Why distributional efficiency matters
The term ‘environmental justice’ can often be used in a mushy, socialistic sense, but behind it is a deadly serious concept. Put broadly, it means that all parts of society should be treated equally under environmental law, or that everyone has the right to the same protection from pollution and other harm from emissions. More strictly, it can be seen as a form of allocative efficiency. In other words, environmental interventions should be directed where they create the most benefit, up to the point that the marginal benefit equals the marginal cost of delivery. Protection from emissions shouldn’t be the preserve of the rich or powerful, but should be judged beneficial for anyone to whom it can deliver a net improvement in the quality of life. Applying this concept is important in any free society where people are not all living in the same circumstances, with the same preferences and behaviours.
Through this lens, we can develop an additional perspective on the current debate around the decarbonisation of transport. In doing so, we can see that a multitude of solutions is the optimal approach not just because of constraints on resources, the actions of hostile states, and the state of our electricity grids, but also because people are diverse, and society’s interests are best served by giving each person the most suitable mode of transport.
Switching from an internal combustion engine (ICE) vehicle to a battery electric vehicle (BEV) is an investment. As well as the obvious financial investment on the part of the buyer, it is an environmental investment in the sense that higher carbon dioxide (CO2) emissions are generated during manufacture which are then offset during the usage of the vehicle. As a good guide, the CO2 footprint of BEVs is greater than that of ICE vehicles because of the emissions from making the battery, as the elimination of the engine and other components is roughly offset by the electric motors. Further, electricity generation according to the average mix in Europe or the US creates about as much CO2 as the oil extraction, refining and distribution. Therefore, switching to a BEV initially makes CO2 worse, until a ‘break-even’ point is reached after a period. It should be well noted that these averages are offered as a rule-of-thumb in order to simplify a complex picture and reveal the break-even concept, not to downplay the actual variability and spread in manufacturing emissions, grid mix and so on in specific places.
Estimates of how long into the life of a vehicle the break-even point is reached vary widely, as the result is sensitive to the interaction of the following main factors:
Carbon intensity of the electricity grid
Embedded carbon in battery manufacture
In-use vehicle emissions rates
Distance driven per year.
Electricity grids vary from near-zero CO2 in France to largely coal in Poland – in the latter scenario most BEVs never pay back the manufacturing CO2. Embedded carbon in battery manufacturing typically varies between 2.5 and 16 tonnes, which is driven by a combination of mining, refining and transporting the wide range of rocks and minerals required. In-use emissions from modern gasoline engines average around 184 g/km according to Emissions Analytics’ real-world EQUA testing on European vehicles, but most fall in the range from 107 g/km for the best fully hybridised engines to 248 g/km for non-hybridised sports utility vehicles. As a result, even assuming average driving distances per year, you can get almost any answer for the CO2 break-even date, depending on your location and the type of the comparator vehicles. As a guide, most commonly cited break-even points fall between two and eight years.
This analysis, however, neglects the vital element of the distance driven per year, which is often – as above – assumed away as some representative average. According to Field Dynamics, in 2019 – pre-Covid – the average UK car was driven 7,124 miles (11,470 km). The UK is around the average of European countries in this respect. The distribution of annual miles across all cars subjected to periodic technical inspection (PTI) saw the majority of cars with less than 5,000 miles per year (8,050 km) and just 0.5% above 30,000 miles (48,300 km). This matters because the fewer miles driven, the longer it takes to reach the break-even CO2 point. The table below compares trading in your old ICE vehicle for a typical BEV, rather than changing to a typical full hybrid electric vehicle (FHEV) emitting 120 g/km.
* Proportion split pro rata from original report.
On the other factors above, typical average values have been taken: average grid carbon intensity for Europe and seven tonnes of embedded carbon in the battery. Calculations here take the mid-point of the distance ranges, and the top group is assumed to have an annual mileage of 35,000. The CO2 and break-even calculations assume driving behaviour is the same between the different vehicles. It is further assumed that vehicles have a twelve-year useful lifespan on average; while many last longer than this, the number of miles driven falls rapidly as they enter a twilight life of reduced use. We should note that there is a potential bias in these numbers as vehicles are not subject to the PTI test in the UK until three years old.
These results prove that the more intensively a BEV is used, the quicker it will pay back the CO2 investment. For the heaviest users, that payback will be within one year, and deliver about ten times the overall CO2 savings than in the original battery manufacture. At the same time, the lightest users never practically pay back that investment if they switch to a BEV, only offsetting half of the battery emissions. Therefore, those light users are much better switching to the FHEV. Most crucial is the proportion of cars that fall into this category: about one third. If these people take the FHEV option rather than switching to the BEV, the overall reduction in CO2 across the fleet would be 17% greater, and the reduction in the need for scarce battery materials would be around 32%.
This proportion will of course be lower in countries with cleaner grids, where the batteries have been manufactured using cleaner energy and the in-use emissions of the ICE vehicles are higher. Equally, the proportion will be higher in the opposite circumstances.
Applying a similar calculus to the US, we see that it is generally a much more suitable region for vehicle electrification. While it shares a similar pattern of grid electricity to Europe – majority based on fossil fuels, with big variations between regions – other factors work to its advantage. First, US car owners travel around 13,500 miles (21,600 km) per year on average, almost double the European average of about 7,000 miles (11,200 km). Therefore, a US driver pays back the CO2 invested in a BEV's manufacturer in half the time. Second, US wholesale energy costs around one quarter of Europe’s, so it can more credibly and competitively build the necessary extraction and processing supply chain, rather than just the final battery assembly part. Third, North America is the global region with the highest degree of urbanisation, and BEVs offer the biggest efficiency gains in urban driving, due to powertrain efficiency at slow speeds and regenerative braking.
In summary, this analysis can be put as: why are we forcing light car users to spend more money on vehicles that actually pollute the planet more? While Zero Emission Vehicle (ZEV) mandates may be direction-finders and worthy aspirations, it is also very important we make sure that those who do convert to BEVs are the right people, from an allocative efficiency point of view. ICE bans are even more problematic than ZEV mandates because ‘success’ would be wilfully suboptimal A better approach would be to drop the bans and be highly selective with mandates, and rely more on the CO2 targets and/or carbon pricing to set the direction and then let the industry and consumers rearrange their supply and demand accordingly to deliver the best environment outcome in the most efficient, speedy and equitable way. In this way, lightly used cars would not be swapped for BEVs, saving money and CO2. That would be true environmental justice.