses.
By 1920, the hybrid was run off the road by more powerful gasoline automobiles. The hybrid attempted to help cars but moved on to heavier vehicles after the ICE established itself. With limited success against power and range, the hybrid moved upstream into industrial uses. From Porsche’s 1899 hybrid through the 1940’s several auto companies tried to produce them including Lohner, GE, Siemens, Paris Electric and Woods. It took several decades before the hybrid returned to American showrooms to change the way we think about energy and transportation.
In the meantime, the hybrid was busy bolstering the United States’ rise to global superpower. It invaded heavy equipment and larger vehicles. It also helped World War II efforts, the industrial revolution and the development of the world’s infrastructures.
Hybrid locomotives built America and powered the industrial age. Hybrid ships and submarines won battles; a hybrid submarine sunk the hybrid ship after it delivered the atomic bomb that ended WWII. Hybrid heavy equipment mined our natural resources that powered manufacturing. Hydraulic hybrids invaded vehicles of all kinds including the trucks and tractors that built our roads. Hybrid electric grids flattened the world and powered civilization. Hybrid elevators ran our buildings and hybrid appliances like dryers and stoves served American homes. Hybrid vehicles finally returned to the auto business and went into mass production by 2000.
At the turn of the millennium, the hybrid moved out of the industrial age and into the information age. After almost 100 years confined to industrial uses, it went mainstream fast. Utilizing off-the-shelf technologies, it sustained an industry in crisis. More efficient power management and the ability to recycle energy increased efficiency. From inputs of oil and gasoline, through consumer use and behavior, to outputs that affected the economy and environment, hybrids became the most visible transportation product that reduced oil consumption.
Combining gasoline and electricity helped the hybrid get the job done. More efficiency reduced its ecological footprint. The hybrid marked a tipping point in the global auto industry. After 100 years of growth powered by fossil fuels and abundant natural resources, the car business moved towards efficiency and away from horsepower. Responding to environmental challenges, automakers developed cleaner technologies and responded to changing consumer behaviors.
At the turn of the last century, Dr. Ferdinand Porsche, a young engineer at the time, was asked to build a new kind of horseless carriage. During a time when electric grids were few and far between, oil was cheap, and the environment lush with natural resources, Porsche’s boss Jacob Lohner, asked his employee to design a better electric car.
Lohner-Porsche had successfully offered a hybrid alternative as early as the late 1890’s. The hybrid solved the limited speed and range of popular electrics. Although electric cars were more efficient, their world’s first hybrid was twice as efficient as the Prius and four times more efficient as conventional cars. Modern internal combustion engine (ICE) vehicles have put out enough horsepower to help warm
the Earth, but have only improved efficiency an estimated 1/10 of a percent per year.
The Lohner-Porsche was a runaway success. It won several races and the carriage maker produced 300 units by hand. It still filled up on gasoline, but electric motors turned the wheels. Compared to a background of a horse pulling a carriage, most vehicles were based on linear horsepower. Energy or food fed the horse or engine which in turn converted movement into propulsion. It was a one-way street! Most of the energy was lost through heat. Grills, body designs, tires, wheels, engine and transmission oils, pumps, brakes, radiators, fans, sensors and many parts were focused on this task. Unfortunately, the cheaper and easier fix for lost efficiency was to eat more energy: engines got bigger, cars went faster and trucks drove trade. We spent the last century focused on only one way to make the horse better: add more horses.
By 1920, the hybrid was run off the road by more powerful gasoline automobiles. The hybrid attempted to help cars but moved on to heavier vehicles after the ICE established itself. With limited success against power and range, the hybrid moved upstream into industrial uses. From Porsche’s 1899 hybrid through the 1940’s several auto companies tried to produce them including Lohner, GE, Siemens, Paris Electric and Woods. It took several decades before the hybrid returned to American showrooms to change the way we think about energy and transportation.
In the meantime, the hybrid was busy bolstering the United States’ rise to global superpower. It invaded heavy equipment and larger vehicles. It also helped World War II efforts, the industrial revolution and the development of the world’s infrastructures.
Hybrid locomotives built America and powered the industrial age. Hybrid ships and submarines won battles; a hybrid submarine sunk the hybrid ship after it delivered the atomic bomb that ended WWII. Hybrid heavy equipment mined our natural resources that powered manufacturing. Hydraulic hybrids invaded vehicles of all kinds including the trucks and tractors that built our roads. Hybrid electric grids flattened the world and powered civilization. Hybrid elevators ran our buildings and hybrid appliances like dryers and stoves served American homes. Hybrid vehicles finally returned to the auto business and went into mass production by 2000.
At the turn of the millennium, the hybrid moved out of the industrial age and into the information age. After almost 100 years confined to industrial uses, it went mainstream fast. Utilizing off-the-shelf technologies, it sustained an industry in crisis. More efficient power management and the ability to recycle energy increased efficiency. From inputs of oil and gasoline, through consumer use and behavior, to outputs that affected the economy and environment, hybrids became the most visible transportation product that reduced oil consumption.
Combining gasoline and electricity helped the hybrid get the job done. More efficiency reduced its ecological footprint. The hybrid marked a tipping point in the global auto industry. After 100 years of growth powered by fossil fuels and abundant natural resources, the car business moved towards efficiency and away from horsepower. Responding to environmental challenges, automakers developed cleaner technologies and responded to changing consumer behaviors.
The Hybrid Phenomenon INTRODUCTION
INTRODUCTION
“The contemporary automobile, after a century of engineering, is embarrassingly inefficient: Of the energy in the fuel it consumers, at least 80 percent is lost, mainly in the engine’s heat and exhaust, so that only 20 percent is actually used to turn the wheels. Of the resulting force, 95 percent moves the car, while only 5 percent moves the driver, in proportion to their respective weights. Five percent of 20 percent is one percent – not a gratifying result from American cars that burn their own weight in gasoline every year.”
Led by the most efficient car ever mass-produced, hybrids disrupted the “largest industry in the world, automotive transportation.” Toyota’s Prius recycled energy and soon became an American icon. The leap forward in efficiency reduced oil demand and left a smaller environmental footprint.
From 2000 to 2005, global Prius sales grew over 820%; U.S. hybrid sales jumped 2,100%. Compared to the modern car at 20-25% efficiency, the Prius provided 37%. The phenomenal little car changed everything. By 2007, over 800,000 consumers fell in love with hybrids and fueled over $15 billion in global sales.
This report studied the hybrid from the perspective of what influenced “The Hybrid Phenomenon.” The search led to questions about oil and fuels, government, the environment, popular culture, the auto industry, hybrid buyers, and technology.
For over two years, I researched the hybrid phenomenon. In a changing environment, the hybrid evolved from a funny looking little car into mainstream technology. At first, gas prices and the environment were the biggest issues. Then came oil and government. Pop culture followed to help the hybrid “cross the chasm.” But it threatened domestic gasoline, so alternative fuels received a huge push. Once the technology successfully established reliability, the hybrid entered the mainstream.
During the research, the most surprising reaction I experienced was at SFSU’s 2006 Graduate Research Showcase of over 140 culminating experiences. The first car on my painted road titled, “Hybrid History 101” attracted the most attention. Most ignored the hybrid savings analysis, celebrities and the growing number of new models. All ages from kids to drivers to masters and PhDs stopped and stared at a picture of the world’s first hybrid (see Figure 1). They were dumbfounded to learn that the hybrid was designed over a century ago by automobile industry genius, Ferdinand Porsche.
Figure 1: World's First Hybrid
Source: Tom Whitney, “Hybrids and Hybrid History,” CanadianDriver, Canadian Driver Communication’s Inc. Web site, February 24, 2005, http://www.canadiandriver.com/articles/tw/images/lohner-porsche-1.jpg, accessed July 10, 2006.
The first hybrid cars came out of a need to add acceleration to electric cars. Around 1897, Porsche probably filed the world’s first hybrid patent. He designed the first front wheel drive, eliminated several moving parts including the transmission, added a petrol engine, to successfully build the world’s first hybrid car. His phenomenal design exhibited 83% efficiency. Most of the billion modern cars and trucks mass-produced until the Prius, only achieved about 10-20% efficiency. Some modern diesel-electric hybrids, electrics and hydrogen-electric hybrids improved to 45%, but had yet to be mass-produced as cars.
In 1900, American car makers produced only about 4,200 cars. Most were steamers and electrics, not gasoline. In the early years, Porsche built and drove his hybrids and won several races. He even set world records for speed. The exposure fueled the early success of the hybrid and jumpstarted Porsche’s legacy. His boss, coach maker Lohner, seized an opportunity that many start-ups have taken; he sold the hybrid patents to Austro-Daimler. During the transaction, Daimler’s head salesman and father of a young girl named Mercedes, convinced Porsche to come aboard. The hybrid enabled Porsche’s first career move on a list of several historical automaking accomplishments including the world’s best selling Volkswagen and Porsche ventures.
General Electric also developed an early hybrid prototype but it never made it into the showroom. A French company built an alcohol-electric hybrid concept in 1903 and followed with an unsuccessful commercial gasoline-hybrid version the following year. In 1905, an American engineer filed the first U.S. hybrid patent, but failed to commercialize it. In about 1912, a Chicago electric carmaker released a fairly luxurious and successful hybrid that sold 600 units. That would be America’s best-selling hybrid until Ford released the first hybrid SUV (see Ford’s Escape) to join the hybrid phenomenon.
Paul Hawken, Amory Lovins and L. H. Lovins, Natural Capitalism (Boston, New York, London: Little Brown and Company, 1999), p. 24.
Ibid., p. 22.
Geoffrey Moore, Crossing the Chasm (New York, NY: HarperBusiness, 2002).
“The contemporary automobile, after a century of engineering, is embarrassingly inefficient: Of the energy in the fuel it consumers, at least 80 percent is lost, mainly in the engine’s heat and exhaust, so that only 20 percent is actually used to turn the wheels. Of the resulting force, 95 percent moves the car, while only 5 percent moves the driver, in proportion to their respective weights. Five percent of 20 percent is one percent – not a gratifying result from American cars that burn their own weight in gasoline every year.”
Led by the most efficient car ever mass-produced, hybrids disrupted the “largest industry in the world, automotive transportation.” Toyota’s Prius recycled energy and soon became an American icon. The leap forward in efficiency reduced oil demand and left a smaller environmental footprint.
From 2000 to 2005, global Prius sales grew over 820%; U.S. hybrid sales jumped 2,100%. Compared to the modern car at 20-25% efficiency, the Prius provided 37%. The phenomenal little car changed everything. By 2007, over 800,000 consumers fell in love with hybrids and fueled over $15 billion in global sales.
