20 Mar PUBLIC PENSION CORNER, #36: ESG, EVs, and the Perils of Planning
NEWS:
I. What’s Good for the Goose…
Last week, the Trump administration filed suit against the state of California, arguing that the state’s vehicle emission standards and electric vehicle (EV) mandates unlawfully usurp the power of the federal government:
The suit comes roughly nine months after the Republican-controlled Congress moved to block California from banning sales of new gas-powered cars by 2035. It targets clean car rules that California has continued to enforce even after the congressional action and, if successful, could reverberate far beyond California. Across the country, 17 states representing more than a third of the American automobile market follow California’s lead on clean car standards.
“Gavin Newsom is determined to continue pushing Democrats’ radical E.V. fantasy — even if doing so is illegal,” Transportation Secretary Sean Duffy said in a statement, referring to Gov. Gavin Newsom of California, a Democrat and frequent critic of President Trump….
In the lawsuit filed on Thursday, the Trump administration argued that California’s limits violated the Energy Policy and Conservation Act of 1975, which directed the federal government to set “uniform” clean car rules that applied to all 50 states.
II. …Is Good for the Gander
This week, the state of California filed suit against the Trump administration, claiming that the administration unlawfully rolled-back the Environmental Protection Agency’s “endangerment finding” classifying greenhouse gas emissions as harmful:
Gov. Gavin Newsom and Attorney General Rob Bonta announced on March 19 that California’s attorney general — along with 24 attorneys general, the Pennsylvania governor, and 12 cities and counties — filed a federal lawsuit against the Trump administration regarding its recent decision to repeal the EPA’s “endangerment finding”, which has been the legal foundation for regulations targeting man-made greenhouse gases for nearly the last two decades….
In 2009, the Obama administration’s EPA released its “Endangerment Findings,” which concluded that six greenhouse gases significantly threaten public health and contribute to worsening environmental conditions. These findings served as the basis for passing the Clean Air Act, which imposed emission standards on cars, trucks and power plants.
In announcing the decision, Trump claimed that revoking these environmental protections would ultimately help Americans by making vehicle costs start “tumbling down” and that the findings had no “basis in fact.”
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“ESG, EVs, and the Perils of Planning”
The other day, Motortrend led a breaking news story as follows:
Starting at just more than $40,000, the 2026 Volvo EX30 was going to be the most affordable vehicle in the carmaker’s lineup. We say “was” because according to a report, this relatively cheap all-electric SUV and its off-roady variant, the EX30 Cross Country, are slated for immediate cancellation after only two years of being sold here in the U.S.
This decision from Volvo comes immediately on the heels of similar – and much larger – news from Honda, also reported by Motortrend:
Honda says it is cancelling three electric vehicles it had planned to build in the U.S., citing financial losses and slowing demand for EVs. The news from Japan is not surprising given that much-touted plans for its next-generation 0 Series of vehicles, including a plant to be built in Canada, had already undergone changes. Now Honda says it is cancelling the launch of the 0 Series SUV and the funky 0 Series sedan as, well as the Acura RSX….
“We determined that starting production and sales of these three models in the current business environment where the demand for EVs is declining significantly would likely result in further losses over the long term,” the company said.
None of this should be considered even remotely surprising. It has been more than two years, after all, since car dealers began warning the Biden administration that nobody wants to buy EVs, since Ford announced that it was laying off employees at its EV plants, since Hertz sold one-third of its EV rental fleet because no one wanted to rent EVs and the upkeep on them was too expensive, and since Albermarle – the largest producer of lithium in the world – laid off 300 employees because of slowed demand for lithium for EV batteries.
Back then, the excuse given by EV manufacturers and their political allies was that it was “too soon” to make the transition, that consumers still had to get used to the idea of electric vehicles. Yet here we are, more than two years later, more than two years further into the so-called energy transition, and consumers’ readiness to buy EVs is probably even lower now than it was then. EVs, in particular, have been a disaster, but green energy policy more generally has been an absolute mess, failing to address real-world issues and failing to anticipate real-world demand.
Again, none of this should be considered even remotely surprising. This is, after all, well-trodden ground. In an essay written in 1977 for Reason magazine, F.A. Hayek – then three years removed from his Nobel Prize in Economics and thirty years removed from the writing of his most famous and best-remembered work, The Road to Serfdom – argued that one of the great tragedies of economics is its tendency to repeat itself, to recycle terrible, previously discredited ideas every few decades. “Economics,” Hayek wrote, “more than other scientific disciplines, is liable to recurrent fashions and fads, the periodic reintrusion into professional discussion of popular superstitions which earlier generations of economists had successfully driven back into the circles of cranks and demagogues.”
At the time – the start of the Carter administration – American academics, politicians, and business leaders were resurrecting the idea of “planning” as a core tenet of “orderly” economic growth. We’ve been here already, Hayek argued, and done that, and we learned that it doesn’t work:
The whole idea of ‘guiding’ private industry by announcing beforehand what quantities of different goods firms ought to produce over a long period of the future is a muddle from beginning to end, wholly ineffective and misleading if left without sanctions constraining industry to do what it is predicted that it will do, destructive of the competitive market and free enterprise, and leading by its inherent logic straight to a socialist system.
As I say, that was roughly three decades after Hayek thought that “planning” had been effectively dispatched, that the reality of economics had effectively and permanently buried its pretensions. Unfortunately, as he admitted, he was wrong – not about planning’s effectiveness, but about its resilience, even in the face of overwhelming evidence of its failures. Hayek was disappointed that he had to fight that same intellectual fight again, but he and countless others did so, and with reality on their side, they buried planning again.
Except that today, three decades after Hayek himself was buried, we are witnessing the failures of “planning” yet again. That’s what the EV debacle is all about – the pretension that policy-makers could better anticipate what consumers would want better than markets could. That’s also what the ESG debacle is all about. ESG is particularly nefarious, of course, in that it turns capitalism’s own instruments against the market, using private actors to supplant government while simultaneously subordinating market forces to preconceived economic objectives.
Based on the disaster that EVs have created for auto manufacturers selling to the American market, one would hope that the fallacy of planning would be killed off and buried once again. But then again, as Benjamin Franklin noted, “He who lives on hope dies fasting.” “Planning” must be actively defeated and, more to the point, the case against it must be reiterated as often as possible to preclude another recurrence.
