Tesla Motors: Beneficially Changing Our Climate?
Will Tesla change our climate for the better, or will climate change disrupt their supply chain first?
Tesla’s CEO and visionary, Elon Musk, has no problem thinking big. Out of this world big. Mars big. “Mr Musk has declared his ambition to die on the red planet, albeit not on impact.” [1] Back on Earth, his automotive company Tesla is also taking off with a 926.72% stock price increase over the past 5 years. [2] Wall Street has made a big bet on Tesla, but will it pay off?
Many investors and Tesla enthusiast are bullish on the future of the company. This hype has certainly been reflected in the stock price, but even Tesla may be humbled by supply chain challenges due to climate change. Every company should have concerns, and Tesla is no exception. Henderson states that there is broad consensus in the scientific community that global warming is being driven by increases in greenhouse gas emissions (GHGs). Implications of Earth’s climate warming are serious; they include rising water levels, changing weather patterns, increased incidences of extreme weather, pressure on water and food supply, political and security risks, human health risks, and an impact on wildlife and ecosystems. [3] Essentially these physical changes will affect every company and human being. Tesla relies on a global supply base as well as in-house manufacturing. Consider Tesla’s HQ and main manufacturing facilities located in the US southwest region. If we stay on our current climate change path, by the end of the century the southwest could see up to two additional months of extreme heat (>95°F) within the already warm region. [4] This has major implications on employee health, air conditioning cost, energy usage, water supply, and coastal water levels.
While the automotive industry will likely suffer challenges due to climate change, they are also a contributor to the problem and therefore have opportunities to mitigate the situation. Traditional gasoline-powered vehicles emit GHGs out the tailpipes when the car is in operation. Large GHG emissions also result from the vehicle production process itself. According to Hao, the lifecycle GHG emissions from vehicle production are 6.2 tons in the USA and 9.6 tons in China. [5] To reduce these lifecycle GHG emissions, manufacturing sites throughout the global industry, both OEMs and suppliers, would need to be updated to operate more efficiently and use cleaner sources of energy.
The automotive industry might pollute, but what does that have to do with Tesla? They only produce battery-powered vehicles. At least they are doing their part to help with climate change, right? Tesla is currently building the largest battery factory in the world, named the Gigafactory. According to Tesla’s 2014 press release, the factory will produce 85GWh of batteries per year by 2020 to support their electric vehicle and stationary storage markets. [6] They have even released all their patents to spur innovation in the field. For these reasons, many people hold the belief that Tesla is the most environmentally friendly automotive company.
As of 2015, a majority 66.3% of the world’s electricity is still produced using fossil fuels. [7] Tesla’s main market by revenue, the USA [8], is not much better. In 2015, the USA produced 65% of electricity with fossil fuels. [9] This means that the majority of Tesla car owners will simply be moving the GHG emissions from the tailpipe of their car to the smoke stack of their local fossil fuel burning utility company. Depending on where your electricity comes from, the fuel source, the efficiency of the plant/grid, and the MPG of your gas-powered alternate vehicle, you may very well emit fewer GHGs by driving your old gas-powered vehicle than a new battery-powered Tesla. Also, with Tesla’s new Gigafactory, what happens in 10 years when all these batteries no longer hold a charge and need to be disposed of?
These are issues that I would recommend Tesla be more transparent on. One of their competitors, Ford Motor Company, has published an annual sustainability report for the past 18 years. [10] I think Tesla could use a similar document to highlight what they are doing now and into the future. They could explicitly state their plans for their production facilities and their future sustainability approach.
On the surface, Tesla is the “green” choice, but if a consumer truly wants to emit less GHGs, is it better to purchase a Tesla or stick with their gas-powered vehicle? The Gigafactory will mass produce batteries like the world has never seen, does a sustainable disposal plan exists? Will Tesla be able to change our climate for the better through a gigantic battery factory, mass production of battery electric vehicles, stationary energy storage systems, and the release of their intellectual property to the world? Or will climate change shape and determine the future of Tesla? Either way, perhaps Mars will be an option by the time we find out. (797 words)
[1] Thornhill, J. (2017). Mars visionaries herald a new space age. FT.Com, Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1940693464?accountid=11311, accessed November 2017.