This report studied the hybrid from the perspective of what influenced “The Hybrid Phenomenon.” The search led to questions about oil and fuels, government, the environment, popular culture, the auto industry, hybrid buyers, and technology.
For over two years, I researched the hybrid phenomenon. In a changing environment, the hybrid evolved from a funny looking little car into mainstream technology. At first, gas prices and the environment were the biggest issues. Then came oil and government. Pop culture followed to help the hybrid “cross the chasm.” But it threatened domestic gasoline, so alternative fuels received a huge push. Once the technology successfully established reliability, the hybrid entered the mainstream.
During the research, the most surprising reaction I experienced was at SFSU’s 2006 Graduate Research Showcase of over 140 culminating experiences. The first car on my painted road titled, “Hybrid History 101” attracted the most attention. Most ignored the hybrid savings analysis, celebrities and the growing number of new models. All ages from kids to drivers to masters and PhDs stopped and stared at a picture of the world’s first hybrid (see Figure 1). They were dumbfounded to learn that the hybrid was designed over a century ago by automobile industry genius, Ferdinand Porsche.
Figure 1: World's First Hybrid
Source: Tom Whitney, “Hybrids and Hybrid History,” CanadianDriver, Canadian Driver Communication’s Inc. Web site, February 24, 2005, http://www.canadiandriver.com/articles/tw/images/lohner-porsche-1.jpg, accessed July 10, 2006.
The first hybrid cars came out of a need to add acceleration to electric cars. Around 1897, Porsche probably filed the world’s first hybrid patent. He designed the first front wheel drive, eliminated several moving parts including the transmission, added a petrol engine, to successfully build the world’s first hybrid car. His phenomenal design exhibited 83% efficiency. Most of the billion modern cars and trucks mass-produced until the Prius, only achieved about 10-20% efficiency. Some modern diesel-electric hybrids, electrics and hydrogen-electric hybrids improved to 45%, but had yet to be mass-produced as cars.
In 1900, American car makers produced only about 4,200 cars. Most were steamers and electrics, not gasoline. In the early years, Porsche built and drove his hybrids and won several races. He even set world records for speed. The exposure fueled the early success of the hybrid and jumpstarted Porsche’s legacy. His boss, coach maker Lohner, seized an opportunity that many start-ups have taken; he sold the hybrid patents to Austro-Daimler. During the transaction, Daimler’s head salesman and father of a young girl named Mercedes, convinced Porsche to come aboard. The hybrid enabled Porsche’s first career move on a list of several historical automaking accomplishments including the world’s best selling Volkswagen and Porsche ventures.
General Electric also developed an early hybrid prototype but it never made it into the showroom. A French company built an alcohol-electric hybrid concept in 1903 and followed with an unsuccessful commercial gasoline-hybrid version the following year. In 1905, an American engineer filed the first U.S. hybrid patent, but failed to commercialize it. In about 1912, a Chicago electric carmaker released a fairly luxurious and successful hybrid that sold 600 units. That would be America’s best-selling hybrid until Ford released the first hybrid SUV (see Ford’s Escape) to join the hybrid phenomenon.
Paul Hawken, Amory Lovins and L. H. Lovins, Natural Capitalism (Boston, New York, London: Little Brown and Company, 1999), p. 24.
Ibid., p. 22.
Geoffrey Moore, Crossing the Chasm (New York, NY: HarperBusiness, 2002).
The Hybrid Phenomenon APPENDIX C: TABLE OF HYBRIDS
APPENDIX C: TABLE OF HYBRIDS
Appendix C is dedicated to a comprehensive list of hybrids I compiled from 2004 through 2006. Table 7 alphabetizes hybrid cars and trucks by chronological make and model. Some makes are brands, nameplates or wholly owned subsidiaries of parent companies denoted in parenthesis. The list includes modern cars and trucks as well as concept, demonstration, experimental, research, prototypes and race cars. The model “Historical” recognizes some hybrids lost in history. I did not include industrial hybrids such as buses, heavy trucks, trains, ships, etc.
Products available for sale or confirmed for future release are listed by model year (generally one year after the calendar year of release). Concepts are arranged by debut year at an auto show. Others were listed as reported. All were U.S. models unless noted by country or region in parenthesis. For example, (Europe) or (Japan).
“Hybrid” means gasoline-electric unless noted otherwise. Fuel Cell Vehicles are also considered hybrids and are designated by “FCV” or Hydrogen Hybrid. Unique technical specifications are occasionally included in parenthesis after make and model. For example, miles per gallon (MPG) figures were listed for the Accelerated Composites Aptera and next generation 2009 Prius.
Table 7: Hybrid Cars and Light Trucks
• Accelerated Composites: Aptera Diesel-Electric Three-Wheel Parallel Hybrid Concept (330 MPG)
• Acura (Honda): 2002 Acura DN-X Hybrid AWD Sportscar Concept
• Audi (Volkswagen): 1989 Duo Hybrid Experimental Car, 1991 Audi 100 Avant Quatro Hybrid Experimental Car, 1997 A4 Duo Diesel-Electric Hybrid Experimental Car (Europe), 2004 A2 Hydrogen Hybrid Concept, 2005 Q7 Quattro Hybrid SUV Concept, 2008 Q7 Quattro Hybrid SUV
• BMW: 2000 745h Gasoline-Electric FCV Concept, 2005 X3 Concept SUV, 2008 X5 Hybrid Concept SUV, 2008 Hybrid 7 Series
• Cadillac (GM): 2008 Escalade Hybrid SUV (Panasonic battery pack)
• Cherry Automobile: 2007 Cherry Hybrid (China)
• Chevrolet (GM): 2001 S-10 Gasoline-Hydrogen-Electric Hybrid FC Pickup, 2005 Silverado Hybrid Truck (AC outlets), 2007 Volt Plug-In Hybrid, 2008 Equinox Hybrid SUV, 2008 Malibu Hybrid, 2008 Tahoe Hybrid SUV
• Geely (China): 2008 Geely Maple Hybrid
• GM: 1969 GM 512 Hybrid Experimental Vehicle, 1997 Sintra FCV Mini Van Concept, 1998-2002 HydroGen/Zafria FCV Mini Van Concept, 2000 Precept FCV Concept, 2002 Autonomy FCV Concept,, 2002 Hy-Wire FCV Concept, 2005 Sequel Hybrid FC Concept, 2005 GMC Sierra Hybrid Truck, 2008 GMC Yukon Hybrid SUV, HydroGen3 Hybrid FCV Concept
• Daihatsu (Toyota): 1999 EV-FC Methanol-Hydrogen-Electric Hybrid FC Micro Van, 2001 MOVE FCV-K-II Hybrid FC Mini-car Concept, 2001 Atrai Hybrid Minivan, 2002-2006 HiJet Cargo Hybrid Van Concept, 2004 UFE2 Hybrid Concept, UFE-III Hybrid Concept Research Vehicle (173MPG), HVS Hybrid Roadster Concept (80MPG)
• Daimler Chrysler: 1982 Boxer Hybrid, 1994-2001 NECAR Methanol and/or Hydrogen Hybrid FC Prototypes, 2000 Jeep Commander 2 Methanol-Hydrogen-Electric Hybrid FC SUV, 2001 Natrium Town & Country Hydride-Hydrogen-Electric FC Mini Van, 2002 F-Cell A-Class Hydrogen-Electric Hybrid FC Prototype, 2003 Jeep Treo FCV Concept, 2003 F500 Mind Hybrid Concept, Chrysler Aspen Hybrid Concept SUV
• Dodge (Daimler Chrysler): 1997 Dodge Intrepid ESX Hybrid Concept Car, 1998 Dodge Diesel-Electric Hybrid Concept Car, 2001 Dodge CNG Hybrid Concept SUV, 2004 Dodge Ram Hybrid Truck, Dodge Caravan FCV Hybrid Concept Van, 2008 Dodge Durango Hybrid SUV
• Esoro (Switzerland): 2001 Hycar Hydrogen Hybrid FC Prototype
• Fiat: 2000 Multipla Hybrid Prototype, Panda Hydrogen FC Prototype, 2001 Seicento Elletra H2 Hydrogen Hybrid FCV Prototype, 2003 Seicento Hydrogen Hybrid FCV Prototype
• Ford: 1999 Ford P2000 HFC Hydrogen-Electric Hybrid Ballard FC Prototype, 1999 Ford Prodigy Hybrid Family Car Prototype, 2000-2002 Ford Focus Hydrogen-Electric Hybrid FC Prototype, 2000 Ford Think FC5 Methanol-Hydrogen-Electric Hybrid FC Demonstration Prototype, 2003 Ford Futura Hybrid Concept, 2003 Ford Glocar FCV, 2005 Ford Escape Gasoline-Electric (AC outlets), 2006 E-85-Electric Hybrid SUV (AC outlets), 2007 Airstream Hydrogen-Electric Plug-In Hybrid, 2009 Ford Fusion Hybrid Midsize, Ford Edge Hybrid, Ford Fiesta Micro Hybrid Concept, Ford-Five Hundred Hybrid Concept, Ford Focus FC5 Methanol FCV-Hybrid Concept, 2006 Ford Reflex Diesel Solar Electric Hybrid Concept (65MPG)
