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Opinion: There’s gold in 54.5 mpg

Capital does not like uncertainty. That’s one reason the national passenger vehicle fuel-efficiency standard that is the focus of a hearing in San Francisco today is so important.

By requiring carmakers to hit an average of 54.5 miles per gallon by 2025, the proposed standard would provide exactly the kind of long-term policy certainty that capital loves. As a long-time investor in innovative car technologies and companies like Tesla, I can attest to the fact that a standard would unlock investmentand innovation, create jobs, and spur economicgrowth, in the automotive sector and beyond.

Setting the bar at 54.5 mpg would causea flurry of technological developments and infrastructure improvements — exactly the kind of thing that interests investors. In the short term, companies will be vying to figure out ways to make conventional gasoline engines more efficient, while also developing the next generation of hybrids. There will be experimentation with lightweight but strong materials, and new ways of building more efficient engines.

For longer-term plays, entrepreneurs and established companies will be on the hunt for alternatives to gasoline. They will innovate on the electric car front. They will further develop fuel-cell technology. And by 2025—an eternity in tech time—a company or two will likely come up with game-changing technologies that aren’t even on the drawing board yet. Somewhere, the next Apple or Google of transportation is waiting in the wings.

If the National Highway Administration and the EPA finalize plans for 54.5mpg by 2025, they will usher in an era of opportunity fora wide range of businesses, from clean tech companies to entrepreneurial engineering firms to auto parts suppliers. As new technologies scale up and become commonplace, more business opportunities will emerge as new generation, transmission, and fueling networks are established.

And of course car companies stand to benefit, as well. A recent analysis by Citi Investment Research and the Investor Network on Climate Risk found that higher mileage standards wouldboost automakers’ profit margins. Better mileage would also make US-made cars more competitive on the international market.

That might be one reason automakers and labor stood shoulder to shoulder with President Obama when the proposed standards were announced last year.  Their show of support was also a pretty good sign that car manufacturers figure they can hit the 54.5 mpg target by 2025.

The Great Recession was rough on car manufacturers. But sales are beginning to recover.  And automakers have announced plans to hire thousands of workers this year– from BMW in South Carolina, to Chrysler and Ford in Michigan, to electric carmakers CODA and Tesla here in California.

Setting a goal of 54.5 mpg by 2025 will keep the hiring coming, and not just in the auto industry. According to the “More Jobs per Gallon” report by Ceres, a national coalition of institutional investors and public interest groups, the new standard would create approximately 484,000 net new jobs across the economy by 2030.

There are other benefits to 54.5 mpg, as well, from cleaner air, to fewer greenhouse gas emissions, to less dependence on foreign oil. But as someone who makes his living deciding where to invest money, I am focused on the bottom line. When it comes to maximizing opportunity —for investors, for California, and for the United States– 54.5 mpg by 2025 is an opportunity too good to miss.

Ed’s Note: 

Bill Green is a co-founder of VantagePoint’s CleanTech Practice, and has 25 years of investment and management experience in renewable energy and related sectors.


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