Elon Musk To California: Mandate Volkswagen To Produce EVs

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This week, a long list of CEOs, including Elon Musk, cousin and SolarCity CEO Lyndon Rive, Michale Brune (Executive Director of Sierra Club), and Jigar Shah (President, Generate Capital co-founder and regular guest writer here at CleanTechnica) wrote to the California Air Resources Board (CARB) to request an intervention in regards to how the agency lays out fines, fees, and required corrective actions for the massive VW Dieselgate scandal, as shared by Newsweek. California, being a global leader of environmental protection and larger (population-wise and economically) than most countries, will, through its actions, set a precedent for many other states and countries to look to as everyone collectively scrambles to find the most effective way to crack down on Volkswagen for this massive, intentional violation of emissions regulations.

Well aware of this, the long list of CEOs, Chairmen, and other influential leaders banded together to call for what they view to be more impactful, long-reaching plans than traditional fix-and-fine mandates. The coalition is calling for CARB to look towards non-traditional solutions that are, at the same time, supported by precedent, noting that many traditional solutions would result in a net increase in CO2 emissions and that owners would not willingly bring in their cars to have performance taken away with a net negative effect on fuel mileage to boot. The overall focus of the letter can be summarized in a single sentence from the body:

“We, the undersigned, instead encourage the CARB to show leadership in directing VW to ‘cure the air, not the cars’ and reap multiples of what damage has been caused while strongly advancing California’s interests in transitioning to zero-emission vehicles.”

This is an exciting turn of events to see business and climate leaders banding together to push the government (who, it’s worth relating, only exists to serve the people) to swap out antiquated regulatory methods for a fresh new set of goggles. They may be rose colored, but there is a truth embedded in the message that is tough to deny: fixing the problem reduces the impact with the current fleet; mandating zero emissions vehicle production and sales helps emissions for decades to come.

Going beyond just mandating sales, the letter explicitly states that the money Volkswagen would have been fined should be fully reinvested into company R&D (in California) which, to me, feels a bit overly generous, though I absolutely love the sentiment of using fine money to turn it around and do great things instead.

This is beyond exciting for me to see a large list of influential business leaders stepping up to challenge the status quo in this high-profile regulatory action just as many have done in their professional careers.

Check out the full text of the letter, from the Newsweek article:

The VW emissions scandal is mainly the result of physics meeting fiction. In the simplest terms, we have reached the point of de miminis returns in extracting performance from a gallon of diesel while reducing pollutants, at least at reasonable cost. Unsurprisingly, and despite having the greatest research and development program in diesel engines, VW had to cheat to meet current European and U.S. standards. Meeting future tighter diesel standards will prove even more fruitless.

For a significant fraction of the non-compliant diesel cars already in the hands of drivers, there is no real solution. Drivers won’t come in for a fix that compromises performance. Further, solutions which result in net greater CO2 emissions, a regulated pollutant, are inappropriate for CARB to endorse. Retrofitting urea tank systems to small cars is costly and impractical. Some cars may be fixed, but many won’t and will be crushed before they are fixed.

A giant sum of money thus will be wasted in attempting to fix cars that cannot all be fixed, and where the fix may be worse than the problem if the cars are crushed well before the end of their useful lives. We, the undersigned, instead encourage the CARB to show leadership in directing VW to “cure the air, not the cars” and reap multiples of what damage has been caused while strongly advancing California’s interests in transitioning to zero-emission vehicles.

The solution we propose for VW and the CARB is to, in a legally enforceable form:

1. Release VW from its obligation to fix diesel cars already on the road in California, which represent an insignificant portion of total vehicles emissions in the state, and which cars do not, individually, present any emissions-related risk to their owners or occupants

2. Instead, direct VW to accelerate greatly its rollout of zero-emission vehicles, which by their very nature, have zero emissions and thus present zero opportunities for cheating, and also do not require any enforcement dollars to verify

3. Require that this acceleration of the rollout of zero emissions vehicles by VW result in a 10 for 1 or greater reduction in pollutant emissions as compared to the pollution associated with the diesel fleet cheating, and achieve this over the next 5 years

4. Require that VW invest in new manufacturing plants and/or research and development, in the amounts that they otherwise would have been fined, and do so in California to the extent that California would have been allocated its share of the fines

5. Allow VW some flexibility in the execution and timing of this plan by allowing it to be implemented via zero-emission vehicle credits.

