Category Archives: transportation

Episode 5 of the Clean Break Podcast

In Episode 5 of the Clean Break podcast, host Tyler Hamilton, returning after a long break (hey, it’s cottage time), discusses Ontario’s heat wave, applauds record Chevy Volt sales in Canada, and wonders why a small slice of EV purchase incentives don’t go to the auto dealerships that sell the cars. This shorter-than-usual podcast concludes with an interview with Phil Abrary, president and CEO of Vancouver-based Ostara Nutrient Recovery Technologies, one of Canada’s most successful pure-play cleantech companies.

 

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Air Canada backs project to build biofuels supply chain for airports

An earlier version was originally published in the Toronto Star.

Canada’s aviation sector made history in 2012 after a number of test flights showed that renewable jet fuel could be blended with regular fuel without affecting airplane performance.

It started in April, when Porter Airlines used a blend of 50 per cent “biojet” fuel on a Bombardier turboprop, which successfully flew from the Toronto island airport to Ottawa. Two months later, Air Canada flight AC991 carried passengers from Toronto to Mexico City using a similar 50/50 mix. It was the first of two commercial test flights Air Canada conducted that year.

“We took 43 per cent of the carbon out of that flight,” said Teresa Ehman, the airline’s director of environmental affairs. “It was phenomenal. But it raised the next question: Why does this not happen every day?”

Environmental groups want an answer. Airline flight and passenger volumes are expected to double over the next 15 years, and if the aviation sector doesn’t change its behaviour, that also means a doubling of greenhouse-gas emissions — from slightly less than 2 per cent today to a projected 4 or 5 per cent by 2050.

At the Paris climate conference in December, there was pressure from a variety of parties to have the aviation sector included in the final text of the resulting international agreement. It didn’t work. Airlines were once again left to their own devices. Initially included as part of the Kyoto Protocol, oversight of international aviation emissions got punted in the 1990s to the International Civil Aviation Organization, which has sat on the issue for two decades and continues to be the chosen overseer. A plan of action is expected to be hammered out this year, but critics warn not to expect anything mandatory or ambitious.

The entire situation frustrates the European Union, which has tried twice to impose a carbon fee on international flights into and out of Europe. It backed down from its most recent attempt in 2014 after U.S. and Chinese airlines threatened to ignore it, but the EU signalled it would revive the effort if ICAO didn’t have its own plan in place by 2017.

The bottom line: airlines need to step up their emissions-reduction game,  and biofuels are expected to play a major role.

Will biojet fuel take off?

In many ways, making biojet fuel is the easiest part of the mission to decarbonize aviation. Many companies are already producing it in limited quantities, using ingredients that range from canola and camelina to animal fats and algae.

The bigger challenge, said Ehman, is coming up with an efficient and economical way of safely getting fuel from a production facility all the way to an airplane’s wing. Biofuels are an important component, but without a supporting infrastructure and supply chain that allows it to be consumed on a large scale across all Canadian airports, the market for this fuel will never grow large enough to matter.

Screen Shot 2016-01-20 at 5.03.32 PMTo tackle this barrier, Air Canada has teamed with experts from industry and academia on a project that will blend 400,000 litres of biojet fuel with an existing fuel-delivery system at a soon-to-be-chosen airport. The current approach — driving a truck directly to the airplane — creates a parallel system that is too expensive and impractical in commercial volumes.

“It’s not just knowing if these fuels can work in the planes, because that is known already,” said Warren Mabee, director of the Institute for Energy and Environmental Policy at Queen’s University, which is part of the initiative. “What we are trying to do is be among the first to put together a supply chain so we can see what it takes to start delivering these fuels into a hub in a way that allows them to be more widely used.”

Fred Ghatala, who as partner with Vancouver-based consultancy Waterfall Group is leading the research effort, said it comes down to lower costs in an industry where fuel purchasing and delivery represents a substantial part of an airline’s operational budget. “Reducing costs where possible when using low-carbon fuels is fundamental to the future of those fuels.”

The University of Toronto, McGill University and the International Air Transport Association are also part of the project as members of the BioFuelNet Aviation Task Force. Funding is coming from the Green Aviation Research and Development Network, which gets its support from the federal government and Canada’s aerospace sector.

Crucial to get it right

Ehman said Air Canada has been working to solve this carbon dilemma for nearly five years. After its biofuel test flights, the airline worked with Airbus and the BioFuelNet team to study Canada’s ability to supply biojet fuel, asking how much the country could produce and how much the fuel would cost. It then passed that research along to Transport Canada, which did its own Canadian feasibility study.

