Proponents of efforts to curb carbon emissions in the United States are using a new tactic when it comes to the battle for hearts and minds in the war on climate change.
Instead of talking about melting ice caps and dying polar bears in the far-away Arctic, they're now talking about effects like asthma and severe weather closer to home.
They're also talking about practical economic matters, like costs to the automotive industry.
Don't just consider the cost of possible increases in electricity rates, they're saying, but take into account what it costs when a major auto plant is shut by a power outage caused by severe weather.
“An hour of downtime means more to these plants than a year's worth of electricity rate increases,” said Jim Doyle, president of the group Business Forward.
Business Forward, based in Washington, D.C., “works with local trade groups and business associations around the country to make it easier for their professional networks to advise government officials,” according to its website.
The organization partners with economic development groups, clean-energy proponents and chambers of commerce around the country, including NorTech in Cleveland.
Last Wednesday, June 4, Business Forward released the results of a study it conducted comparing the costs of an increase in electricity costs with the cost of an auto plant shutdown.
Here's the math:
Business Forward worked with several economists that follow the automotive industry, including Debra Menk of the Center for Automotive Research in Ann Arbor, Mich. They calculated that electricity makes up about $105 of the cost of the average car — including $60 worth of electricity used in automotive assembly and $45 used to make the parts for each vehicle.
The EPA predicts its new carbon regulations will increase the cost of electricity by about 6.2% between now and 2020, effectively adding about $7 to the cost of each new vehicle, Business Forward concludes.
That's nothing to sneeze at; even with a typical new vehicle costing about $30,000, automakers would still love to cut $7 from the cost of each vehicle they make, parts suppliers say.
But it's small potatoes compared to the cost of a single power outage, Doyle said.
The cost of a single power outage can easily be much greater, the group's research found.
“It's about $1.25 million for every hour that an assembly plant is out of service,” Menk said.
So, 300,000 cars a year, times $7 per car, comes out to about $2.1 million in additional costs from a rise in electric rates, while a two-hour power outage would cost the same auto plant about $2.5 million in downtime. Even if rates go up by twice what the EPA predicts, a single four-hour power outage still would be more costly, Business Forward reckons. (It takes only a single hour if the electric costs of the vehicle's assembly plants are considered alone, but more if the parts are included.)
They're real, and expensive
Ford, one of the largest automakers with significant operations in Cleveland, did not comment on the Business Forward report and also did not confirm the group's numbers.
Auto suppliers contacted by Crain's also could not confirm the figure, but said they are aware that causing an assembly line to go down is a major no-no.
“I asked our buyer what the line-down fee was if we were to ship late (at any given time we can be hours away from effecting the line at Honda) and his response was "there is no line down fee,' said Jeff Walters, president of Cleveland-based Master Products Company, an auto supplier.
“Surprised, I asked, "Really?' He said "Yes, but you will make headlines in the paper the following day.' So to answer your question, yes, the line-own fees are real, and they are expensive,” Walters added.
Of course, no single storm or power outage can be directly attributed to climate change. And the EPA's new rules are not going to turn back the clock and immediately decrease the amount of severe weather and resultant power outages that a plant experiences.
But what's important is to consider both sides of the equation, rather than simply looking at potential increases in electric rates by themselves, Business Forward contends.
“You've got two sides that are talking past each other. One side is talking about the business impact of the new regs and the other is talking about a moral imperative with regards to climate change,” Doyle said. “What we're trying to do is get people to realize what severe weather is costing” the automakers.
Not quite convinced
Nonetheless, many in the industry are likely to be skeptical of the comparison.
The cost of power is a concrete number that automakers can look at in real terms, they say.
“Affordable power is one of the elements that makes the U.S. an attractive place to do business for manufacturers,” said Bill Adler, president of Stripmatic, another Cleveland-based auto parts maker. “If auto manufacturers chose to locate production elsewhere as a result of the rule, not only will Americans lose jobs but more carbon will be emitted as we ship vehicles and parts back to our market.”
Proponents of carbon regulations, however, argue that the United States will have no leverage in asking other nations to curb their emissions if America does not cut its emissions as well, which is what many of them hope will happen next if the EPA's new rules go into effect.