• Historical: 1900 Pieper, 1903 Krieger, 1906-1912 Auto Mixte, 1907 L'Energie Electro-Mécanique AL Hybrid (France), 1914 Couple Gear Aerial Ladder Truck, 1920 Owen Magnetic Model 60 Touring Hybrid, 1914 Woods Dual Power Hybrid, 1916 Baker, 1979 Mother Earth, 1980 Briggs and Stratton Hybrid
• Honda: 1997 J-VX Hybrid Concept, 1999 VV Hybrid Concept, 1999-2006 Insight Hybrid, 2001 Dual-Note Hybrid Concept Sportscar, 1999-2001 FCX-V1-4 Methanol then Hydrogen-Electric Hybrid FC Prototypes, 2002-2006 FCX FCV Concept, 2003 Kiwami FCV Concept, 2003-2005 Civic I Hybrid Compact, 2005 Accord Hybrid Sedan, 2006 Civic II Hybrid Compact, 2007 CR-V Hybrid CUV, 2008 Fit Hybrid, Honda Pilot Hybrid SUV, Honda Ridgeline Hybrid Truck
• Hyundai: 1995 FGV-1 Concept Hybrid, 2000-2001 Santa Fe FCV Concept SUVs, FGV-2/Verna/Avante Hybrid Concept, 2004 Click Hybrid, 2004 Tucson FCV Concept, 2005 Hyundai Accent Hybrid Concept, 2005 Portico Hybrid Concept
• Isuzu: 2004 Elf Diesel Hybrid Light Duty Truck
• Kia: 2004 Sportage FCV Concept, 2006 Kia Rio Hybrid Concept
• Lexus (Toyota): 2003 Lexus RX 330 Hybrid Concept SUV, 2005 Lexus 450h Hybrid Racecar, 2006 Lexus RX 400h Hybrid SUV, 2007 Lexus GS 450h, 2008 Lexus LS 600h Hybrid Luxury Sedan, 2009 Lexus LF-Sh V-8 4WD Hybrid
• Lincoln (Ford): Lincoln MKX Hybrid SUV
• Loremo: Loremo LS (165 MPG) & GT (92 MPG) Hybrid Concepts
• Mahindra & Mahindra (India): 2008/2009 Mahindra Scorpio Diesel-Electric Hybrid SUV Concept, Hy-Alpha Hydrogen Hybrid Concept
• Mazda (Ford): 1997 Demio FCV Concept Car, 2001 Premacy Methanol FCV Concept, 2002 Demio Hybrid Van, 2003 Ibuki Hybrid Roadster Concept, 2007 Tribute Hybrid SUV, Premacy RE Hydrogen Electric Concept Mini Van, Senku Rotary Hybrid Concept
• Mercury (Ford): 2006 Mariner Hybrid SUV, Montego Hybrid, 2009 Milan Hybrid Midsize
• Mercedes (Daimler Chrysler): 1999 Mercedes S-Class Hybrid Concept, 2004 Mercedes Vision GST Diesel-Electric Hybrid Concept, 2005 S400 Hybrid Concept, 2005 Smart Diesel-Electric and Gasoline-Electric Hybrid Concepts, 2007 Mercedes Blutec E320 Diesel Electric Hybrid, 2009 Mercedes S-Class Hybrid, Mercedes Blutec GL and SL Diesel Electric Hybrids, Mercedes A-Class Hybrid Concept
• Mitsubishi: 2001 Spaceliner Methanol FCV Concept, 2003 Gradis FCV Concept Mini Van, 2004 Concept-E Hybrid Concept, Sportscar, 2006 Concept-CT MiEV Prototype, FCV Hydrogen Hybrid Van Concept
• N Technology/Tattus (Renault): 2007 NT207 Hybrid Racecar
• Opel (GM): 1997 EV1 FCEV Methanol-Hydrogen-Electric Hybrid Prototype, 1997 Sintra FCV Hybrid Mini Van Prototype, 2006 Astra Diesel Electric Hybrid Concept
• Nissan (Renault): 1999 R’nessa Hydrogen-Electric Hybrid FC Concept SUV, 2000-2001 Xterra Hydrogen-Electric Hybrid FC Concept, 2002 X-TRAIL Hydrogen-Electric Hybrid FC Concept SUV, 2003 Effis Hydrogen-Electric Hybrid FC Concept Commuter Car, 2007 Nissan Altima Hybrid Passenger Car
• Panoz: 1998 Panoz Q9 GT Ford Gasoline Zytec Electric Hybrid LeMans Racecar
• PATAC (GM/Shanghai Automotive Industry Corp. Group): 2001 Phoenix FCV Concept
• Porsche: 1898-1905 Lohner Porsche Hybrids, 2005 Cayenne Hybrid Concept SUV, Porsche Panamera Hybrid Concept
• PSA Peugeot Citroen: 2001 Hydro-Gen Hybrid FCV Concept, 2007 307 HDi Hybrid, 2006 Peugeot 307 CC Hybrid Diesel Hybrid and Citroen C4 Hdi Diesel Electric Hybrid Demonstration Concepts, 2006 Paris Auto Show Peugeot C-Metisse Diesel Hybrid, Peugeot 207 Epure FCV Hybrid Concept
• Renault: 1997 Laguna Hydrogen-Electric Hybrid FC Concept Wagon, 2003 Kangoo Hybrid Van Concept
• Shanghai Maple Automobile (Geely): 2008 Hybrid Concepts
• Saab (GM): 2006 SAAB BioPower Ethanol-Electric Hybrid Concept Convertible, 2010 SAAB E-85 Hybrid Turbo Passenger Car
• Saturn (GM): 2007 Saturn VUE Green Line Hybrid SUV, 2007 Saturn Aura Greenline Hybrid Sedan, 2008 Saturn VUE Green Line Two-Mode Hybrid SUV, Saturn VUE Green Line Plug-In Hybrid SUV
• Subaru: 2003 Subaru B9 Scrambler Hybrid Concept Roadster, 2005 Subaru B5-TPH Turbo Parallel Hybrid AWD Concept Wagon
• Suzuki: 2001 Covie FCV Concept, 2003 Mobile Terrace FCV Concept, 2003-2005 Twin Hybrid, Landbreeze Hybrid SUV Concept, Ionis FCV Hybrid Concept Van, 2010-2012 Hybrid
• Tokyo R&D: Vemac RD408H V-8 150KW Hybrid Racecar
• Toyota: 1977 Toyota Sports 800 Gas Turbine (GT) Hybrid Prototype, 1996-1997 RAV-4 FCEV Hydrogen-Electric Hybrid FC Concept, 1997-2000 First Generation Prius (Japan), 2000-2003 Second Generation Prius or Prius Classic Hybrid Compact (Japan/Europe/U.S.), 2001 Estima Hybrid Minivan, 2001 Crown Hybrid Sedan, 2001-2002 Kluger FCHV 3-5 Hydrogen-Electric FC Hybrid Concept, 2003 Alphard (Japan, AC outlets) Hybrid Minivan, 2003 FINE-S FCV Concept, 2004-2008 Third Generation Prius, New Prius or Prius II Compact (Global), 2004 FTX Hybrid Truck Concept, Highlander FCV Concept SUV, 2003 SU-HV1 Hybrid SUV Concept, 2004 Volta Hybrid Sportscar Concept, 2004 Harrier Hybrid (Japan) SUV, 2004 Highlander (U.S.A.) Kluger (Australia/Japan) Hybrid SUV, 2006 Vitz CVT Light Hybrid (First Lithium-ion), 2007 Camry Hybrid, 2007 FT-SH Concept Sportscar, 2008 Tundra Hybrid Truck, 2009 Fourth Generation Prius (Lithium-Ion, 94 MPG), Sienna Hybrid Minivan Concept, Crown Concept, CS&S Hybrid Concept, Vitz Hybrid Sub-Compact, Prius Sub-Compact Hybrid Concept, Prius CUV Hybrid Concept, Prius Wagon Hybrid Concept, Prius Plug-In Hybrid Concept
• Quantum: 2004 H2 Hydrogen Electric Hybrid Prius Research Vehicle
• Venturi: 2009 Astrolab Solar-Electric Hybrid
• Volkswagen: Golf ECO.Power Diesel-Electric Hybrid, 2008 Touran Hybrid Minivan (China), Bora Hydrogen Hybrid Concept, Jetta Hybrid, HY.MOTION FCV Concept
Sources: Toyota, http://www.toyota.co.jp/en/tech/environment/hsd/05.html, accessed October 28, 2004 and November 3, 2006; Hybrids, http://www.whnet.com/4x4/hybrid.html. Wikipedia, “List of Hybrid Vehicles,” http://en.wikipedia.org/wiki/List_of_hybrid_cars, Wikimedia Foundation Web site, accessed 2004 – 2006; Union of Concerned Scientists, “Hybrid Vehicle Timeline,” Hybridcenter.org Web site, http://www.hybridcenter.org/hybrid-timeline.html, accessed May 16, 2006, October 20, 2006 and November 3, 2006; Hybridcars.com, “History of Hybrid Vehicles,” http://www.hybridcars.com/history/history-of-hybrid-vehicles.html, accessed 2006; “Fuel Cell Vehicles,” http://www.fuelcells.org/info/charts/carchart.pdf, accessed December 1, 2006; Ward’s Automotive Reports and Various Organization Web sites including Audi, CNET, Motor Trend, MSN Autos, MSNBC Green Machines and Auto Show Web sites.
Appendix C is dedicated to a comprehensive list of hybrids I compiled from 2004 through 2006. Table 7 alphabetizes hybrid cars and trucks by chronological make and model. Some makes are brands, nameplates or wholly owned subsidiaries of parent companies denoted in parenthesis. The list includes modern cars and trucks as well as concept, demonstration, experimental, research, prototypes and race cars. The model “Historical” recognizes some hybrids lost in history. I did not include industrial hybrids such as buses, heavy trucks, trains, ships, etc.
Products available for sale or confirmed for future release are listed by model year (generally one year after the calendar year of release). Concepts are arranged by debut year at an auto show. Others were listed as reported. All were U.S. models unless noted by country or region in parenthesis. For example, (Europe) or (Japan).
“Hybrid” means gasoline-electric unless noted otherwise. Fuel Cell Vehicles are also considered hybrids and are designated by “FCV” or Hydrogen Hybrid. Unique technical specifications are occasionally included in parenthesis after make and model. For example, miles per gallon (MPG) figures were listed for the Accelerated Composites Aptera and next generation 2009 Prius.