The industry has to get it right. For its part, Air Canada has done a good job of finding efficiencies in its operations, with measures to reduce aircraft weight, improve fleet maintenance and streamline routes. Out of 20 transatlantic airlines measured for operational efficiency, Canada’s biggest airline tied for fourth place behind only KLM, Aer Lingus, Airberlin and Norwegian Air, according to a November report from the International Council on Clean Transportation.

In Europe, airports themselves are committing to be carbon-neutral by 2030 through an increase in efficiency and use of solar power. But on-the-ground or in-the-air efficiency can only go so far, said Ehman, pointing out that fuel consumption represents more than 95 per cent of any airline’s emissions.

As a global industry, airlines have made a voluntary commitment to increase the fuel efficiency of their fleets by 1.5 per cent annually and achieve carbon-neutral growth beyond 2020. By 2050, the industry says it will cut its absolute GHG emissions in half compared to 2005 levels.

The only way to get there is with biofuels, and if that’s going to happen, Air Canada wants to make sure a vibrant market is developed domestically to keep jobs and money in the country. “There’s a paradigm shift happening,” said Ehman. “It’s important for Canada to take a lead in this.”

Mabee echoed that view. “This is the way the world is moving. We have to deal with emissions in every sector, somehow. So let’s figure this out.”

Canada’s advantage

Canada is in an ideal position to lead development of aviation biofuels.

For one, it has all the resources it needs to sustainably produce vast quantities of biofuel, whether from agricultural and forest residues or specially grown oilseed crops such as canola or camelina. Second, the country has the domestic expertise to refine those materials into a certifiable product that the industry can trust.

Homegrown companies such as Hamilton-based Biox and Enerkem of Montreal could be ideal producers of the fuel down the road. “They have the building blocks to start assembling those types of molecules,” said Mabee, director of the Institute for Energy and Environmental Policy at Queen’s University. “But the key part of this, what is missing, is a policy driver for it. We don’t have a government mandate to make these fuels.”

A renewable fuel standard, like the federal requirement that gasoline contain at least 5 per cent ethanol, is one policy option. Another is a B.C.-style low-carbon fuel standard, which requires a 10 per cent reduction in the carbon intensity of gasoline by 2020. Putting the aviation sector under the umbrella of a carbon tax might also be considered.

But it makes no sense to knock on the government’s door if a barrier such as fuel distribution makes it overly difficult for the industry to comply. And while some might ask why batteries or hydrogen or solar technology isn’t being considered as an alternative, Mabee offers a reality check. “Solar planes and battery-powered planes are nice research efforts, but practically biofuels are the only way to go.”

This article was part of a series produced in partnership by the Toronto Star and Tides Canada to address a range of pressing climate issues in Canada leading up to and following the United Nations Climate Change Conference in Paris. Tides Canada supported the partnership to increase public awareness and dialogue around the impacts of climate change on Canada’s economy and communities. The Toronto Star had full editorial control and responsibility to ensure stories are rigorously edited in order to meet its editorial standards.

Low crude prices aren’t the only reason big oil should worry

This story was originally published in the Toronto Star.

By Tyler Hamilton

When solar entrepreneur Jeremy Leggett bumped into Suncor Energy boss Steve Williams at the World Economic Forum in 2014, odds were high that tempers would flare.

The two men were among about 40 dinner guests – a mix of CEOs, pension fund managers, economists and government leaders. They had gathered in Davos, Switzerland, to talk about “short-termism” in the financial and corporate worlds and how it undermines efforts to tackle climate change.

At one point during the dinner, Leggett recalls in his book The Winning of the Carbon War, Williams mentioned the difficulty he had in pushing through a 50-year investment plan for the oil sands.

Leggett, who is also non-executive chairman of London-based financial think tank Carbon Tracker, asked Williams after the dinner if he was concerned the investment would become stranded; that within five decades the world would no longer need what Canada’s largest oil company had to offer.

SteveWilliams“Clean energy can’t do the job oil does… Clean energy can’t be economic,” Williams snapped. To which Leggett replied: “But we are already in the process of doing that… Doesn’t that make you worry just a little about your 50-year plan?”

In Leggett’s book, the exchange ends there. But it continued – and got heated, to the point where a red-in-the-face and clearly insulted Williams stormed off in anger.

