When will the battery electric vehicle consensus break?
As regular readers of Emissions Analytics’ newsletter will know, the evidence clearly points to using full hybrid electric vehicles (FHEVs) as the best route to rapid, low-risk decarbonisation of cars and vans for the next decade. FHEVs cannot deliver the biggest aggregate reduction in principle, but with scarce battery resources and higher manufacturing carbon dioxide (CO2) emissions of battery electric vehicles (BEV), FHEVs can deliver more CO2 reduction now, and potentially for some time to come. As the evidence for this is strong, yet the argument is losing traction, we wanted to explore the paradox.
Perhaps the answer is that – for now – BEVs work for everyone. The buyers are early-adopters, excited by the prospect of an iPad-on-wheels. Industry is embracing the opportunities for disruptive innovation, competitive advantage and reputational gains, encouraged along by the incentive to avoid fleet average CO2 fines. Environmental groups, broadly, are taking the position that fewer private vehicles are desirable, but, to the extent they are needed, at least BEVs are 'zero emission.’ Governments are appreciating an apparently simple policy position to reduce climate change, solve air quality and extinguish the smell of Dieselgate in one go.
Reviewing the facts, let us look at the data, all from Emissions Analytics’ independent testing and modelling:
References:
1. Super Size EV Automotive's obesity crisis
2. Schrödinger’s Car
3. Cutting pollution and improving public health
4. The septillion particle problem (literally)
5. Gaining traction, losing tread Pollution from tire wear now 1,850 times worse than exhaust emissions
These figures are based on facts today for the developed world, rather than future scenarios and projections, except for a forward trajectory of decarbonisation of the electricity grid, which is a highly likely trend despite Europe reopening coal power stations for this winter. The conclusion can only be that it is a mixed scorecard: BEVs cut CO2 emissions by 19% compared to FHEVs (and by more than half compared to traditional ICE) at the price of being bigger, heavier and more expensive, plus some elevated non-exhaust emissions such as tyre wear. Even though they are non-zero, hybrid emissions are all substantially under the regulatory limits. Furthermore, the table does not include the utility limitations of BEVs, and the increasing danger to other cars in accidents, owing to the mass.
Ordinarily, such a mixed scorecard would lead to a mixed market of BEVs, FHEVs and internal combustion engine (ICE) vehicles, where the needs and means of different buyers are matched to the available products. If pollution externalities were also internalised through appropriate taxation, that market could also reach an efficient equilibrium. Currently, however, policy is simply seeking to ban alternatives to BEVs based on a false ‘zero emissions’ promise.
The issue is not just that the emissions reductions of BEVs are not as big as billed, but that most people will not be able to afford BEVs at these prices. In 2022, prices have gone up owing to inflationary pressure on battery materials. The suggested BEV:ICE price parity point of $100 per kWh was meant to have been reached by now, but has been put back to mid-decade at least. More widely, average real incomes in the developed world are under pressure. So, this policy is likely to price people out of cars. Maybe this is the point?
One hypothesis to consider is that policy makers are fully signed up to the argument that private transportation is the main source of environmental ills, and therefore must be curtailed. Groups such as the European Institute of Innovation and Technology Urban Mobility Initiative say, “We want to see a massive shift. We want fewer cars”. While this may be beneficial in congested and networked cities, it is harder to argue elsewhere. For those against cars on principle, not only could higher purchase prices be welcome, but also range anxiety, usually billed as a negative, may actually be a good thing if it reduces vehicle miles driven, helped out by insufficient charging infrastructure. FHEVs do not fit the mould because they are not zero emission, have no range anxiety, and they are hardly more expensive that traditional ICE vehicles, so do not discourage private driving.
Taking the policy argument further, reducing private transportation may also ameliorate problems of congestion, and the associated pressure to spend on road expansion. Increasing public transport usage would go some way to resolving the economics of buses and trains, which have always been a challenge outside of dense urban centres, and which were rendered dire as a result of Covid. In this way, some governments are attracted by anti-car arguments of certain interest groups.
