Fully charged: who stands to gain from the clean revolution?
Governments, manufacturers and consumers are moving towards electric vehicles – a significant shift away from fossil fuel. Global Insight assesses who will benefit and who could put on the brakes.
German carmakers are among the most powerful industrial lobbies in Europe, but that hasn’t stopped German Chancellor Angela Merkel floating, for the first time, the prospect of a Germany-wide ban on petrol and diesel cars. The move would bring her in line with French President Emmanuel Macron’s pledge to outlaw sales of petrol and diesel cars by 2040. Norway aims to phase out fossil fuel cars by 2025, and Paris has proposed to ban diesel vehicles by 2020. Manufacturers have been similarly bold – Swedish giant Volvo will only sell electric or hybrid cars from 2019.
Action at state level is the latest and most eye-catching step in Europe’s decisive turn away from fossil fuel-powered passenger vehicles, and towards electric vehicles (EVs). The Paris Climate Agreement aims to hold the increase in global average temperatures below two degrees – if possible, below 1.5 – requiring aggressive measures. Fourteen per cent of global emissions in 2010 came from the transport sector, and 95 per cent of those emissions came from the burning of petrol and diesel.
Car manufacturers are rising to the challenge, with almost all major brands including multiple hybrid and EVs in their current offerings and product roadmaps. It’s a sea change for an industry built on fossil fuels but with an image in need of rehabilitation after recent high-profile scandals. In 2015, Volkswagen (VW) was found to have intentionally programmed some engines to activate certain emission controls only in the testing environment – cars were meeting the required standards in the laboratory, yet emitting up to 40 times more pollutants in the real world.
Once the purchasing costs of electric vehicles become comparable to combustion engine cars, there will be no way back"
Javier de Cendra
Dean of IE Law School, Madrid; Vice Chair, IBA Environment, Health and Safety Law Committee
Javier de Cendra is Dean of IE Law School, Madrid and Vice Chair of the IBA’s Environment, Health and Safety Law Committee. ‘VW’s “dieselgate” scandal and its aftermath generated conclusive evidence about a global, industry-wide, massive and well planned effort to breach emissions control legislation, thereby cheating governments, car drivers and society in general,’ he explains. ‘The level of deception and thus anger reached a point that may well lead to a paradigm shift whereby petrol and diesel cars are just no longer tolerated by a significant portion of society.’’
Consumers are certainly interested, with prestige brands like Tesla building up huge excitement, and the waiting lists to match – a Tesla Model 3 EV ordered in the United States in August 2017 is likely to hit your driveway late in 2018. But, EVs are already widely available from more accessible brands like Renault, Nissan and Toyota. So what’s holding back the shift to electric, and who stands to win and lose if the tipping point is finally reached?
Price parity has been a stumbling block for many would-be buyers of EVs. Martin Schirmbacher, Partner at HÄRTING in Berlin and Co-Chair of the IBA Technology Law Committee, points out the need for manufacturers to deliver EVs suitable for the average consumer: ‘we need incentives for the industry to build cars that the average person can use. Building a product that people would buy should be the focus for now – if I buy a car, I like the idea of it being electric, but not the idea of renting another separate car to go to the south because the battery in my electric car won’t be sufficient.’
Technical issues, like the distance EVs can cover before needing to recharge, must be overcome, but they present challenges to companies built on a different method of propulsion. ‘The industry has to turn its supertankers around: for 100 years all their research and development has focused on vehicles running on petrol and diesel. Now they need to focus on battery and plugin cars. They need to shift their whole mindset,’ says Melanie Shufflebotham, Director of Next Green Car, which runs a buyer’s guide for electric cars. However, the signs are encouraging: ‘all major car manufacturers have product road maps with significant numbers of electric vehicles, and they’ve been pushed by the VW emissions scandal to accelerate the announcements,’ she says.
CDP (formerly the Carbon Disclosure Project) is an international non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests by helping companies, cities and countries to disclose their environmental data. Their 2016 report ‘Emission impossible. Which car makers are driving into trouble?’ gave a comprehensive analysis of car manufacturers’ efforts to mitigate emissions, including their investment in advanced vehicles. CDP found a mixed picture, with some clear leaders: BMW, Nissan, Renault and Toyota have all made significant progress, for example, while companies like General Motors, Ford and Fiat-Chrysler all risked financial penalties due to failures to hit environmental targets.
Luke Fletcher, an analyst at CDP, outlines charging infrastructure as a potential area for improvement in certain jurisdictions. While technological progress with regard to the parts necessary for EVs has been swift, broadening charging infrastructure needs to be a key priority for governments. ‘We have falling battery costs, there’s rising consumer demand, fewer parts are needed for EVs, which means lower maintenance costs, and these are all driving the transition; but, on the government side, the charging infrastructure needs to keep pace.’
Eighty per cent of EV charging takes place at home through regular outlets, but public availability of charging points will be needed to drive adoption of EVs. ‘There are already around 5,000 public charging locations around the United Kingdom, with over 13,000 charging connectors,’ explains Shufflebotham, whose company also operates the Zap-Map app, which helps drivers find charging points. ‘However, with the expected increase in electric car drivers, more public charging points – particularly rapid chargers – need to be installed across the whole country. There are some areas that already have a good provision, such as Milton Keynes, but others that really need more investment,’ she explains. City-dwelling younger drivers are open to adopting new, clean technologies, but often live in flats without on-street parking, making charging more complicated.
Feasible and credible
Battery life has improved significantly in recent years, increasing the range of EVs. In August, a driver in Italy claimed to have driven almost 670 miles on a single charge. ‘The price of batteries is falling dramatically, which will both bring down the overall price of EVs and also enable a broader range of smaller, cheaper cars to be introduced,’ says Shufflebotham.