[2] Google Finance,https://finance.google.com/finance?q=NASDAQ:TSLA, accessed November 2017.
[3] Henderson, R.M., et al, Climate Change in 2017: Implications for Business (HBS No. 317-032).
[4] Risky Business Project, Risky Business: The Economic Risks of Climate Change in the United States (2014).
[5] Hao, H., Qiao, Q., Liu, Z., Zhao, F., & Chen, Y. (2017). Comparing the life cycle greenhouse gas emissions from vehicle production in china and the USA: Implications for targeting the reduction opportunities. Clean Technologies and Environmental Policy, 19(5), 1509-1522. doi:http://dx.doi.org.ezp-prod1.hul.harvard.edu/10.1007/s10098-016-1325-6.
[6] Tesla Motors Press Release, “Panasonic and Tesla Sign Agreement for the Gigafactory”
http://www.chemwinfo.com/private_folder/Uploadfile2014July/Panasonic_and_Tesla_Sign_Agreement_.pdf, accessed November 2017.
[7] Statista, “World electricity generation in 2015, by energy source”, https://www-statista-com.ezp-prod1.hul.harvard.edu/statistics/269811/world-electricity-production-by-energy-source/, accessed November 2017.
[8] Statista, “Tesla’s revenue from FY 2012 to FY 2016, by region (in millions U.S. dollars)
”, https://www-statista-com.ezp-prod1.hul.harvard.edu/statistics/314759/revenue-of-tesla-by-region/, accessed November 2017.
[9] Statista, “Distribution of electricity generation in the U.S. from 1990 to 2015, by fuel type (in million metric tons)”, https://www-statista-com.ezp-prod1.hul.harvard.edu/statistics/489226/electricity-generation-share-in-the-us-by-fuel/, accessed November 2017.
[10] Ford, “Sustainability Report 2016/17”, https://corporate.ford.com/microsites/sustainability-report-2016-17/index.html, accessed November 2017.
[11] Photo credit, Google Finance, https://finance.google.com/finance?q=NASDAQ:TSLA, accessed November 2o17.
It is true that there is a significant issue in whether electric vehicle (EV) is truly “green”, in that it does not solve the problem of fossil-fuel usage but rather shifts it to centralized power plants. However, studies have shown that compared to diesel cars, EVs still generate less GHG no matter how dirty the national grid looks like. In the EU, it is estimated that an EV is expected to produce 55% less CO2 compared to an equivalent diesel-powered vehicle. The study further shows that even in countries that still relies heavily on non-renewable electricity production such as Poland, EVs would produce 25% less CO2. Although EVs does not provide a 100% reduction in GHG generation, it is a step forward towards a better future, and serves as an interim solution before the world reaches fully renewable electricity generation.
Source:
https://electrek.co/2017/11/01/electric-cars-dirty-electricicty-coal-emission-cleaner-study/
This is a great addition to the article Nicholas. I think Tesla leans on public perception of the environmental impact of EV versus gas and diesel but it is comforting to have data to support this. But this quick fact base and one of the comments made in the case make me question why Tesla has not published more materials to education on the impact as well as its own sustainability practices beyond its actual product.
Thanks Scott. I definitely do not have enough data about Tesla itself, but all of Elon Musk’s ventures (Tesla, Space X, Solar City, Mars Mission) seem to have one singular vision – long term existence of the human civilization. I do agree that there is a need for Tesla to be the thought leader and ultra transparent of how they are working towards environmental sustainability.
I have been following this blog over the past few years and it articulates Elon Musk’s mission in simple, layman’s language:
https://waitbutwhy.com/2015/06/how-tesla-will-change-your-life.html