Here are two ways to make the world better—make a cheaper car or reduce greenhouse gas emissions. The first way is a lot easier. Witness the announcement that Tata Motors is going ahead with its plan to produce a car that sells for Rs1 lakh. The car won’t be available until 2008, and initial production will be a modest 2,50,000. But if the car works, it will be 40% cheaper than its nearest rival. That’s enough of a difference to add hundreds of millions of new consumers to the auto-owning class. In the Chinese economy, which is growing at 8-10% annually, car ownership gets pushed forward by four years. Where growth is slower, demand acceleration could be correspondingly more pronounced.
That’s good news for consumers, mitigated by the prospect of bigger traffic jams. But it’s terrible news for environmentalists and governments that want to reduce carbon emissions. The Rs1-lakh car will be small, so it will use less fuel than an average western car. But it will lack European emission controls and it may be subjected to rather primitive maintenance as it ages. It thus seems likely that its emissions of carbon dioxide will be close to those of a western car.
Carbon emissions grow along with industrial production. In 2007, China is set to become a larger emitter of carbon gases than the US. Any solution to the global carbon emissions problem must involve China, India and other large-population emerging markets. But the emerging middle class of emerging markets is poorer than the well-established middle class in rich countries. So, the rich poor have less money to spend on global cooling than the rich rich. What’s more, the threat of warming is lower down their relative priority scale, below such unmet needs as transportation. So, much more of their technological effort will be dedicated to reducing production costs than to reducing carbon emissions.
The automobile market in developing economies may be hot, in more than one sense. It is potentially a huge free market success—and a massive blow to dreams of reducing carbon emissions. The conflict between emission reduction and development can only get worse.