Global warming dominated the headlines this week, despite the fact 20 people died in the fierce cold front sweeping the Eastern U.S.

China publicly blamed the West. Why not? Somebody must take responsibility for the intense droughts, fierce hurricanes, lingering heatwaves and rising sea levels many scientists predict will soon result from rising temperatures.

Beijing does have a point. We’re the world’s most blatant carbon emitter. The United States produces roughly 25% of the world’s total carbon emissions. And one third of those emissions are transportation-related. It’s those damn SUVs we can’t get enough of.

The Environmental Defense Fund, or EDF, estimates that if American cars and light trucks were a nation, they would be the world’s fifth-largest carbon emitter.

Our infatuation with motor vehicles larger than the average suburban living room seems quite comical when you stop and think for a second. Take the Hummer H2. What reasonable stay-at-home, Chanel-clad soccer mom on the planet needs a 6,100 pound “scaled-down” version of a military fighting machine to transport little Chip and Mimsy from piano practice to swimming lessons at the Country Club of Virginia on a warm August afternoon?

The Chinese may have a point. But to claim rich, industrialized nations like the United States bear the “unshirkable responsibility” for our warming planet may be a bit much.

Those are awfully strong words coming from a country that continues adding more electricity-generating power each year than the entire U.K. national grid. Last year alone, China added 102 gigawatts of new capacity — twice the total output of California.

Carbon-rich coal serves as the feedstock for most of this growth. Approximately two new coal-fired power plants are added each week just to keep up with demand. In fact, the only double-digit statistic that China’s growing by nearly 15% each year.

The fact remains that both the United States and China share the responsibility. Our two countries combine for 40% of global carbon emissions.

Scientists warn that nothing short of urgent international action to cut emissions can prevent a climate-related catastrophe.

Many people still believe in ethanol. I have no Earthly idea why.

In the United States, ethanol yielded only about 10% more energy than was required to produce it. Furthermore, ethanol can’t be transported by pipe. You have to move the fuel by truck, which becomes cost intensive considering most consumption takes place on the coasts, not the Corn Belt.

It gets trickier.

According to Martin Hoffert, physics professor at NYU, we would need more than 10% of the world’s landmass (or the equivalent of all the land currently under cultivation) to grow enough biomass to meet the world’s energy needs.

It’s looking grim… But consider this: The diesel engine.

Diesel-powered cars generally have about a 40% better fuel economy than equivalent gasoline engines and produce only about 69% of the greenhouse gases.

Audi now makes a competitive race engine that runs on diesel. The Audi R10 TDI won both its maiden race at the 2006 “12 Hours of Seabring” and the 2006 “24 hours of Le Mans.” It became the first diesel to win either of those events.

Audi Sport developed and built this revolutionary 12-cylinder diesel engine that excels in both torque and power output. In its first Le Mans participation ever, the R10 TDI not only achieved the fastest race lap, but also covered a new record distance of 380 laps in 24 hours. It also dispelled the notion that diesels have to be noisy: The Audi is arguably one of the quietest racecars ever conceived.

I’m not too surprised at their success. Regardless, that helps solve the 0-60 concerns most Ford Mustang drivers must have over diesel engines…

One small-cap diesel engines company in particular has my attention. We will be highlighting this company later this year in The Offshore Speculator.

Remember, automobiles represent the single greatest source to our increasing global warming problem.

So before we jump to the hydrogen car, current engine technology capable of reducing greenhouse gas emissions by 30% without sacrificing the power seems to me to be the most logical choice.

Sincerely,
Christopher Hancock
February 9, 2007

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Christopher Hancock

Christopher Hancock lives and breathes emerging markets. He travels extensively and utilizes his contacts across the globe to recommend the best international investments in the world. After working with Citigroup in Hong Kong on the challenges and opportunities associated with the forthcoming RBM flotation reform, Christopher left many of his friends behind and decided to return to the States to pursue a career in equity research.

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