Tag: GM. sustainability

OM in the News: Artificial Intelligence vs. Sustainability

Google just released its environmental report. It doesn’t make for comforting reading. Despite the tech giant’s best efforts to operate its business sustainably, GHG emissions rose 13% from a year earlier and are up almost 50% compared to a 2019 baseline.

The reason? Artificial Intelligence. Or rather the expansion of data centers required to service the needs of its insatiable appetite.  But as The Wall Street Journal (July 8, 2024) writes, Google isn’t alone in this. The sustainability reports of other tech firms tell similar stories. 

Of course, it is not just the power demands of data centers that are driving up the emissions numbers. It is the construction of the infrastructure that is also carbon heavy. So we won’t know if any of the efficiencies AI brings truly offset its environmental costs until those centers are all up and running.

Google and Microsoft have vowed to slash emissions by the end of the decade, but new disclosures show their numbers are moving in the wrong direction. The AI boom is substantially responsible for the lack of progress. Large language models like ChatGPT are powered by energy-intensive data centers, and AI is projected to increase electricity demands from data centers by 50% by 2027.

To address the issue, they’re getting creative. Amazon Web Services is pursuing a deal to buy energy directly from a nuclear power plant on the East Coast. Microsoft has eyed small-scale nuclear, too, and unlike many of its peers, it is an enthusiastic purchaser of carbon offsets. Google’s sustainability report was accompanied by an announcement that it had partnered with BlackRock to build a one-gigawatt pipeline of solar capacity in Taiwan. The company also touted its data center efficiency metrics, saying Google-owned data centers are 1.8 times more energy efficient than average.

Despite these efforts, now that the numbers are trickling in, it’s becoming clear that the growth of AI has presented real challenges to tech companies that have long sought to position themselves as climate leaders.

Classroom discussion questions:

  1. High tech firms have long promoted their sustainability goals. What can they do now that AI is demanding massive new sources of power?
  2. How is this an operations management issue?

OM in the News: Tesla’s Secret Source of Cash

For years, Tesla has hauled in revenue by selling credits to other carmakers that needed to offset sales of polluting vehicles to U.S. consumers. “These sorts of transactions have largely been shrouded in secrecy — until now,” reports Industry Week (June 3, 2019). GM and Fiat Chrysler just disclosed that they reached agreements to buy federal greenhouse gas credits from Tesla.

The deal with GM will come as a surprise to those who thought years of sales of plug-in hybrid Chevrolet Volts and all-electric Chevy Bolts would leave GM in the clear with regard to regulatory compliance. But demand for its battery-powered vehicles will still be dwarfed by its gas-guzzling trucks and SUVs in coming years. Fiat Chrysler disclosed agreements to buy credits from Tesla that were reached in 2016, 2018 and earlier this year. Fiat says that “U.S. standards are getting stricter at a pace that far exceeds the level of consumer demand for electric cars that is required for compliance.”

Tesla has generated almost $2 billion in revenue from selling regulatory credits since 2010. Its home state of California has a mandate that requires carmakers to sell zero-emission vehicles in proportion to their share of the state’s auto market, which is the largest in the country. If manufacturers don’t sell enough non-polluting vehicles, they have to purchase credits from competitors like Tesla to make up the difference.

GM’s credit purchases illustrate how challenging the U.S. fuel efficiency requirements are getting, even for automakers that are adding more zero-emission vehicles to their lineup. While all automakers complied with U.S. rules in model year 2017, most large manufacturers cashed in credits to get there.

Classroom discussion questions:

  1. The cost of purchasing greenhouse gas credits is a direct cost to those purchasing standard internal combustion engine cars. Is this a fair cost to those customers?
  2.  Tesla’s owners also purchase less gasoline per mile traveled and therefore pay fewer taxes to maintain roadways. Should this disparity be addressed?