In support of this hypothesis, consider the proposed Euro 7 emissions regulations. Why is so much effort and priority being put into a regulation for making pretty clean tailpipes a bit cleaner? It is inevitable that the effects of the regulation will be to make ICE vehicles more expensive, and close the price gap with BEVs. Even setting aside hybridisation, if we were serious about getting rapid emissions reductions, the unequivocal number one policy objective would be to get older ICE vehicles replaced with the latest ICE models, which have much lower emissions. Making new vehicles more expensive impedes this process.
The alternative hypothesis is that cheaper BEVs will come to the market to maintain mass private mobility. Such cars, with lower price premia over equivalent ICE vehicles, are already coming to market, such as the MG range. Other manufacturers, such as Volvo, are making rapid shifts towards all-electric ranges, while new entrants such as BYD are arriving. What is common between many of these is that they are Chinese owned – MG by SAIC and Volvo by Geely. China’s current powerful position in mining and refining battery and electric motor materials, together with its lower labour costs and state subsidies, allows it to price vehicles at a level that rivals cannot match in the market. This competitive advantage is then being used to expand along the value chain into finished car manufacturing and assembly, branding and sales. By the time developed countries have built their mining and refining infrastructures, China is likely to have captured a significant proportion of worldwide automotive economic value, finally usurping Europe, the US and Japan’s historical leadership in engine and hybrid technology. It is even quite likely that most of this infrastructure will never be built, as the competitiveness of China in part rests on its willingness to pollute air, soil and water through its manufacturing more than would be acceptable elsewhere. In this case, visibility of and control over the supply chain and, by extension, product lifecycle CO2 emissions would be restricted, so targeting it meaningfully would be difficult.
So, when it comes to the choice between curtailing private mobility and ceding significant economic value to the Chinese, the current BEV consensus may start to fall apart. Even then, some will prosper. Premium European manufacturers may be able to make more profit, even on lower sales volumes, by going up-market with highly innovative eco-flagships. Those of significant personal means or without the need to travel for work, may find the lower level of economic activity and congestion attractive. Governments may be happy if air quality targets are met. But the general population, reliant on private transportation for day-to-day life, may find themselves colliding with their governments. What feels like a win-win BEV policy now, may rapidly turn into a lose-lose for Europe.
Looking at the latest new car sales figures in the UK, there is evidence of what the revealed preference of the car-buying public might be. The share of FHEVs has risen to 11.6% over the last six months compared to 9.9% in the previous period, while the BEV proportion fell to 14.1% from 16.4%, despite on-going retail subsidies and hidden subsidies through emissions regulations. However, the trend is quite variable, and this is more likely to be just a pause, with all the investment by manufacturers into BEVs and the large pipeline of products about the hit the market.
Ultimately, there is only one way really to solve the greenhouse gas emissions problem: nuclear energy as substantial baseload electricity on top of which cheap and clean, but intermittent, wind and solar power can prosper. When you have a world economy and society built on the plentiful energy of fossil fuels, the only way to transition away is to an alternative plentiful fuel supply. As we need to do it as quickly as possible, we can only use existing nuclear fission technology, although this includes innovations such as small modular reactors. If we do this, many options become possible, that can compete in the market against one another: green hydrogen, synthetic liquid fuels, ammonia, methanol, battery vehicles, and so on.
While we scale up the nuclear energy industry, which will take a few decades, it may be simpler and more effective to taxi gasoline and diesel more, to compensate for as much of the environmental externality as possible, consistent with preserving widespread private mobility. Pushing for BEVs is an expensive way to discourage travel, with a huge deadweight cost of forcing a largely unnecessary change in powertrain. It also sets up future geopolitical grief, as powerful fossil fuel interests are swapped for powerful mining and refining interests. However, for a while, governments will like the policy because it paints a simple, compelling net-zero story – until their electors realise the actual costs and consequences.
Emissions Analytics will continue to bring independent data to inform this evaluation, updating it as new information arises. We are neither pro nor anti bicycles, walking, horses, skateboards, flying, biofuels or Hummers in themselves. What we are in favour of is actually reducing emissions, rather than virtuous noise. Yes, there is a value to policies that are simple to communicate, but not if they do not work.