Before visiting this website, you should confirm that you are a qualified investor within the meaning of the Prospectus Regulation (EU) 2017/1129 of 14 June 2017.
You should make sure that the rules you are subject to allow you to subscribe to shares and/or units of the Collective Investment Schemes (“CIS”) mentioned on this website. Certain rules (including rules on public offering and/or marketing of CIS) may, depending on the country where the CIS are marketed, impact the marketing options for CIS and restrict the marketing thereof to certain types of investors.
I hereby acknowledge that I am aware of the rules applicable to me and I wish to access this website.
By accessing this website, I confirm that I have read and approved the legal notice
"Legal Information and Website Terms and Conditions of Use".
As floods and wildfires threaten communities around the world, the need for dependable climate solutions is rapidly growing. Are electric vehicles (EVs) a credible solution to global warming, or does their carbon cost pollute their green image? The current research is often conflicting, making it particularly difficult for consumers and regulators to make up their minds. But where do these discrepancies come from? And which publications matter to policy makers and end-consumers?.
These events are, perhaps, the first milestones of a new cycle of international tax harmonisation after “thirty-year race to the bottom on corporate tax rates”, in the words of the US Treasury Secretary Janet Yellen.
TAKING A STEP BACK: A LOOK AT THE ENTIRE VALUE CHAIN
The concept of ‘life cycle assessment’ (i.e. emissions associated with every single stage in the life cycle of the car and its fuel) helps us to evaluate the green credentials of EVs. Life-cycle stages range from mining, production and manufacturing to fuel consumption and end-of-life processing.
When comparing cars with an internal combustion engine (ICEs) to battery electric vehicles (BEVs), the main differences in terms of life cycle emissions originate from both the powertrain and fuel technologies.
The latest transport emissions data from the International Energy Agency states approximately 11% of all global emissions in 2018 are linked to passenger road transport. So, a shift from ICEs to BEVs should logically result in a significant emissions reduction. While EVs generally do not directly contribute to carbon emissions thanks to their battery-powered engines, we do need to consider the carbon intensity of the electricity mix used to charge these batteries, especially when developing future regulation. This is challenging, as the electricity mix varies from region to region, and its corresponding carbon intensity is not always accurately calculated. Interestingly, EVs can become ‘greener’ throughout their lifecycle when the electricity grid switches towards renewables. This is obviously not the case with ICEs..
Geographical differences in carbon intensity for electricity production (gCO2/kWh)
Source: International Energy Agency, 2020
AN APPLES-TO-APPLES COMPARISON, AT LEAST WHEN COMPARING CARS
When we look at life cycle emissions, it is important to compare cars with similar characteristics. It does not make sense to compare an electric SUV, like Tesla’s Model X, with a much smaller Toyota Yaris with an internal combustion engine. Since an electric SUV requires a larger battery, the amount of raw materials required for its battery production increases, next to the augmented electricity consumption for battery charging, thus likely making it more carbon emitting than a small EV. Hence, one should take the vehicle size into account when comparing BEV with its ICE counterpart; size does matter.
Furthermore, assumptions on the emissions associated to battery production tend to be inaccurate. According to scientists at the Eindhoven University of Technology, these emissions are often much lower than assumed, likely due to the use of approximations and secondary data. In addition, estimates on battery lifespan range from 150.000 kms to 400.000 kms or more – a dramatic difference. However, consensus is generally skewed towards the upper side of the range. Furthermore, in a rapidly evolving industry like battery technologies, one should also take forward-looking data into account. As batteries keep evolving, their range is only expected to increase.
These different estimates and variations can be a breeding ground for misleading articles: Researchers from the Transport & Environment agency identified several publications with misleading comparisons, using outdated data for the EV market and relying on the most recent data for conventional vehicles. In short, data accuracy and transparency remain crucial.
THE BROADER ENVIRONMENTAL IMPACT GOES WELL BEYOND CARBON EMISSIONS
Other environmental benefits, such as air pollution, need to be considered too in policy-or purchasing- decisions. By replacing conventional cars with electric ones, harmful ‘nitrogen-oxide’ and ‘particular-matter’ emissions are avoided. According to recent research1 , the latter caused almost 1.5 million deaths worldwide in 2018. But particulate matter is not only linked to exhaust emissions. So-called ‘non-exhaust’ emissions, i.e. particulate matter emitted from tyre wear, brakes, road surfaces and from the resuspension of road dust are getting more attention lately. Emerging evidence shows EVs are estimated to emit 5-19% less ‘larger particular matter’ (PM10) from non-exhaust sources per kilometre than ICEVs, across vehicle classes. However, EVs do not necessarily emit less ‘smaller particular matter’ (PM2.5) than ICEVs. Although lightweight EVs emit an estimated 11-13% less PM2.5 than ICEV equivalents, heavier EVs emit an estimated 3-8% more PM2.5 than ICEVs. The OECD states that consumer preferences for greater autonomy and larger vehicle size could therefore drive an increase in PM2.5 emissions in the future.