Table 7: Hybrid Cars and Light Trucks
• Accelerated Composites: Aptera Diesel-Electric Three-Wheel Parallel Hybrid Concept (330 MPG)
• Acura (Honda): 2002 Acura DN-X Hybrid AWD Sportscar Concept
• Audi (Volkswagen): 1989 Duo Hybrid Experimental Car, 1991 Audi 100 Avant Quatro Hybrid Experimental Car, 1997 A4 Duo Diesel-Electric Hybrid Experimental Car (Europe), 2004 A2 Hydrogen Hybrid Concept, 2005 Q7 Quattro Hybrid SUV Concept, 2008 Q7 Quattro Hybrid SUV
• BMW: 2000 745h Gasoline-Electric FCV Concept, 2005 X3 Concept SUV, 2008 X5 Hybrid Concept SUV, 2008 Hybrid 7 Series
• Cadillac (GM): 2008 Escalade Hybrid SUV (Panasonic battery pack)
• Cherry Automobile: 2007 Cherry Hybrid (China)
• Chevrolet (GM): 2001 S-10 Gasoline-Hydrogen-Electric Hybrid FC Pickup, 2005 Silverado Hybrid Truck (AC outlets), 2007 Volt Plug-In Hybrid, 2008 Equinox Hybrid SUV, 2008 Malibu Hybrid, 2008 Tahoe Hybrid SUV
• Geely (China): 2008 Geely Maple Hybrid
• GM: 1969 GM 512 Hybrid Experimental Vehicle, 1997 Sintra FCV Mini Van Concept, 1998-2002 HydroGen/Zafria FCV Mini Van Concept, 2000 Precept FCV Concept, 2002 Autonomy FCV Concept,, 2002 Hy-Wire FCV Concept, 2005 Sequel Hybrid FC Concept, 2005 GMC Sierra Hybrid Truck, 2008 GMC Yukon Hybrid SUV, HydroGen3 Hybrid FCV Concept
• Daihatsu (Toyota): 1999 EV-FC Methanol-Hydrogen-Electric Hybrid FC Micro Van, 2001 MOVE FCV-K-II Hybrid FC Mini-car Concept, 2001 Atrai Hybrid Minivan, 2002-2006 HiJet Cargo Hybrid Van Concept, 2004 UFE2 Hybrid Concept, UFE-III Hybrid Concept Research Vehicle (173MPG), HVS Hybrid Roadster Concept (80MPG)
• Daimler Chrysler: 1982 Boxer Hybrid, 1994-2001 NECAR Methanol and/or Hydrogen Hybrid FC Prototypes, 2000 Jeep Commander 2 Methanol-Hydrogen-Electric Hybrid FC SUV, 2001 Natrium Town & Country Hydride-Hydrogen-Electric FC Mini Van, 2002 F-Cell A-Class Hydrogen-Electric Hybrid FC Prototype, 2003 Jeep Treo FCV Concept, 2003 F500 Mind Hybrid Concept, Chrysler Aspen Hybrid Concept SUV
• Dodge (Daimler Chrysler): 1997 Dodge Intrepid ESX Hybrid Concept Car, 1998 Dodge Diesel-Electric Hybrid Concept Car, 2001 Dodge CNG Hybrid Concept SUV, 2004 Dodge Ram Hybrid Truck, Dodge Caravan FCV Hybrid Concept Van, 2008 Dodge Durango Hybrid SUV
• Esoro (Switzerland): 2001 Hycar Hydrogen Hybrid FC Prototype
• Fiat: 2000 Multipla Hybrid Prototype, Panda Hydrogen FC Prototype, 2001 Seicento Elletra H2 Hydrogen Hybrid FCV Prototype, 2003 Seicento Hydrogen Hybrid FCV Prototype
• Ford: 1999 Ford P2000 HFC Hydrogen-Electric Hybrid Ballard FC Prototype, 1999 Ford Prodigy Hybrid Family Car Prototype, 2000-2002 Ford Focus Hydrogen-Electric Hybrid FC Prototype, 2000 Ford Think FC5 Methanol-Hydrogen-Electric Hybrid FC Demonstration Prototype, 2003 Ford Futura Hybrid Concept, 2003 Ford Glocar FCV, 2005 Ford Escape Gasoline-Electric (AC outlets), 2006 E-85-Electric Hybrid SUV (AC outlets), 2007 Airstream Hydrogen-Electric Plug-In Hybrid, 2009 Ford Fusion Hybrid Midsize, Ford Edge Hybrid, Ford Fiesta Micro Hybrid Concept, Ford-Five Hundred Hybrid Concept, Ford Focus FC5 Methanol FCV-Hybrid Concept, 2006 Ford Reflex Diesel Solar Electric Hybrid Concept (65MPG)
• Historical: 1900 Pieper, 1903 Krieger, 1906-1912 Auto Mixte, 1907 L'Energie Electro-Mécanique AL Hybrid (France), 1914 Couple Gear Aerial Ladder Truck, 1920 Owen Magnetic Model 60 Touring Hybrid, 1914 Woods Dual Power Hybrid, 1916 Baker, 1979 Mother Earth, 1980 Briggs and Stratton Hybrid
• Honda: 1997 J-VX Hybrid Concept, 1999 VV Hybrid Concept, 1999-2006 Insight Hybrid, 2001 Dual-Note Hybrid Concept Sportscar, 1999-2001 FCX-V1-4 Methanol then Hydrogen-Electric Hybrid FC Prototypes, 2002-2006 FCX FCV Concept, 2003 Kiwami FCV Concept, 2003-2005 Civic I Hybrid Compact, 2005 Accord Hybrid Sedan, 2006 Civic II Hybrid Compact, 2007 CR-V Hybrid CUV, 2008 Fit Hybrid, Honda Pilot Hybrid SUV, Honda Ridgeline Hybrid Truck
• Hyundai: 1995 FGV-1 Concept Hybrid, 2000-2001 Santa Fe FCV Concept SUVs, FGV-2/Verna/Avante Hybrid Concept, 2004 Click Hybrid, 2004 Tucson FCV Concept, 2005 Hyundai Accent Hybrid Concept, 2005 Portico Hybrid Concept
• Isuzu: 2004 Elf Diesel Hybrid Light Duty Truck
• Kia: 2004 Sportage FCV Concept, 2006 Kia Rio Hybrid Concept
• Lexus (Toyota): 2003 Lexus RX 330 Hybrid Concept SUV, 2005 Lexus 450h Hybrid Racecar, 2006 Lexus RX 400h Hybrid SUV, 2007 Lexus GS 450h, 2008 Lexus LS 600h Hybrid Luxury Sedan, 2009 Lexus LF-Sh V-8 4WD Hybrid
• Lincoln (Ford): Lincoln MKX Hybrid SUV
• Loremo: Loremo LS (165 MPG) & GT (92 MPG) Hybrid Concepts
• Mahindra & Mahindra (India): 2008/2009 Mahindra Scorpio Diesel-Electric Hybrid SUV Concept, Hy-Alpha Hydrogen Hybrid Concept
• Mazda (Ford): 1997 Demio FCV Concept Car, 2001 Premacy Methanol FCV Concept, 2002 Demio Hybrid Van, 2003 Ibuki Hybrid Roadster Concept, 2007 Tribute Hybrid SUV, Premacy RE Hydrogen Electric Concept Mini Van, Senku Rotary Hybrid Concept
• Mercury (Ford): 2006 Mariner Hybrid SUV, Montego Hybrid, 2009 Milan Hybrid Midsize
• Mercedes (Daimler Chrysler): 1999 Mercedes S-Class Hybrid Concept, 2004 Mercedes Vision GST Diesel-Electric Hybrid Concept, 2005 S400 Hybrid Concept, 2005 Smart Diesel-Electric and Gasoline-Electric Hybrid Concepts, 2007 Mercedes Blutec E320 Diesel Electric Hybrid, 2009 Mercedes S-Class Hybrid, Mercedes Blutec GL and SL Diesel Electric Hybrids, Mercedes A-Class Hybrid Concept
• Mitsubishi: 2001 Spaceliner Methanol FCV Concept, 2003 Gradis FCV Concept Mini Van, 2004 Concept-E Hybrid Concept, Sportscar, 2006 Concept-CT MiEV Prototype, FCV Hydrogen Hybrid Van Concept
• N Technology/Tattus (Renault): 2007 NT207 Hybrid Racecar
• Opel (GM): 1997 EV1 FCEV Methanol-Hydrogen-Electric Hybrid Prototype, 1997 Sintra FCV Hybrid Mini Van Prototype, 2006 Astra Diesel Electric Hybrid Concept
• Nissan (Renault): 1999 R’nessa Hydrogen-Electric Hybrid FC Concept SUV, 2000-2001 Xterra Hydrogen-Electric Hybrid FC Concept, 2002 X-TRAIL Hydrogen-Electric Hybrid FC Concept SUV, 2003 Effis Hydrogen-Electric Hybrid FC Concept Commuter Car, 2007 Nissan Altima Hybrid Passenger Car
• Panoz: 1998 Panoz Q9 GT Ford Gasoline Zytec Electric Hybrid LeMans Racecar
• PATAC (GM/Shanghai Automotive Industry Corp. Group): 2001 Phoenix FCV Concept
• Porsche: 1898-1905 Lohner Porsche Hybrids, 2005 Cayenne Hybrid Concept SUV, Porsche Panamera Hybrid Concept
• PSA Peugeot Citroen: 2001 Hydro-Gen Hybrid FCV Concept, 2007 307 HDi Hybrid, 2006 Peugeot 307 CC Hybrid Diesel Hybrid and Citroen C4 Hdi Diesel Electric Hybrid Demonstration Concepts, 2006 Paris Auto Show Peugeot C-Metisse Diesel Hybrid, Peugeot 207 Epure FCV Hybrid Concept
• Renault: 1997 Laguna Hydrogen-Electric Hybrid FC Concept Wagon, 2003 Kangoo Hybrid Van Concept
• Shanghai Maple Automobile (Geely): 2008 Hybrid Concepts
• Saab (GM): 2006 SAAB BioPower Ethanol-Electric Hybrid Concept Convertible, 2010 SAAB E-85 Hybrid Turbo Passenger Car
• Saturn (GM): 2007 Saturn VUE Green Line Hybrid SUV, 2007 Saturn Aura Greenline Hybrid Sedan, 2008 Saturn VUE Green Line Two-Mode Hybrid SUV, Saturn VUE Green Line Plug-In Hybrid SUV
• Subaru: 2003 Subaru B9 Scrambler Hybrid Concept Roadster, 2005 Subaru B5-TPH Turbo Parallel Hybrid AWD Concept Wagon
• Suzuki: 2001 Covie FCV Concept, 2003 Mobile Terrace FCV Concept, 2003-2005 Twin Hybrid, Landbreeze Hybrid SUV Concept, Ionis FCV Hybrid Concept Van, 2010-2012 Hybrid
• Tokyo R&D: Vemac RD408H V-8 150KW Hybrid Racecar
• Toyota: 1977 Toyota Sports 800 Gas Turbine (GT) Hybrid Prototype, 1996-1997 RAV-4 FCEV Hydrogen-Electric Hybrid FC Concept, 1997-2000 First Generation Prius (Japan), 2000-2003 Second Generation Prius or Prius Classic Hybrid Compact (Japan/Europe/U.S.), 2001 Estima Hybrid Minivan, 2001 Crown Hybrid Sedan, 2001-2002 Kluger FCHV 3-5 Hydrogen-Electric FC Hybrid Concept, 2003 Alphard (Japan, AC outlets) Hybrid Minivan, 2003 FINE-S FCV Concept, 2004-2008 Third Generation Prius, New Prius or Prius II Compact (Global), 2004 FTX Hybrid Truck Concept, Highlander FCV Concept SUV, 2003 SU-HV1 Hybrid SUV Concept, 2004 Volta Hybrid Sportscar Concept, 2004 Harrier Hybrid (Japan) SUV, 2004 Highlander (U.S.A.) Kluger (Australia/Japan) Hybrid SUV, 2006 Vitz CVT Light Hybrid (First Lithium-ion), 2007 Camry Hybrid, 2007 FT-SH Concept Sportscar, 2008 Tundra Hybrid Truck, 2009 Fourth Generation Prius (Lithium-Ion, 94 MPG), Sienna Hybrid Minivan Concept, Crown Concept, CS&S Hybrid Concept, Vitz Hybrid Sub-Compact, Prius Sub-Compact Hybrid Concept, Prius CUV Hybrid Concept, Prius Wagon Hybrid Concept, Prius Plug-In Hybrid Concept
• Quantum: 2004 H2 Hydrogen Electric Hybrid Prius Research Vehicle
• Venturi: 2009 Astrolab Solar-Electric Hybrid
• Volkswagen: Golf ECO.Power Diesel-Electric Hybrid, 2008 Touran Hybrid Minivan (China), Bora Hydrogen Hybrid Concept, Jetta Hybrid, HY.MOTION FCV Concept
Sources: Toyota, http://www.toyota.co.jp/en/tech/environment/hsd/05.html, accessed October 28, 2004 and November 3, 2006; Hybrids, http://www.whnet.com/4x4/hybrid.html. Wikipedia, “List of Hybrid Vehicles,” http://en.wikipedia.org/wiki/List_of_hybrid_cars, Wikimedia Foundation Web site, accessed 2004 – 2006; Union of Concerned Scientists, “Hybrid Vehicle Timeline,” Hybridcenter.org Web site, http://www.hybridcenter.org/hybrid-timeline.html, accessed May 16, 2006, October 20, 2006 and November 3, 2006; Hybridcars.com, “History of Hybrid Vehicles,” http://www.hybridcars.com/history/history-of-hybrid-vehicles.html, accessed 2006; “Fuel Cell Vehicles,” http://www.fuelcells.org/info/charts/carchart.pdf, accessed December 1, 2006; Ward’s Automotive Reports and Various Organization Web sites including Audi, CNET, Motor Trend, MSN Autos, MSNBC Green Machines and Auto Show Web sites.