THAT WAS THEN…

Back then Williams had less reason to worry. Brent crude was priced at around $107 (U.S.) a barrel and meaningful political action on climate change, both in Canada and internationally, was largely absent.

Two years later the fossil fuel industry is under siege. Brent prices have plunged by two-thirds to below $40 (U.S.) a barrel, and the International Energy Agency says a recovery shouldn’t be expected anytime soon.

At the same time, Alberta now has an ambitious climate plan that includes a carbon tax and hard cap on oil sands emissions. And just last week, 196 countries approved a binding global climate deal in Paris.

The Paris agreement seeks no less than a peaking of greenhouse-gas emissions “as soon as possible” and a de-carbonized global economy within the second half of the century. It is through the lens of this new, irreversible reality that Canada’s oil sands industry must move forward in competition with every other oil-producing nation.

“Most people in the industry have been to some extent surprised at how quickly change has happened over the past 12 months,” said Chad Park, executive director of non-profit sustainability consultancy The Natural Step Canada.

Park is heading up an initiative called the Energy Futures Lab, which has assembled a group of experts from academia, industry, government and civil society to come up with a low-carbon transition plan for Alberta.

Current CO2 emissions from oil sands production sit at around 70 megatonnes, twice as much compared to 10 years ago. Alberta’s new climate plan calls for a ceiling of 100 megatonnes.

Two years ago, when the oil sands were riding high on above-$100 oil, the industry would have hit that emissions ceiling by 2020, according to projections from Environment Canada. But with sub-$40 oil, development has slowed substantially. At today’s rates of production based on current technology, the industry could delay reaching its emissions cap to 2030, possibly later.

“No new projects are being built,” said economist Dave Sawyer, CEO of Ottawa- based EnviroEconomics. “Right away the market has taken care of all that new growth.”

It creates space for Alberta’s economy to diversify, which has never been more crucial. “We can argue about the pace and the strategy, but the idea of transition is now part of government policy,” said Park. “Some are getting the message. Some aren’t.”

Suncor, under Williams’ leadership, seems to get it more than others. He was one of four oil sands CEOs who backed Alberta Premier Rachel Notley’s climate plan and, rather than dismissing the events in Paris, he flew there to listen and learn.

These days, he says, Suncor’s goal is to be “the last man standing,” implying that many in his industry will fall. He says he’ll tackle low oil prices and an emissions cap in Alberta by boosting operational efficiencies and using new technologies to reduce costs and emit less GHGs per barrel of oil.

Dan Zilnik, president of Oil & Gas Sustainability, a consultancy in Calgary, said limits on global emissions will, over time, keep more fossil fuels in the ground. But not all fossil fuels, oil producing regions and individual projects will be threatened equally.

He equates it to a game of musical chairs. “For Alberta and for the companies invested in the oil sands, the challenge is to position some portion of their reserves to be consistent with a carbon constrained world, either by being first to find a seat, or by being faster – lower-carbon – that the competition,” said Zilnik.

But eventually, by the end of this century, all seats will be taken away and the music will stop for fossil fuels, assuming the political will behind the Paris agreement and the advance of clean, renewable technologies prove lasting.

That means being better and more efficient at producing oil won’t be enough as we approach the second half of this century. Companies, such as Suncor, will need to ask themselves what they want to be when they grow up in the low-carbon economy.

So how might it all play out? Expect the following actions from oil companies over the coming years…

PLAN & DISCLOSE

CarneyBank of England governor Mark Carney, in his role as chair of the international Financial Stability Board, announced in Paris that he was creating a climate disclosure task force to be led by former New York City mayor Michael Bloomberg. The task force will encourage companies to disclose the risks that climate change pose to assets and operations, and will create standardized guidelines for how those risks should be publicly disclosed.

Guidelines will be voluntary, though there will be immense pressure on companies to embrace them. Over time, they could become mandatory through national securities regulators.

Carney said investors deserve to know if climate change and responses to it will affect their investments. Does a company have a strategy to reduce its carbon footprint consistent with each country’s commitment under the Paris agreement?

“It’s a reasonable question to ask,” said Carney, who has stressed previously, “the more we invest with foresight, the less we will regret in hindsight.”

With such disclosure, more capital will flow to companies with a transition plan and projects that carry the least climate risk.

LOWER-CARBON BARRELS

Days after the Paris summit, the CEO of global engineering giant WorleyParsons sent a memo to employees about the “significant business change” that would soon hit the company’s customers, which in the oil sands include Nexen, Devon, Suncor, Statoil, Total and Shell. “These customers will need to adapt to remain relevant,” the memo said. A long-time WorleyParsons employee told the Star: “I’ve never heard this tone before from the brass.”