LESS DOUBT FOR REGULATORS, CONSENSUS AMONG CAR MAKERS
Luckily, the debate among car makers seems to be over. With an increasing number of EU and UK car manufacturers setting hard targets on the phase-out of conventional cars, it seems like road transportation’s carbon emissions will reduce significantly. But make no mistake, the European shift is mainly driven by the 2020-2021 EU car regulations, which impose heavy fines on missed carbon intensity targets. Transport & Environment expects electric cars to increase from 1.3 million at the end of 2019 to 44 million by 2030 (+3285%), across Europe. This figure is in stark contrast with the EU’s ambition of 30 million EVs by 2030.
Overview of scope 3 climate targets of some car manufacturers active in Europe)
Source: Firstpost, 2021
Globally, more than 20 countries have announced a ban on ICEs by 2035 (or sooner) and several countries have launched EV purchase subsidy programs (e.g. France, Germany, Austria, UK). The Biden administration recently announced new proposals to decarbonise their transport sector. Over half of all new US vehicles sold in 2030 will need to be zero-emissions (currently at 3%). This will require factory conversions, ramped up battery production and increased charging infrastructure. In fact, 2.4 million public EV charging points will be needed by 20302 , significantly more than the existing 100,000 points and the Administration’s ambition to build an additional 500,000 points by 2030. Several incentives are planned to promote the shift (e.g. EV tax credit), but US consumer preferences will remain a considerable challenge: their preferences for trucks and SUVs increase the barriers towards electrification. China is advancing quickly though, with the government targeting a 20% EV penetration of by 2025. EV sales are already booming with almost 1 million cars brought to the market in 2020.
SO, WHAT’S NEXT?
We’d like to stress the importance of looking at all assumptions before forming a conclusion on the life cycle emissions of electric vehicles. Compare apples with apples and remember that life cycle emissions differ according to the model, manufacturing location, battery size and the local electricity mix. Furthermore, data accuracy and transparency remain key. But, based on latest available research, we can confidently state that – already today– globally (and especially in Europe), BEVs and fuel-cell EVs have much lower life cycle emissions compared to ICEVs, regardless of geographical scope.
Life cycle GHG emissions of average medium-size ICEV and BEVs across different regions in 2021
and projected to be registered in 2030
Source: International Council on Clean Transportation, 2021
The publication debunks several myths and is fully transparent in its methodology. Some of the main assumptions made for the assessment include3 :
4 regions are assessed, with their respective electricity mix based on IEA data;
A medium-size ICEV is compared to a medium-size BEV;
GHG emissions of vehicle production, maintenance, and recycling as well as fuel and electricity production and consumption (i.e. both vehicle and fuel cycle) are combined into a single value based on the functional unit of gCO2 eq./km traveled;
Emissions corresponding to the construction and maintaining of the infrastructure are not considered (due to limited impact and similarities).
the ICCT urges policy makers globally to phase out ICEVs within the next 15 years. BEVs powered by renewable electricity and fuel-cell EVs fuelled by green hydrogen are the only two technologies that fit within the 1.5°C global warming framework. Hybrid or biofuel models only have a transitional role to play as they are still too polluting in the long term.
From a sustainable investment point of view, one needs to focus on carmaker’s transition details (curve/speed, dynamic shift capacity, flexibility of production), the fuel cell/battery tech development, supply chain management, production intensity, and lastly governmental views on hybrids’ role. Furthermore, from a value chain approach, it will be interesting to assess who’ll be the winners and losers when making the shift to BEVs (and hybrids during the transition period), since technological evolutions are still expected.
If you want to strengthen your debating skills on vehicles, we highly recommend you to have a look at reports from the International Council on Clean Transportation or following recent publication in Nature Sustainability.
1Data stems from a recent report from Harvard University, in collaboration with the University of Birmingham, the University of Leicester and University College London. Note that the scope entails mortality due to fossil fuel emissions in general (i.e. not solely due to transport emissions). According to the publication, more than 8 million people died in 2018 from fossil fuel pollution. Researchers estimated that exposure to particulate matter from fossil fuel emissions accounted for 18 percent of total global deaths.
2According to research from the University of Princeton.
3More details on the methodology can be found in the ICCT report