Tuesday, September 26, 2006
Strategy or Tactic
Raw Response to Geoffrey Moore
Coins in the Couch
avail http://geoffmoore.blogs.com/my_weblog/2006/09/coins_in_the_co.html
I disagree that squeezing costs out of the value chain is a strategy... This is the destiny of all organizations, you might call it evolution, it's nothing new. I would argue that finding coins in the couch is a tactic, most commonly know as kaizen. Incremental improvement is not a strategy, it's reality. I feel that tactics are part of a larger strategy that one might pursue, such as becoming the low-cost leader. But, that's a tough strategy that allows only one player per industry and if one thinks that finding coins in the couch is a tactic that will lead towards that strategy, that leader may end up like K-Mart. The 2nd cheapest and bankrupt.
On the other hand, if one incorporates finding coins in the couch with a differentiation strategy, this leader should be able to keep up with or beat the competition. The reason being that lowering certain productivity improvements can fund quality and not lower costs.
Be very clear on your strategy and make sure your tactics are aligned. Finding coins in the couch is a tactic, not a strategy.
Posted by: John Acheson | September 24, 2006 at 12:36 PM
Coins in the Couch
avail http://geoffmoore.blogs.com/my_weblog/2006/09/coins_in_the_co.html
I disagree that squeezing costs out of the value chain is a strategy... This is the destiny of all organizations, you might call it evolution, it's nothing new. I would argue that finding coins in the couch is a tactic, most commonly know as kaizen. Incremental improvement is not a strategy, it's reality. I feel that tactics are part of a larger strategy that one might pursue, such as becoming the low-cost leader. But, that's a tough strategy that allows only one player per industry and if one thinks that finding coins in the couch is a tactic that will lead towards that strategy, that leader may end up like K-Mart. The 2nd cheapest and bankrupt.
On the other hand, if one incorporates finding coins in the couch with a differentiation strategy, this leader should be able to keep up with or beat the competition. The reason being that lowering certain productivity improvements can fund quality and not lower costs.
Be very clear on your strategy and make sure your tactics are aligned. Finding coins in the couch is a tactic, not a strategy.
Posted by: John Acheson | September 24, 2006 at 12:36 PM
Friday, December 17, 2004
Pollution Poker
Pollution Poker: Carbon Trading Responds to the Kyoto Protocol
John Acheson
San Francisco State University
Abstract
Throughout civilization, it has been free to pollute greenhouse gases into the atmosphere, but on February 16, 2005, organizations agreed to start paying to have their “garbage taken out.” The Kyoto Protocol called for 55 industrialized nations of the 127 that ratified the agreement. Starting in 2008 through 2012, most developed countries have agreed to reduce emissions levels over 5% below global levels in 1990. Carbon Dioxide has been targeted as the leading cause of global warming and has grown over 150% in the past 200 years. The United States has released more greenhouse gases than any other country in the world, but decided not to ratify the Kyoto Protocol as early as 2001. With the U.S. uninterested, the instrument, originally drawn up in 1997, did not have enough polluters signed on. The plan stalled, until Russia moved to sign on November 4, 2004. On February 16, 2004, eight years after the historic meeting in Kyoto, Japan and 90 days following Russia’s President Vladimir Putin’s historical signing, the agreement will come into full force. For the first time in the history, businesses have initiated investment into a new market for “carbon credits” that give industrialized countries the right to pollute. This paper examined the carbon trading industry at its infancy: a critical time of growth from start-up to mainstream. With the Protocol expected to jump start activity in early 2005, there was already a tremendous growth of carbon trading around the world. The case writer focused on the key players and global opportunities, as well as some of the broader mechanisms for implementation.
Introduction
“For strategic reasons, some companies have chosen to be quiet about their efforts
under the Kyoto Protocol’s more stringent emissions regulations
(Packard and Reinhardt, 2000).”
Carbon credits allow companies to pollute. Firms who pollute can buy, sell and trade for the right to pollute in a manner similar to stock market trades. Polluters from 55 developed nations must buy credits or invest in projects that will reduce emissions or pursue a combination of socially responsible activities such as trading credits with a partner from a developing country. Clean projects such as renewable energy and forestation in designated areas, can generate additional credits. From virtually nothing, a new commodities market sparked by the Protocol created trading platforms that could grow to an estimated hundreds of billions of dollars. Firms in gross polluting countries such as Japan have been buying credits even before the Protocol went into effect. Activity has grown in anticipation of 2008 and is expected to grow throughout 2012, the treaty’s commitment period.
Macro Forces
The most significant forces that influenced the carbon trading market were political and economical. Internationally, different countries polluted at significantly different levels, and some guidelines created a feeling of discrimination. Annex B countries included developed nations including 15 EU states, US, Canada, Hungary, Japan and others. Those developed countries were mandated to reduce emissions to specific targets (See Table 1).
Table 1
Countries included in Annex B to the Kyoto Protocol and their emissions targets
Country Target (1990** - 2008/2012)
EU-15*, Bulgaria, Czech Republic, Estonia, Latvia,Liechtenstein, Lithuania, Monaco, Romania,Slovakia,Slovenia, Switzerland -8%
US*** -7%
Canada, Hungary, Japan, Poland -6%
Croatia -5%
New Zealand, Russian Federation, Ukraine 0
Norway +1%
Australia +8%
Iceland +10%
(United Nations Framework Convention on Climate Change)
Policy tensions became an issue when the President of the United States refused to sign the Protocol. He stated that it would impact the U.S. economy negatively. In an article release two days after Russia signed, White house officials including James Connaughton, chairman of the White House Council on Environmental Quality defended Bush’s position in terms of protecting the $400 billion and 5 million jobs that the Kyoto Protocol would cost the U.S. (Heilprin , 2004). President Bush also complained that the Protocol was not fair. Since smaller countries were relieved from its impacts, Bush argued that the brunt of responsibility fell on developed countries.
In terms of the economic impact, business had every right to claim that the Kyoto Protocol was unfair. No matter what, it would raise prices and impact the bottom line. But, as consumerism shifted towards a more socially responsible stance in many industries, for example increased demand for clean hybrid automobiles and renewable energies, U.S. firms have joined the efforts and have volunteered to reduce emissions. The argument was that it helped stakeholders, and in fact stockholders have a new metric (carbon credits) from which to analyze firms. In the short run, there is no doubt that the impact of the Kyoto Protocol would raise the costs of doing business for several industries, including many politically charged ones such as steel and aluminum as well as the majority of manufacturing and energy production.
With energy prices reeling from an all time high in 2004, political and economic forces from the Kyoto Protocol would raise the world’s costs of doing business starting in 2005. The U.S. policy against the Protocol has left firms to pursue carbon trading on their own, or fall behind other developed countries like Japan.
Policy
Two extreme views toward the Kyoto Protocol (KP) emerged during 2004: one of support and one of skepticism and resistance. Having invested millions into projects geared towards buying credits or funding projects in developing countries, Japan was one of the highest polluting developed countries that took a pro-KP stance into 2005. But the U.S. held steady to economical reasoning and firmly believed that the KP would hurt. Other developed countries including many European members, admitted that there would be economic impact, but moved forward with projects under KP guidelines.
United States
The leading opponent to the Kyoto Protocol emphasized negative economic impact, while scientists and environmentalists got caught up in another argument. Most agreed that the impact would significantly raise the costs of doing business, so politicians successfully shifted debates towards the causes of global warming. Although scientists and environmentalists disagreed on the evidence that pollution caused global warming, the policy effectively steered the argument towards science and away from economics.
As the largest polluter in the world (36% of global emissions), there’s no doubt the impact of the Kyoto Protocol would hit the U.S. quite hard. Environmentalists pointed the finger at bad science and a poor social responsible political stance In light of the scientific debate, a fiscal policy could be blamed for the holdout policies. Politicians have focused on the potential rise in the costs of business and jobs. Still recovering from terrorist attacks and having experienced an expensive oil war financed by a tremendous deficit, most analysts agreed that the Kyoto Protocol would simply hurt the American economy.