Making existing operations more energy-efficient will lower costs and per-barrel emissions. Expect more oil sands projects to capture and reuse waste heat and embrace alternative processes that consume less energy. What energy that is used will increasingly come from clean electricity such as hydropower, instead of natural gas. There’s also potential for capturing CO2 emissions and recycling them into high-value industrial chemicals, though purchasing offsets through international carbon markets will be the least-cost option.

“The pace at which the pieces of the carbon pie crumble is going to be based on advancements in low-emission technologies,” said Chad Park of Energy Futures Lab.

UNDERMINE COAL

The Paris agreement, at minimum, aims to keep the rise in average global temperatures “well below” 2 degrees C compared to pre-industrial levels. To stay below that threshold, Citigroup estimates that one-third of oil reserves, half of natural gas reserves, and 80 per cent of coal reserves need to stay in the ground.

Burning coal emits the highest amount of CO2 per unit of energy it delivers, so coal is first on the firing line when it comes to emissions regulation and carbon pricing. This explains why most big oil companies support a carbon tax, which will hurt coal much more than oil. The reality is that every tonne of coal that gets left in the ground leaves more of the global carbon budget to oil. From hereon in, oil majors will be jockeying for a bigger piece of that fixed budget to extend the life of their traditional businesses for as long as possible.

We’ve already seen that in Alberta. Remember, it was four CEOs from the oil industry who happily stood on stage with Premier Rachel Notley when she announced a climate plan that includes phasing out all coal-fired power generation.

FILL UP ON NAT GAS

When burned, natural gas emits about 25 per cent less CO2 than oil and 50 per cent less than coal, so it makes sense for big petroleum companies to lean more heavily on this resource. It helps big energy companies lower their carbon footprints and capture an even larger share of a shrinking global carbon budget. It also makes use of existing expertise in drilling, hydraulic fracturing, and pipeline transmission.

This is why oil giants like ExxonMobil are investing more these days in natural gas, demand for which is expected to grow as electric utilities in Canada, the United States and Europe switch from coal to gas-fired power generation. Within that context, Shell’s recent $70-billion takeover of BG Group, the world’s largest liquefied natural gas supplier, makes a whole lot of sense.

Relying more on natural gas, however, is not a long-term climate solution. What it does do is buy the big oil companies some time. Natural gas will also be needed over the short and medium term to manage the variable nature of wind and solar energy systems, at least until large-scale energy storage becomes more economical.

BUY & SELL

Heading into 2016, the industry is certain to consolidate. Independent policy think tank Chatham House, in a report released in July, says a period of adjustment is expected in the transition to a low-carbon economy in which financially strong companies acquire strong assets currently belonging to weaker companies. “High-cost and high-risk projects will be abandoned or deferred,” it says. “Companies whose existence relies on such projects will be taken over or broken up, and countries that depend on them for future development will have to revise their strategies.”

To a certain extent, low oil prices have already sparked some merger and acquisition activity. Suncor’s hostile bid to acquire Canadian Oil Sands is an example. Deal making is expected to heat up as deep-pocketed players seek lower-carbon assets that keep them in the game longer.

REDIRECT CASH FLOW

After Paris, it’s widely believed that the petroleum industry is entering an “ex growth” phase, meaning demand for oil will level off and eventually begin to decline as national emissions regulations tighten and clean energy alternatives become more affordable.

In this environment more investors will be asking: Why spend billions of dollars exploring for oil in the Arctic that likely won’t be needed? The same question will be posed to any company proposing to break ground on a new oil sands project.

“Now, it will be all about running sunk assets into the ground,” said Dave Sawyer of EnviroEconomics. For existing oil sands projects, “they have all this built capital already producing significant amounts of oil, and they can pretty much sell it at any price.”

Risky, high-cost exploration plans will be avoided, leading to reduced capital spending. Cash flows will be returned to shareholders through dividend increases or share buybacks that prop up stock prices. Alternatively, if a company is determined to stay relevant in a low-carbon world, those cash flows can be used to fund aggressive diversification.

DIVERSIFY OR DIE

If companies choose to fight for a lasting role in the low-carbon economy, they will need to start investing more of their cash flows into non-fossil alternatives. “Many companies are asking themselves, are we a pure play upstream oil and gas company, or do we want to be something bigger and broader than that?” said consultant Dan Zilnik of Oil & Gas Sustainability.