In contrast to the punishments and recalls being considered, this proposal would be a real win for California emissions, a big win for California jobs, and a historic action to help derail climate change.

The bottleneck to the greater availability of zero emissions vehicles is the availability of batteries. There is an urgent need to build more battery factories to increase battery supply, and this proposal would ensure that large battery plant and related investments, with their ensuing local jobs, would be made in the U.S. by VW.

A satisfactory way to fix all the diesel cars does not likely exist, so this solution sidesteps the great injury and uncertainty that imposing an ineffective fix would place on individual diesel car owners. A drawn out and partial failure of the process will only exacerbate the public’s lack of trust in the industry and its regulators. By explicit design, this proposal would achieve, in contrast, a minimum of a 10X reduction in pollutant emissions as compared to a complete fix.

There is a precedent for this type of resolution. In the industry-wide 1990 diesel truck cheating scandal, the EPA chose not to require an interim recall but instead moved up the deadline for tougher standards to make up the difference. This proposal does the same for VW and ties the solution to a transition to zero emissions vehicles.

We strongly urge CARB to consider this proposal in resolving the VW cheating scandal.

Ion Yadigaroglu, Partner, Capricorn Investment Group

Elon Musk, CEO, Tesla and SpaceX

Jeff Skoll, CEO, Jeff Skoll Group

Dipender Saluja, Partner, Capricorn Investment Group

Carl Pope, Inside Straight Strategies

Chamath Palihapitiya, CEO, Social Capital

Ira Ehrenpreis, Partner, DBL Partners

Hal Harvey, CEO, Energy Innovation

Antonio Gracias, CEO, Valor Equity Partners

Lyndon Rive, CEO, SolarCity

Michael Brune, Executive Director, Sierra Club

Cole Frates, Renewable Resources Group

Ari Swiller, Renewable Resources Group

Lawrence Bender, Producer, An Inconvenient Truth

Reuben Munger, Partner, Vision Ridge

Jigar Shah, President, Generate Capital Angel

Jason Calacanis, Launch Fund Partner

Gregory Manuel, MNL Partners

Adam Wolfensohn, Partner, Encourage Capital

Jason Scott, Partner, Encourage Capital

Martin Roscheisen, CEO, Diamond Foundry

Steve Westly, Former California State Controller

Jules Kortenhorst, CEO, Rocky Mountain Institute

Steven Dietz, Partner, Upfront Ventures

Kevin Parker, CEO, Sustainable Insight Capital

Anja Manuel, Partner, RiceHadleyGates

Larry Lunt, CEO, Armonia

Mindy Lubber, President, Ceres

Tom Darden, Partner, Cherokee Fund

Panos Ninios, Partner, True Green Capital

Jesse Fink, Chairman, MissionPoint

Matt Breidert, Senior Portfolio Manager, Ecofin

Suhail Rizvi, CEO, Rizvi Traverse

Jeffrey Tannenbaum, Chairman, sPower

Rob Davenport, Managing Partner, Brightpath Capital

Stuart Davidson, Chairman, Sonen

Laurence Levi, Partner, VO2 Partners

Rob Day, Partner, Black Coral Capital

Dan Fuller, CIO, Fuller Smith

Nicholas Eisenberger, Partner, Pure Energy

Marc Stuart, CEO, Allotrope Partners

Justin Kamine, Kamine Development

Peter R. Stein, Managing Director, Lyme Timber

Bruce Kahn, PM, Sustainable Insight

Raúl Pomares, Capital Managing Director, Sonen

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Kyle Field

I'm a tech geek passionately in search of actionable ways to reduce the negative impact my life has on the planet, save money and reduce stress. Live intentionally, make conscious decisions, love more, act responsibly, play. The more you know, the less you need. As an activist investor, Kyle owns long term holdings in Tesla, Lightning eMotors, Arcimoto, and SolarEdge.

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