Japan
Japan was one of the leading polluters on the list of Kyoto’s developed nations. The country supported ratification and invested into carbon trading activity faster than any other country. As a first-mover in carbon credits, Japan already amassed billions in carbon resources. Most of Japan’s large multinationals aligned with financial and governmental institutions to create intermediaries that had already purchased large quantities of carbon credits. The organizations had cut many deals from other markets, key players and exchanges. In addition, entities were already pooling and setting aside cash to fund future carbon trading activities. Japan’s policy seemed quite practical, with a common goal of meeting the Kyoto Protocol with a vision that aligned stakeholders from all sectors of society.
And Japan wanted to take polluting a step further. The government hoped to get consumers involved. The country’s Environment Ministry called for a plan that added customers to the carbon trading value chain. A proposed policy included new “carbon taxes.” Additional costs passed to consumers were proposed on fossil fuels, energy and electricity. For example, an oil tax added to the pump price for gasoline, or an additional tax on utilities. The rise in monthly expenses for a typical Japanese household was estimated at $30 at 100 yen per U.S. dollar (Japan Times, November 11, 2004).
Japan, home to some of the world’s largest manufacturing and polluting industries acted fast to meet Kyoto Protocol requirements. And by proposing to get consumers involved, Japan’s policy making generated a new tactic that brought the end-user into the carbon trading value chain. The pro-KP stance suggested that pollution was everyone’s problem, not just business.
Carbon Trading Industry
The goal of the carbon trading industry is to reduce global warming by providing the right to buy, sell and trade pollution. Exchanges allow companies in any country and industry to trade carbon and currency. Direct deals are another way to conduct business between organizations to generate carbon reductions. The industry allows global cooperation.
Credit trading grew around the world in 2004. Even the U.S. traded credits along with coalitions of Asian governments and Europeans. The Japanese were first-movers, as several large firms pooled millions in investment dollars to manage funds that would buy credits from Community Development Mechanism (CDM) partners.
Internal trading was also been instituted by large multinational players with multiple business units in different countries. BP Amoco announced voluntary goals to cutback carbon dioxide emissions; it setup a program that required business units to trade greenhouse gas levels in-house (Packard and Reinhardt, 2000).
Markets
The market for carbon credits was estimated at $200 million at the end of 2004, and projected to grow to $10 billion by 2007 by energy consultant, Point Carbon (Carr and Coulter, November 8, 2004). The EU has announced allowances over 2 billion tons worth 20 billion euros for 2005 (Ibid). The price per ton for the right to pollute carbon ranged from $1 in the U.S. to $11 in Europe. Growth reported by an emissions broker in London was reported at 140,000 credits in August, 1 million in September and 1.7 million tons in October (Ibid). In the United States, trading grew from 400,000 in September to October to over 1.7 million credits while the price jumped over 70% to $1.72 per ton (Carr and Coulter, 2004; Gibson, 2004).
“We are putting a price on pollution,” said Richard Sandor,
creator of U.S. Treasury futures at the Chicago Board of Trade
(Appelbaum, November 2004).
Even though the U.S. did not ratify the Protocol, volunteers lined up to join the Chicago Climate Exchange (CCX). Founded by financial futures pioneer, Sandor, the trading platform attracted 70 members including Baxter Healthcare, Ford, IBM, and the city of Chicago. The members have pledged to reduce carbon by 1% per year through 2006, and the exchange put a lower price on the U.S. version of the new global commodity. In its first nine months of operations, members exchanged over one million tons of carbon valued at several million dollars by the close of 2005 (Appelbaum, November 2004).
The CCX is viewed as a pilot program and its early success showed that members drove volume even before the Kyoto Protocol went into effect. The activity suggested that the U.S. market had acted on its own, and firms have adopted social responsibility voluntarily. It was not clear if the actions were driven by anticipation of U.S. ratification or environmental concerns.
By 2005, Sandor had looked to the EU to expand his platform and negotiated with London’s International Petroleum Exchange. He attracted E.CON, Royal Dutch/Shell Group, Britain’s largest steelmaker and other interested firms (Carr and Coulter, November 8, 2004).
Key Players
Several industries have been affected by the Kyoto Protocol. With interconnected global supply chains, the cost of doing business has increased across a variety of businesses. Japan’s proposed policy that added the customer to the carbon value chain implied that the effects of the Protocol would probably reach further than expected. Some of the key players that have conducted carbon trading by the end of 2004 have been profiled here.
Buyers.
• Japan, Netherlands, Europe, U.S. and the World Bank
Sellers.
• Latin America: Argentina, Brazil, Chile, Colombia, Panama, Costa Rica and Peru
• Eastern Europe: Austria, Romania
• Asia: Phillipines, China (world’s 2nd largest polluter), India
Major Industries.
• Automakers: GM, Ford
• Energy companies: Exxon-Mobil, BP, Shell, Matsushita Electric Industrial Co.
• Manufacturers: Factories that created emissions i.e. steelmakers
• Financial: The World Bank, Mitsui & Co.
Exchanges and futures markets have also created a new group of carbon credit management opportunities. Brokers, commodities traders, equity managers, and bankers were some of the human resources thrown at defending the Protocol. For example, some entities have avoided use of the carbon exchanges and have traded carbon credits directly: firms in developed countries have privately bought carbon credits from groups of projects in developing countries.
Brokers and Consultants.
For conducting deals between a CDM and multinational, several consultants and brokers have conducted large transactions in the tune of millions of credits. Cantor Fitzgerald, L.P.’s subsidiary, CO2e.com exemplified one such brokerage:
CO2e.com has offices in London, Toronto, Tokyo and the USA, together with local representation in many other countries through agency agreements. The company brokers greenhouse gas emissions allowances and credits globally, plus many other environmental commodities and instruments in different jurisdictions across the world. CO2e.com has brokered tens of millions of tonnes greenhouse gas offsets and has become a globally recognized market leader (Kendrik and Messina).
Opportunities
There were two areas of opportunities in the growing billion dollar business of carbon trading: financial trading opportunities and projects that reduce or eliminate carbon in developing countries. Carbon trading exchanges have been discussed earlier. For this section, strategies for foreign direct investment (FDI) was the focus. Under CDM guidelines, developed countries invested billions of dollars into projects in the developing world. Most were energy projects in Latin America that replaced existing power plants with cleaner alternatives.
Clean Development Mechanism
CDM has been the largest opportunity for key players that want to get involved in projects that satisfy the Kyoto Protocol. The requirements call for sustainable projects in developing countries. For example, sugar cane waste fired energy plants in Brazil and reforestation projects more commonly know as “sinks” in South East Asia. Forests or sinks were the only projects that cleaned the environment. Producers that have received CDM status had little problem selling their credits to international buyers from around the developed world.
CDM proposals grew fast in 2004. According to Canada’s CDM & JIO Office, there were several opportunities created by the Kyoto Protocol (Canada’s Clean Development Mechanism & Joint Implementation Office, 2004). CDM project guidelines were reported as follows:
• Increasing energy efficiency
• Renewable energy
• Electricity production
• Oil and gas production
• Alternative fuels and gases
• Waste management
• Afforestation and reforestation (Canada’s Clean Development Mechanism & Joint Implementation Office, 2004)
The Asian Development Bank described the following criteria for CDM projects in Asia:
A project should meet three essential requirements to qualify as a CDM project: reduce emissions below the level in the absence of the project, be located in a developing member country (DMC) of the Asian Development Bank (ADB), and provide benefits that contribute to sustainable development in the DMC (Asian Development Bank, 2004).
In Latin America, some examples of planned activity and projects underway included:
• Peru: 19 projects with investments planned at $935 million dollars including the replacement of coal and diesel fired power plants with hydroelectric
• Columbia: 15 projects including a wind energy plant
• Brazil: thermoelectricity powered on plant carbon from reforestation
• Mexico: 4 hydroelectric dams (Lasso, 2004)
Innovation
Some manufacturers responded to the Kyoto Protocol with new technology. Toyota for example, researched and developed Hybrid Electric Vehicle technology pushed by the first KP meeting. The R&D successfully became a consumer product called the Prius automobile. Toyota utilized socially responsibility and technology in designing the Prius that produced 90% less emissions than typical cars. It won “Car of the Year” in both America and Europe, and the prestigious Economist award:
The Economist recognized the following leader for launching new markets and revolutionising the way business is done:
Energy and the Environment, Prius hybrid automobile: Takeshi Uchiyamada, Director, Toyota Motor Corporation. Acting under a Toyota directive to create the lowest emissions vehicle possible, Uchiyamada in 1994 became leader of a project dubbed G21, for Global 21st Century. Toyota gave Uchiyamada a free hand in the design of a new automobile, unbound by traditional restraints such as component sharing, marketing considerations and project hierarchy. Uchiyamada's team initially developed an automobile that employed both an internal combustion engine and electric motor, working alternately or together, engaged with a clutch. Later, some 80 research engineers (working to meet a deadline of the 1997 Kyoto Conference on global warming) reviewed multiple engine designs to develop what eventually would become a full-production vehicle. By 2002, Prius sales had topped 100,000 units worldwide (Evenson, September 14, 2004).
Future
From energy producers, to manufacturers, and even consumers in Japan, carbon trading will impact value chains all over the world. The economic jolt will increase FDI flows. With the costs of doing business projected to rise 10-30%, the Kyoto Protocol could be a contributing factor that increases global prices starting in 2005. In the U.S. most operations are linked to international suppliers and interdependence could also create an upturn in costs. Combined with the currency crisis and sensitive policy issues, the United States of America may be poised for inflation and/or a recession at the same time the Kyoto Protocol goes into effect.
On the other hand, the developing world and the environment are enjoying the attention. CDMs will create jobs and economic growth; they will build clean projects that can provide developing countries with a new model for society. Sustainable living combined with high technology might become a reality in Latin American and South East Asia. Electronic carbon trading exchanges are using this new model to add social responsibility to global value chains.
With the fossil fuel model for industrialization waning, the Kyoto Protocol might come to define the physical turning point from the industrial age to the information age. As oil and other banked energies run critically low within a century, the world’s power might in fact become de-centralized. At the same time knowledge is being networked virtually. This new world could run on information and not oil. If knowledge becomes a natural resource and continues to flow freely into developing nations, global villages may become a reality.
The Kyoto Protocol is hurting the world’s developed nations, but it’s already stimulating the developing world. More importantly, the globalization of socially responsible values in the private and public sectors, and across multiple industries and country lines, might be argued as the largest macro force that has ever pushed Earth’s environment towards sustainability.
References
Appelbaum, A. (2004, November). What’s your carbon worth? Ask Richard Sandor [Electronic version]. Fast Company, Issue 88, November, Page 38.