Jumping into renewables is not a slam dunk. The expertise that oil companies have is with massive, highly centralized multibillion-dollar projects with decades-long time horizons. Most renewable power projects, by comparison, run in the hundreds of millions of dollars and are built in a matter of years, not decades.

They also involve the movement of electrons over wires, not molecules through pipelines. Solar development, for example, couldn’t be more different than oil development, which is grounded in geology and mining. It’s like asking an NFL football player to turn tennis pro.

Many already dabble in wind and solar. “Whether or not they are thinking about doing more, we need to recognize that oil and gas companies are already amongst the biggest players in the renewables game,” said Zilnik, pointing to Suncor and Enbridge as domestic leaders.

But holding and bankrolling a renewable asset and letting it operate independently is much easier than transforming core competencies, which is a rare feat for an incumbent with magnetic attraction to the status quo.

An oil company’s drilling and engineering expertise would be better directed to geothermal power development, while refinery and pipelines operations could transition to biofuels, hydrogen or synthetic oils made from recycled CO2. “You could see Suncor also turning its Petro-Canada gas stations into EV charging stations,” said Dave Sawyer of EnviroEconomics.

ELECTRIC CAR WILD CARD

How quickly the world moves to electrify transportation may, in fact, be the biggest determinant of how fast global demand for oil falls.

In a post-Paris economy, that transition will need to accelerate, said Fatih Birol, executive director of the International Energy Agency (IEA). “The IEA has shown that if global warming is to be limited to 2 degrees, at least a fifth of all vehicles on roads by 2030 should be electric.”

The bad news for the oil industry is that batteries costs for EVs continue to fall. The U.S. Department of Energy estimates such costs have dropped by more than 60 per cent since 2009. Research indicates that energy storage is expected to follow the same growth and cost trend as solar power technologies.

General Motors, for example, surprised many in October when it said the battery system in its new Chevy Bolt all-electric car, which hits dealerships this year, costs around $145 per kilowatt-hour.

That’s a huge breakthrough, considering average costs were thought to be between $300 and $400. Citigroup, UBS and consultancy McKinsey predicted the $200 milestone would be hit sometime between 2017 and 2020, so GM’s revelation is eye-opening. Consider also that Citigroup has called $230 the point at which electric cars begin to pose a serious threat to conventional gasoline-fuelled vehicles.

John Mitchell, an associate research fellow with policy think tank Chatham House, said mass production of a low-cost battery capable of carrying a vehicle hundreds of kilometres is the biggest threat to oil.

“That will change the transport market profoundly,” he said.

We may not be there yet, but we’re getting pretty damn close.

Continue reading Low crude prices aren’t the only reason big oil should worry

Tracking the transition to a low-carbon economy: $5.2 trillion invested since 2007, according to report

gts_1.13_web_mediumEthical Media Markets calls itself an independent publisher of research reports and other information related to the emerging green economy, and every six months it comes out with an annual and mid-year update to its Green Transition Scoreboard. The scoreboard has been tracking private investments in the green economy globally since 2007. In its August 2013 report, it highlighted what it is calling a “dramatic mid-year surge” in cumulative global investment since 2007, rising to $5.2 trillion by August from $4.1 trillion in February. And remember, this is private investment — i.e. it excludes investment in government projects.

The jump, according to the report, is partially driven by the following trends: “…the write-down of fossil fuel assets; the inevitable wave of nuclear plants due to be retired; the exposing of hypothetical forecasts of 100 years of shale gas; and the decline of large, centralized electricity generation.”

Nearly $2.4 trillion has gone into renewable energy investments, making it the largest investment theme out of the $5.2 trillion total. Energy efficiency investments represent $1.33 trillion, followed by green construction at $880 billion, corporate R&D at $378 billion and remaining “cleantech” at $235 billion. Ethical Markets Media says it comes up with these numbers by scanning reports from Cleantech Group, Bloomberg, Yahoo Finance, Reuters and many UN and other international studies and individual company reports.

The report has a narrow definition of “green” investment. It excludes funds invested in nuclear power, carbon capture and sequestration, and biofuels, with some limited exceptions. Even so, it projects the $10 trillion investment mark will easily be reached by 2020 and, alongside this increase, we will see a transition away from fossil fuels.

