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Leveraging their vast manufacturing sites, automakers are deploying solar panels to generate captive renewable energy. They are also signing power purchase pacts with third-party renewable energy providers to ensure electricity is carbon-free.
Suzuki has scaled up captive solar power generation from 1 MW four years ago to 26 MW now, said Rahul Bharti, executive director, corporate affairs at Maruti Suzuki. The company was also increasing use of railways to reduce logistics-related emissions, he said.
Rival M&M has taken it a step further by fixing an internal carbon price when making business decisions, said Rajesh Jejurikar, executive director for auto and farm sectors, Mahindra Group. While assessing a new project, the company will consider a price of $10 per ton of CO2 that is estimated to be generated. This ensures that less expensive but more polluting options do not trump those that are cleaner but more expensive. “At M&M, we identify climate change risk to our business and stakeholders and build a strategy with a mitigation action plan,” he said.
However, these measures do not tackle the elephant in the room.
As per Greenhouse Gas (GHG) Protocol – an internationally recognised framework to measure emissions – any company’s carbon footprint includes direct emissions that it causes as well as the indirect emissions from the energy it uses, its supply chain and the life cycle of the products that it sells.
Essentially, the emissions caused by vehicles add to the manufacturer’s balance sheet. How significant can the tailpipe emissions be in the grand scheme of things?
As per Volkswagen AG’s sustainability report 2021, three-quarters of the group’s GHG emissions come from the tailpipe of vehicles they sell. Daimler reported that about 80% of its emissions in 2020 came from the use phase of vehicles it sold.
“Therefore, any automobile company looking to reduce emissions will have to work on tailpipe (emissions),” said SJR Kutty, chief sustainability officer, Tata Motors.
While automakers are taking steps towards making their vehicles more efficient and reducing tailpipe emissions in compliance with government mandated norms like BS-VI, experts say the bigger remedy will be transitioning to cleaner vehicle technologies like EV or hydrogen fuel cell vehicles. “Entire transition has to happen towards zero tailpipe emissions and this has to be led by manufacturing companies like ours,” Kutty said.
Tata Motors presently is the market leader in electric cars in India, with about 5% of its sales coming from EVs. Suzuki Motor in March announced its plan to invest over ₹10,000 crore in Gujarat. The funds will be used to set up local capacity to make EVs, batteries as well as a vehicle recycling unit.
Mahindra, Ashok Leyland and TVS Motor, among others, have set up separate subsidiaries for increasing investment in EVs, bringing down their tailpipe emissions. But no company has yet committed to a complete transition away from fossil fuel.
But EVs may not be the silver bullet that everyone hopes for. A recent report from Volvo claimed that the carbon footprint of manufacturing an EV was far higher than manufacturing a combustion engine vehicle owing to the materials that go into its batteries. The Swedish carmaker reported that the production of its all-electric C40 Recharge caused 70% more emissions than its combustion engine counterpart XC40.
Manufacturing and supply chain usually account for 15-20% of the carbon footprint of automakers. Another challenge is the source of the electricity used to drive EVs. In a country like India, where a bulk of electricity is from fossil fuels, the emissions are simply moving away from tailpipe to the power plant, Mohapatra said.
However, Kutty played down these concerns. EVs have a higher thermal efficiency than combustion engine vehicles, he said. This means that even if 100% electricity comes from burning fossil fuel, the carbon footprint of EVs will still be lower than combustion engine vehicles.
And the needle is moving in the sustainable direction in India. Fossil fuel-based power plants today account for 60% of installed electricity generation capacity compared to 70% five years ago, as per power ministry data. With the Centre’s renewable push, the share of fossil fuel-based electricity is bound to dip further, making net emissions of EVs during usage phase much lower than fossil-fuel driven vehicles.
So, while automakers are taking steps to make manufacturing processes cleaner, to reduce their net carbon footprint, they will have to look much deeper at supply chains and the technologies they bet on. This article is part of a series on sustainability in association with BCG. BCG did not play any role in editorial decision-making.
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