Clean development mechanism facility (2004). Retrieved November 9, 2004 from Asian Development Bank’s Web site: http://www.adb.org/Documents/Brochures/Clean_Devt_Mech_Facility/default.asp
Carr, M. and Coulter, R. (2004, November 8). E.ON wins, hydro loses as EU prepares pollution limit. Bloomberg.com. Retrieved November 8, 2004, from http://quote.bloomberg.com/apps/news?pid=nifea&&sid=aJZ1u3ANcKA4
Editorial (2004, November 11). Rationale for a carbon tax Japan Times via LexisNexis Retrieved online on November 11, 2004.
Evenson, L. (2004). The Economist celebrates new routes to innovation at the 3rd annual Innovation Awards and Summit in San Francisco. The Economist, September 2004. Retrieved November 9, 2004, from Business Wire, Factiva,
http://0-global.factiva.com.opac.sfsu.edu/en/eSrch/ss_hl.asp
Gibson, K. (2004, November 17). Chicago climate exchange bears fruit in Europe. Retrieved November 18, 2004, from MarketWatch.com, Inc.
Heilprin J., (2004, November 13). Bush stands by rejection of Kyoto treaty. Washington Dateline. Retrieved November 14, 2004, from Associated Press, http://abcnews.go.com/Politics/wireStory?id=232031&CMP=OTC-RSSFeeds0312
Kendrick, T. and Messina, D. CO2e combines Kyoto Protocol and European Union Emissions Trading Provision for another landmark transaction to reduce greenhouse gas emissions. Retrieved online.
Lasso, M. A. (2004, November 24). Is Latin American really a carbon market pioneer? Inter Press Service News Agency, Retrieved November 24, 2004, from http://www.ipsnews.net/new_nota.asp?idnews=26417
Packard, K. O. and Reinhardt, F. (2000, July 1). What every executive needs to know about global warming. Harvard Business Review.
Canada’s Clean Development Mechanism & Joint Implementation Office, Question and Answers (2004). What type of projects qualify under the CDM and JI? Retrieved November 9, 2004 from http://www.dfait-maeci.gc.ca/cdm-ji/q_a-en.asp
United Nations Framework Convention on Climate Change: Essential Background, Kyoto Protocol. (n.d.) Retrieved December 15, 2004, from http://unfccc.int/essential_background/kyoto_protocol/items/3145.php
John Acheson
San Francisco State University
Abstract
Throughout civilization, it has been free to pollute greenhouse gases into the atmosphere, but on February 16, 2005, organizations agreed to start paying to have their “garbage taken out.” The Kyoto Protocol called for 55 industrialized nations of the 127 that ratified the agreement. Starting in 2008 through 2012, most developed countries have agreed to reduce emissions levels over 5% below global levels in 1990. Carbon Dioxide has been targeted as the leading cause of global warming and has grown over 150% in the past 200 years. The United States has released more greenhouse gases than any other country in the world, but decided not to ratify the Kyoto Protocol as early as 2001. With the U.S. uninterested, the instrument, originally drawn up in 1997, did not have enough polluters signed on. The plan stalled, until Russia moved to sign on November 4, 2004. On February 16, 2004, eight years after the historic meeting in Kyoto, Japan and 90 days following Russia’s President Vladimir Putin’s historical signing, the agreement will come into full force. For the first time in the history, businesses have initiated investment into a new market for “carbon credits” that give industrialized countries the right to pollute. This paper examined the carbon trading industry at its infancy: a critical time of growth from start-up to mainstream. With the Protocol expected to jump start activity in early 2005, there was already a tremendous growth of carbon trading around the world. The case writer focused on the key players and global opportunities, as well as some of the broader mechanisms for implementation.
Introduction
“For strategic reasons, some companies have chosen to be quiet about their efforts
under the Kyoto Protocol’s more stringent emissions regulations
(Packard and Reinhardt, 2000).”
Carbon credits allow companies to pollute. Firms who pollute can buy, sell and trade for the right to pollute in a manner similar to stock market trades. Polluters from 55 developed nations must buy credits or invest in projects that will reduce emissions or pursue a combination of socially responsible activities such as trading credits with a partner from a developing country. Clean projects such as renewable energy and forestation in designated areas, can generate additional credits. From virtually nothing, a new commodities market sparked by the Protocol created trading platforms that could grow to an estimated hundreds of billions of dollars. Firms in gross polluting countries such as Japan have been buying credits even before the Protocol went into effect. Activity has grown in anticipation of 2008 and is expected to grow throughout 2012, the treaty’s commitment period.
Macro Forces
The most significant forces that influenced the carbon trading market were political and economical. Internationally, different countries polluted at significantly different levels, and some guidelines created a feeling of discrimination. Annex B countries included developed nations including 15 EU states, US, Canada, Hungary, Japan and others. Those developed countries were mandated to reduce emissions to specific targets (See Table 1).
Table 1
Countries included in Annex B to the Kyoto Protocol and their emissions targets
Country Target (1990** - 2008/2012)
EU-15*, Bulgaria, Czech Republic, Estonia, Latvia,Liechtenstein, Lithuania, Monaco, Romania,Slovakia,Slovenia, Switzerland -8%
US*** -7%
Canada, Hungary, Japan, Poland -6%
Croatia -5%
New Zealand, Russian Federation, Ukraine 0
Norway +1%
Australia +8%
Iceland +10%
(United Nations Framework Convention on Climate Change)
Policy tensions became an issue when the President of the United States refused to sign the Protocol. He stated that it would impact the U.S. economy negatively. In an article release two days after Russia signed, White house officials including James Connaughton, chairman of the White House Council on Environmental Quality defended Bush’s position in terms of protecting the $400 billion and 5 million jobs that the Kyoto Protocol would cost the U.S. (Heilprin , 2004). President Bush also complained that the Protocol was not fair. Since smaller countries were relieved from its impacts, Bush argued that the brunt of responsibility fell on developed countries.
In terms of the economic impact, business had every right to claim that the Kyoto Protocol was unfair. No matter what, it would raise prices and impact the bottom line. But, as consumerism shifted towards a more socially responsible stance in many industries, for example increased demand for clean hybrid automobiles and renewable energies, U.S. firms have joined the efforts and have volunteered to reduce emissions. The argument was that it helped stakeholders, and in fact stockholders have a new metric (carbon credits) from which to analyze firms. In the short run, there is no doubt that the impact of the Kyoto Protocol would raise the costs of doing business for several industries, including many politically charged ones such as steel and aluminum as well as the majority of manufacturing and energy production.
With energy prices reeling from an all time high in 2004, political and economic forces from the Kyoto Protocol would raise the world’s costs of doing business starting in 2005. The U.S. policy against the Protocol has left firms to pursue carbon trading on their own, or fall behind other developed countries like Japan.
Policy
Two extreme views toward the Kyoto Protocol (KP) emerged during 2004: one of support and one of skepticism and resistance. Having invested millions into projects geared towards buying credits or funding projects in developing countries, Japan was one of the highest polluting developed countries that took a pro-KP stance into 2005. But the U.S. held steady to economical reasoning and firmly believed that the KP would hurt. Other developed countries including many European members, admitted that there would be economic impact, but moved forward with projects under KP guidelines.
United States
The leading opponent to the Kyoto Protocol emphasized negative economic impact, while scientists and environmentalists got caught up in another argument. Most agreed that the impact would significantly raise the costs of doing business, so politicians successfully shifted debates towards the causes of global warming. Although scientists and environmentalists disagreed on the evidence that pollution caused global warming, the policy effectively steered the argument towards science and away from economics.
As the largest polluter in the world (36% of global emissions), there’s no doubt the impact of the Kyoto Protocol would hit the U.S. quite hard. Environmentalists pointed the finger at bad science and a poor social responsible political stance In light of the scientific debate, a fiscal policy could be blamed for the holdout policies. Politicians have focused on the potential rise in the costs of business and jobs. Still recovering from terrorist attacks and having experienced an expensive oil war financed by a tremendous deficit, most analysts agreed that the Kyoto Protocol would simply hurt the American economy.
Japan
Japan was one of the leading polluters on the list of Kyoto’s developed nations. The country supported ratification and invested into carbon trading activity faster than any other country. As a first-mover in carbon credits, Japan already amassed billions in carbon resources. Most of Japan’s large multinationals aligned with financial and governmental institutions to create intermediaries that had already purchased large quantities of carbon credits. The organizations had cut many deals from other markets, key players and exchanges. In addition, entities were already pooling and setting aside cash to fund future carbon trading activities. Japan’s policy seemed quite practical, with a common goal of meeting the Kyoto Protocol with a vision that aligned stakeholders from all sectors of society.
And Japan wanted to take polluting a step further. The government hoped to get consumers involved. The country’s Environment Ministry called for a plan that added customers to the carbon trading value chain. A proposed policy included new “carbon taxes.” Additional costs passed to consumers were proposed on fossil fuels, energy and electricity. For example, an oil tax added to the pump price for gasoline, or an additional tax on utilities. The rise in monthly expenses for a typical Japanese household was estimated at $30 at 100 yen per U.S. dollar (Japan Times, November 11, 2004).
Japan, home to some of the world’s largest manufacturing and polluting industries acted fast to meet Kyoto Protocol requirements. And by proposing to get consumers involved, Japan’s policy making generated a new tactic that brought the end-user into the carbon trading value chain. The pro-KP stance suggested that pollution was everyone’s problem, not just business.
Carbon Trading Industry
The goal of the carbon trading industry is to reduce global warming by providing the right to buy, sell and trade pollution. Exchanges allow companies in any country and industry to trade carbon and currency. Direct deals are another way to conduct business between organizations to generate carbon reductions. The industry allows global cooperation.
Credit trading grew around the world in 2004. Even the U.S. traded credits along with coalitions of Asian governments and Europeans. The Japanese were first-movers, as several large firms pooled millions in investment dollars to manage funds that would buy credits from Community Development Mechanism (CDM) partners.
Internal trading was also been instituted by large multinational players with multiple business units in different countries. BP Amoco announced voluntary goals to cutback carbon dioxide emissions; it setup a program that required business units to trade greenhouse gas levels in-house (Packard and Reinhardt, 2000).