There’s the possibility China will become pioneers of battery tech and the electric car industry"
Senior Analyst, Investor Research, CDP
Yet, while the UK’s rollout of charging infrastructure will help, it’s the world leader in solar panels that might prove critical to the mass adoption of EVs, according to Tarek Soliman, Senior Analyst, Investor Research at CDP. ‘China’s adoption of solar panels, and the economies of scale that came with that, led to a global fall in price,’ says Soliman. ‘There’s the possibility China will become a pioneer of battery tech and the electric car industry. Once the country puts its mind to something and has the policy conviction to follow through, the ripple effects are usually felt far and wide. China could really be an integral part of the development of the EV industry.’
Action at the national and local level has been forthcoming in recent months. Emmanuel Macron has pledged to wean France off fossil fuel cars by 2040, but is that a realistic ambition? ‘That timeline is feasible yet ambitious, and thereby credible,’ says de Cendra. ‘Even if it were possible to mandate that all cars produced this year would be electric, it would take another 15 years for existing petrol and diesel cars to be replaced by electric cars,’ he estimates.
In the short term, cities are taking matters into their own hands: Transport for London has mandated that, by 1 January 2018, all new black cabs in London must be electric models, in a bid to reduce diesel pollution around the capital. Some London boroughs broke annual limits for toxic air within days of 2017 beginning, and London is putting £18m behind the installation of hundreds of rapid charging points for battery-powered taxis, as well as consumer vehicles.
Although consumers, manufacturers and environmental standards all have much to gain from the decline of petrol and diesel and the shift to EVs, there are vested interests with much to lose, and those interests have shown a ruthless streak over the years in protecting their market shares. A new study from Geoffrey Supran and Naomi Oreskes published in August 2017 examined 187 public and private communications from Exxon Mobil. The study found that around 80 per cent of the documents prepared for internal use only acknowledged climate change to be ‘real and man-made’; just 12 per cent of public statements, including advertising, suggested that climate change was a cause for concern.
Some oil companies have seen the writing on the wall and are responding accordingly. Shell and BP have committed to installing charging points on their forecourts. The question is whether they can adapt in time: ‘everyone is jumping on this and looking at new entrants trying to grab market share before it’s taken from under their feet,’ says Fletcher. While some companies are forward-looking, others have used their influence to block or impede potential legislation, having committed to diesel in the long-term. ‘Europe adopted diesel as an economical and – so we thought – eco-friendly way of fuelling vehicles,’ says Soliman. ‘There are lots of diesel refineries, particularly supplying markets like France, owned by oil companies that might start to feel the pinch. If demand is down, that ripple effect will be felt.’ It seems likely that commercial realities will be too stark for companies reliant on fossil fuels to ignore the advantages of, and demand for, EVs. ‘The manufacturers may slow down the process but, 40 years from now, everyone will sell electric cars. Once everyone realises that, then it’s better to be in the driving seat than losing contracts to Tesla and others,’ says Schirmbacher.
De Cendra agrees: ‘once the purchasing costs of EVs become comparable to combustion engine cars, there will be no way back, since fuel and maintenance costs of the former are a fraction of the latter,’ he says. An open question is whether oil companies will simply pivot to new markets. If mature markets like China, Europe and Japan shift to a majority-EV model, will developing countries like India choose to go through decades of fossil fuel usage, or forego the cheap fossil fuels to join developed nations in a clean transport future?
How clean are the supply chains?
The development and rapid expansion of an entirely new industry – particularly in technology – presents new risks of its own. Fulfilling the backlog of EVs already ordered, plus the many millions of vehicles that would be required to displace petrol and diesel cars, will require a dramatic increase in our ability to mine lithium, the essential component for EV batteries.
The industry has to turn its supertankers around: for 100 years all their research and development has focused on vehicles running on petrol and diesel "
Director, Next Green Car Ltd
The US Geological Survey estimates around 13.5 million tonnes of lithium remain to be extracted, mostly in Argentina, Australia, Bolivia, Chile and China. Although lithium is recyclable, and many lessons have been learned over the years, the history of international companies extracting minerals is a cause for concern. It’s worth noting that Tesla, poster child of the clean car movement, is an outlier in disclosing no ustainability data at all to CDP – something even the petrol-burning giants do.
Similarly, the impressive capabilities of high-end electric cars rely on cobalt, reserves of which are heavily concentrated in the Democratic Republic of Congo. ‘Human rights and environmental degradation issues accompany that supply chain if it’s not conducted in a proper manner,’ warns Soliman, raising the question: are clean vehicles being built on the back of dirty or unsavoury extractive practices? EVs have many benefits to bring, but any new supply chain presents a new set of dangers that must be managed and mitigated, rather than simply bringing the same undesirable practices to the new transport paradigm.
Finally, the paradigm of private passenger vehicles itself may need to be challenged. The replacement of fossil fuel-burning cars with clean EVs will bring environmental benefits but, if it mirrors our population growth, it will still undoubtedly result in a net increase of vehicles on the road, with all the attendant consequences for our economy, health, environment and, of course, traffic jams. In answering the question of how to drive cars cleanly, we may just be dodging the harder question of whether we should be driving cars at all.
Nonetheless, it seems that the EV revolution is close to reaching critical mass. ‘It’s thought that, when we get to 2020, a standard EV will cost £20,000 and have a range of over 200 miles – that will be the tipping point at which people will say it’s a no brainer with the running costs,’ says Shufflebotham.
The shift will only increase as time goes on and the second hand market matures: the availability of used cars will make the pricing even more accessible for consumers. Regardless of whether manufacturers and countries are ready, commercial and consumer imperatives dictate that the days of the gas-guzzler are numbered.
Tom Bangay is a freelance journalist and can be contacted at firstname.lastname@example.org