Says the report: “Increasingly, worldwide regulations are leaving fossil fuel investments as stranded assets with pension funds heeding the call to divest from fossil fuels and invest in green technologies. Dutch Rabobank will now refuse loans to companies involved in tar sands and shale gas, citing the long-term financial and environmental risks are too large. In July 2013, Storebrand, a major Norwegian pension fund advisor, excluded from its Energy Sector all 13 coal producers and the 6 oil companies with the highest exposure to tar sands ‘to reduce Storebrand’s exposure to fossil fuels and to secure long term, stable returns for our clients…'”

I don’t entirely agree with some of the conclusions this report reaches, but it adds another interesting perspective to the energy transition that is clearly taking place globally. Big dollars are being spent on cleaner forms of energy. That a transition is happening there is little doubt. The question now is: how fast, and can we accelerate it?

Has North America hit “peak car”? The signs are there…

MEC-EVNavigant Consulting held Wednesday what I thought was a fascinating webinar on whether vehicle sales and use in North America have peaked — or are close to peaking. Dave Hurst, principal research analyst at Navigant, defined “peak cars” as a point of market saturation “characterized by an unprecedented deceleration in the growth of car ownership, total miles driven and annual sales.”

At the outset, he made the following points:

  • Auto sales have been relatively slow to rebound in the United States, whereas in past economic rebounds we’ve seen car sales lead the way;
  • He figures sales of light-duty vehicles peaked in 2005 and those record levels won’t be reached again until about 2020, despite the growth in population between now and then;
  • There has been significant growth in bicycle commuting — 47 per cent growth between 2000 and 2011. In more bike-friendly cities, growth has jumped 80 per cent;
  •  E-bicycle sales are growing strongly, particularly in Europe. While they aren’t necessarily displacing car sales, they are reducing the amount of miles driven in cars;
  • Influencing trends being noticed: urban planning with attention to more transit-oriented designs and streets that accommodate multiple modes of transportation; more people telecommuting; a rise in car-sharing as an alternative way to travel in cities; increased political interest in congestion pricing.

But can we say with certainty that we’ve hit “peak cars” yet? “I would argue in western Europe we’re likely there. Right now it looks like North America is going to be next,” said Hurst. “The jury is still out.”

Phineas Baxandall, senior analyst for transportation policy at the U.S. Public Interest Research Group, came across as more certain in his comments. Up until 2004, he said, there has been a steady increase in per-capita miles driven since WWII. But nine years ago it suddenly began to fall, and this happened well before the economic downturn. “What we see in 2004 is truly a break with an almost 60-year trend.” Total miles driven also began to fall in 2007, despite ongoing population growth. So what explains this? Baxandall said a big part of it has to do with younger drivers — at least that’s what the data says between 2001 and 2009. “During this period, driving among younger Americans fell much faster than the rest of the country — a breathtaking 23 per cent per person.” Young people are taking fewer vehicle trips and shorter trips. “This trend was seen with young people both with and without jobs,” he added, pointing out that younger people are embracing alternatives modes of transportation much more aggressively than their parents. “This group’s public transportation trips increased (between 2001 and 2009) by 40 per cent. Bicycle trips increased 24 per cent, and walking trips by 16 per cent. A truly big change.”

And let’s not forget driver’s license statistics. In the mid-1980s more than 80 per cent of young people between 16 and 20 years of age had a driver’s license. Today, that number is in the mid-60s. Another interesting point that Baxandall made has to do with the recent decoupling of GDP from driving miles per person. For decades driving miles per person almost shadowed the movement of GDP, but in recent years they have diverged. This likely has much to do with rising gasoline prices following a long period of relatively cheap fuel.

All of this raises the big question: Is it temporary?

Is it a blip? Will the shift we have seen be enduring? Will it grow more intense to the detriment of the auto industry? I got the sense from the call that Baxandall doesn’t think it’s temporary, which isn’t a bad thing depending on where you sit. “It’s going to mean less pollution and oil consumption, less stress on our existing roadways, and less need for new and wider highways,” he said. But there’s bad news for some. There will be more risk for public-private toll ventures, shrinking North American auto sales, and the amount of federal tax revenue collected through gasoline sales is going to fall significantly — a combination of more efficient vehicles, electric vehicles and reduced driving. “We can no longer continue to believe there will be an increase in driving,” he added. “Policy in our country has yet to catch up to these trends and still reflect old driving assumptions.”

There’s much to think about here, for auto manufacturers, urban planners, political leaders and consumers. Of course, some of the market demand issues will be offset by rising demand from Asia and elsewhere, but in North American and Europe these trends beg a much closer, careful look.