Markets
The market for carbon credits was estimated at $200 million at the end of 2004, and projected to grow to $10 billion by 2007 by energy consultant, Point Carbon (Carr and Coulter, November 8, 2004). The EU has announced allowances over 2 billion tons worth 20 billion euros for 2005 (Ibid). The price per ton for the right to pollute carbon ranged from $1 in the U.S. to $11 in Europe. Growth reported by an emissions broker in London was reported at 140,000 credits in August, 1 million in September and 1.7 million tons in October (Ibid). In the United States, trading grew from 400,000 in September to October to over 1.7 million credits while the price jumped over 70% to $1.72 per ton (Carr and Coulter, 2004; Gibson, 2004).
“We are putting a price on pollution,” said Richard Sandor,
creator of U.S. Treasury futures at the Chicago Board of Trade
(Appelbaum, November 2004).
Even though the U.S. did not ratify the Protocol, volunteers lined up to join the Chicago Climate Exchange (CCX). Founded by financial futures pioneer, Sandor, the trading platform attracted 70 members including Baxter Healthcare, Ford, IBM, and the city of Chicago. The members have pledged to reduce carbon by 1% per year through 2006, and the exchange put a lower price on the U.S. version of the new global commodity. In its first nine months of operations, members exchanged over one million tons of carbon valued at several million dollars by the close of 2005 (Appelbaum, November 2004).
The CCX is viewed as a pilot program and its early success showed that members drove volume even before the Kyoto Protocol went into effect. The activity suggested that the U.S. market had acted on its own, and firms have adopted social responsibility voluntarily. It was not clear if the actions were driven by anticipation of U.S. ratification or environmental concerns.
By 2005, Sandor had looked to the EU to expand his platform and negotiated with London’s International Petroleum Exchange. He attracted E.CON, Royal Dutch/Shell Group, Britain’s largest steelmaker and other interested firms (Carr and Coulter, November 8, 2004).
Key Players
Several industries have been affected by the Kyoto Protocol. With interconnected global supply chains, the cost of doing business has increased across a variety of businesses. Japan’s proposed policy that added the customer to the carbon value chain implied that the effects of the Protocol would probably reach further than expected. Some of the key players that have conducted carbon trading by the end of 2004 have been profiled here.
Buyers.
• Japan, Netherlands, Europe, U.S. and the World Bank
Sellers.
• Latin America: Argentina, Brazil, Chile, Colombia, Panama, Costa Rica and Peru
• Eastern Europe: Austria, Romania
• Asia: Phillipines, China (world’s 2nd largest polluter), India
Major Industries.
• Automakers: GM, Ford
• Energy companies: Exxon-Mobil, BP, Shell, Matsushita Electric Industrial Co.
• Manufacturers: Factories that created emissions i.e. steelmakers
• Financial: The World Bank, Mitsui & Co.
Exchanges and futures markets have also created a new group of carbon credit management opportunities. Brokers, commodities traders, equity managers, and bankers were some of the human resources thrown at defending the Protocol. For example, some entities have avoided use of the carbon exchanges and have traded carbon credits directly: firms in developed countries have privately bought carbon credits from groups of projects in developing countries.
Brokers and Consultants.
For conducting deals between a CDM and multinational, several consultants and brokers have conducted large transactions in the tune of millions of credits. Cantor Fitzgerald, L.P.’s subsidiary, CO2e.com exemplified one such brokerage:
CO2e.com has offices in London, Toronto, Tokyo and the USA, together with local representation in many other countries through agency agreements. The company brokers greenhouse gas emissions allowances and credits globally, plus many other environmental commodities and instruments in different jurisdictions across the world. CO2e.com has brokered tens of millions of tonnes greenhouse gas offsets and has become a globally recognized market leader (Kendrik and Messina).
Opportunities
There were two areas of opportunities in the growing billion dollar business of carbon trading: financial trading opportunities and projects that reduce or eliminate carbon in developing countries. Carbon trading exchanges have been discussed earlier. For this section, strategies for foreign direct investment (FDI) was the focus. Under CDM guidelines, developed countries invested billions of dollars into projects in the developing world. Most were energy projects in Latin America that replaced existing power plants with cleaner alternatives.
Clean Development Mechanism
CDM has been the largest opportunity for key players that want to get involved in projects that satisfy the Kyoto Protocol. The requirements call for sustainable projects in developing countries. For example, sugar cane waste fired energy plants in Brazil and reforestation projects more commonly know as “sinks” in South East Asia. Forests or sinks were the only projects that cleaned the environment. Producers that have received CDM status had little problem selling their credits to international buyers from around the developed world.
CDM proposals grew fast in 2004. According to Canada’s CDM & JIO Office, there were several opportunities created by the Kyoto Protocol (Canada’s Clean Development Mechanism & Joint Implementation Office, 2004). CDM project guidelines were reported as follows:
• Increasing energy efficiency
• Renewable energy
• Electricity production
• Oil and gas production
• Alternative fuels and gases
• Waste management
• Afforestation and reforestation (Canada’s Clean Development Mechanism & Joint Implementation Office, 2004)
The Asian Development Bank described the following criteria for CDM projects in Asia:
A project should meet three essential requirements to qualify as a CDM project: reduce emissions below the level in the absence of the project, be located in a developing member country (DMC) of the Asian Development Bank (ADB), and provide benefits that contribute to sustainable development in the DMC (Asian Development Bank, 2004).
In Latin America, some examples of planned activity and projects underway included:
• Peru: 19 projects with investments planned at $935 million dollars including the replacement of coal and diesel fired power plants with hydroelectric
• Columbia: 15 projects including a wind energy plant
• Brazil: thermoelectricity powered on plant carbon from reforestation
• Mexico: 4 hydroelectric dams (Lasso, 2004)
Innovation
Some manufacturers responded to the Kyoto Protocol with new technology. Toyota for example, researched and developed Hybrid Electric Vehicle technology pushed by the first KP meeting. The R&D successfully became a consumer product called the Prius automobile. Toyota utilized socially responsibility and technology in designing the Prius that produced 90% less emissions than typical cars. It won “Car of the Year” in both America and Europe, and the prestigious Economist award:
The Economist recognized the following leader for launching new markets and revolutionising the way business is done:
Energy and the Environment, Prius hybrid automobile: Takeshi Uchiyamada, Director, Toyota Motor Corporation. Acting under a Toyota directive to create the lowest emissions vehicle possible, Uchiyamada in 1994 became leader of a project dubbed G21, for Global 21st Century. Toyota gave Uchiyamada a free hand in the design of a new automobile, unbound by traditional restraints such as component sharing, marketing considerations and project hierarchy. Uchiyamada's team initially developed an automobile that employed both an internal combustion engine and electric motor, working alternately or together, engaged with a clutch. Later, some 80 research engineers (working to meet a deadline of the 1997 Kyoto Conference on global warming) reviewed multiple engine designs to develop what eventually would become a full-production vehicle. By 2002, Prius sales had topped 100,000 units worldwide (Evenson, September 14, 2004).
Future
From energy producers, to manufacturers, and even consumers in Japan, carbon trading will impact value chains all over the world. The economic jolt will increase FDI flows. With the costs of doing business projected to rise 10-30%, the Kyoto Protocol could be a contributing factor that increases global prices starting in 2005. In the U.S. most operations are linked to international suppliers and interdependence could also create an upturn in costs. Combined with the currency crisis and sensitive policy issues, the United States of America may be poised for inflation and/or a recession at the same time the Kyoto Protocol goes into effect.
On the other hand, the developing world and the environment are enjoying the attention. CDMs will create jobs and economic growth; they will build clean projects that can provide developing countries with a new model for society. Sustainable living combined with high technology might become a reality in Latin American and South East Asia. Electronic carbon trading exchanges are using this new model to add social responsibility to global value chains.
With the fossil fuel model for industrialization waning, the Kyoto Protocol might come to define the physical turning point from the industrial age to the information age. As oil and other banked energies run critically low within a century, the world’s power might in fact become de-centralized. At the same time knowledge is being networked virtually. This new world could run on information and not oil. If knowledge becomes a natural resource and continues to flow freely into developing nations, global villages may become a reality.
The Kyoto Protocol is hurting the world’s developed nations, but it’s already stimulating the developing world. More importantly, the globalization of socially responsible values in the private and public sectors, and across multiple industries and country lines, might be argued as the largest macro force that has ever pushed Earth’s environment towards sustainability.
References
Appelbaum, A. (2004, November). What’s your carbon worth? Ask Richard Sandor [Electronic version]. Fast Company, Issue 88, November, Page 38.
Clean development mechanism facility (2004). Retrieved November 9, 2004 from Asian Development Bank’s Web site: http://www.adb.org/Documents/Brochures/Clean_Devt_Mech_Facility/default.asp
Carr, M. and Coulter, R. (2004, November 8). E.ON wins, hydro loses as EU prepares pollution limit. Bloomberg.com. Retrieved November 8, 2004, from http://quote.bloomberg.com/apps/news?pid=nifea&&sid=aJZ1u3ANcKA4
Editorial (2004, November 11). Rationale for a carbon tax Japan Times via LexisNexis Retrieved online on November 11, 2004.
Evenson, L. (2004). The Economist celebrates new routes to innovation at the 3rd annual Innovation Awards and Summit in San Francisco. The Economist, September 2004. Retrieved November 9, 2004, from Business Wire, Factiva,
http://0-global.factiva.com.opac.sfsu.edu/en/eSrch/ss_hl.asp
Gibson, K. (2004, November 17). Chicago climate exchange bears fruit in Europe. Retrieved November 18, 2004, from MarketWatch.com, Inc.
Heilprin J., (2004, November 13). Bush stands by rejection of Kyoto treaty. Washington Dateline. Retrieved November 14, 2004, from Associated Press, http://abcnews.go.com/Politics/wireStory?id=232031&CMP=OTC-RSSFeeds0312
Kendrick, T. and Messina, D. CO2e combines Kyoto Protocol and European Union Emissions Trading Provision for another landmark transaction to reduce greenhouse gas emissions. Retrieved online.
Lasso, M. A. (2004, November 24). Is Latin American really a carbon market pioneer? Inter Press Service News Agency, Retrieved November 24, 2004, from http://www.ipsnews.net/new_nota.asp?idnews=26417
Packard, K. O. and Reinhardt, F. (2000, July 1). What every executive needs to know about global warming. Harvard Business Review.
Canada’s Clean Development Mechanism & Joint Implementation Office, Question and Answers (2004). What type of projects qualify under the CDM and JI? Retrieved November 9, 2004 from http://www.dfait-maeci.gc.ca/cdm-ji/q_a-en.asp
United Nations Framework Convention on Climate Change: Essential Background, Kyoto Protocol. (n.d.) Retrieved December 15, 2004, from http://unfccc.int/essential_background/kyoto_protocol/items/3145.php
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