Climate change is an indisputable reality; it is also a scientific consensus that human emissions of carbon dioxide and other greenhouse gasses are a primary driver of climate change. However, the overall consensus on a problem doesn’t imply an easy solution to it. Although the policymakers seem determined to proceed with green energy solutions as fast as possible, there are voices calling for caution, as many issues with regard to the process of transition remain highly uncertain.
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If humans caused climate change, it should be up to us to eliminate the causes and save the world – and ourselves – from the seemingly imminent disaster. But is it possible? Can we totally eliminate emissions by using 100% green fuels? Can we do it without throwing our economy into chaos? Are green fuels economically viable? Can we save the planet without lowering the quality of our lives? Can technology help?
Governments Push, Consumers Pull, Producers Abide
As the scientific community tries to answer these questions, many countries are taking steps to what they see as a greener future – by eliminating coal plants, transferring to solar and hydro sources of power, etc. The rising climate change awareness is shifting demand toward more environmentally friendly goods, pushing businesses to take steps in the “green” direction even before they are required to do so by governmental regulations.
Transport accounts for around 30% of global carbon emissions, and around three-quarters of these emissions come from road transportation. As such, road transport is the largest single contributor of GHG emissions – so it was to be expected that much of the “green” effort would be directed at vehicles.
When we say “electric vehicle”, the first names that come to mind are the obvious EV players, such as Tesla (TSLA) and the Tesla-wannabes like Lucid (LCID), Rivian (RIVN), and Fisker (FSR). However, all major global automakers are now producing EVs and hybrid vehicles; some have set plans to fully eliminate internal combustion in the next decade.
Bentley, a subsidiary of the Volkswagen Group (DE:VOW), won’t produce any combustion engines by 2030; General Motors (GM) plans to phase out internal combustion vehicles by 2035; Honda (HMC) will do that by 2040.
Jaguar Land Rover, a subsidiary of Tata Motors, and Mercedes Benz plan to become all-electric by 2030; by that year, 25% of Mazda’s cars will run on batteries. Volkswagen says that battery EVs will be 70% of its sales in Europe and 50% in the U.S. in 2030; by that year, Volvo (DE:VOL1) will make only electric cars.
Elon Musk said last year that “given how quickly the world is shifting to electric vehicles, a gas/diesel vehicle bought today will probably have low resale value.”
Although he’s obviously vested in the issue, it looks like Musk is onto something: The UK says it will ban sales of new petrol vehicles from 2030; the European Parliament voted for a ban on sales of petrol and diesel cars by 2035, followed by California (and some other states in the U.S. may follow suit soon enough). Japan and others are also aiming for a ban by 2035.
Can We EV the World?
Although electric cars are currently only about 1% of the global vehicle fleet, that percentage may surge more rapidly than many can imagine. In 2021 alone, the sales of electric passenger vehicles, including plug-in hybrids, doubled worldwide to about 9% of all car sales that year. The surge in oil and gas prices in 2022 is expected to hasten the shift in consumer behavior; battery-powered cars are forecast to rise to 40% of total global sales in 2030.
If that forecast is correct, it could translate to adding between 25 and 40 million EVs a year, which, in turn, would more than substantially raise the demand for batteries. Still, all the efforts to switch to electric cars could run into a wall: the world doesn’t yet have enough capacity to manufacture the batteries necessary to power all those cars.
With all the plans for expansion, the six established global battery-makers can make up for about half of the expected demand at best; the success of any new producers in this capital-intensive field is highly uncertain.
Meanwhile, surging demand for batteries has led to a sharp spike in battery metal prices, especially lithium, whose price has soared by 250% from last year; cobalt & nickel are also becoming pricier. That’s pushing up battery costs in 2022 – after a decade of improving cost efficiency.
It should be also noted that most of the battery metals are mined in politically and/or economically unstable developing countries, which makes the future production plans highly uncertain, as mines can be shut down or nationalized.
In addition, the child labor issues in the cobalt mines of Congo push away Western producers, while the low grade of Indonesian nickel (about 40% of global output) requires a lengthy smelting process with extra high carbon emissions – defeating the very purpose of the “green” battery-making.
The most troubling issue about batteries isn’t metal scarcity or costs, but Western dependency on China, which dominates the battery market with close to 80% of global manufacturing capacity. After taking into account the plans of European and U.S. producers to expand capacity, in 10 years from now, China will supply “only” 70% of all batteries.
Add that to the fact that most new battery-metal mines are expected to be China-owned, while Chinese companies refine from 70% to 85% of these metals, and you get the picture.
It’s the Infrastructure, Stupid
In many places, including large parts of the U.S., the electricity infrastructure is incapable of withstanding the load. In the U.S. alone, the full electricity supply chain will need about $100 billion of investment to meet demand by 2030. In Europe and Asia, where consumer demand for electric vehicles is, and expected to remain, higher than in the U.S., the need for infrastructure investment may be higher even when considering better quality grids in some parts of the EU.
However, before you transmit the electricity through your faulty and outdated power grids, you need to produce it first. Will there be enough electricity generated to power the expected six-fold increase of EVs on the road? If all cars went electric, the U.S. alone would need to increase its power production by at least 40%. Can all that additional power come from renewables, or will we have to use fossil fuels to power up our “green transition”?
As we watch the grim results of Germany’s failed attempt to fully decarbonize its economy by replacing its fossil fuel and nuclear plants with wind and solar energy, the renewable sources are still incapable of replacing our current energy needs. This is even before adding millions of charging stations to our power requirements.
Furthermore, what about the mining of the metals needed for massive electrification? For example, copper: there are no power lines without the red metal, but extending a mine takes 10 years, and opening a new one takes 30 years. The mining and refining processes of the industrial metals emit carbon and toxic heavy metals into the air and the earth, putting a heavy question mark on the “greenness” of the result.
All these considerations are not unknown to the vehicle producers, but while most car makers give in to governments’ push and the consumers’ adoption of the green agenda, not everyone complies with the hype. Toyota, the world’s largest automaker and a hybrid pioneer, isn’t planning to go all in on EVs, limiting them to about a third of its production by 2030.
Unswayed by environmentalists’ outrage, the company says that the global vehicle market isn’t ready for the complete switch to EV due to the high cost of the vehicles as well as a lack of infrastructure. Toyota’s chief Akio Toyoda called EVs “overhyped” back in 2020.
Another major car maker, BMW (DE:BMW), says half of its sales will be battery-powered by 2035. However, the company has no plans to go all-electric. BMW CEO Oliver Zipse advocates against government bans on petrol car sales, saying that EVs are still too expensive to replace them.
Electrification is Not a Simple Solution
To sum it all up, electrification is clearly not a simple solution for eliminating transport emissions. Of course, EVs are good for the environment as they emit much less CO2 in the driving process. Nonetheless, producing electric vehicles, on average, leads to significantly more emissions than producing petrol cars; EVs run on electricity that isn’t carbon-free at source (and won’t be for a while at least).
As electric cars are much heavier than gas-guzzlers, they use more energy per person transported, which is environmentally wasteful. Battery metals mining and production are monopolized by China and/or suffer from horrible working conditions. It also harms the soil and causes air contamination. Besides, EVs are still too expensive for most people, making them a solely rich people phenomenon.
What’s more, the focus on electric vehicles may be not only unproductive but harmful (besides the losses incurred by investors in the money-burning EV producers’ stocks). The hype around EVs leads to over-concentration on battery electric vehicles almost to the exclusion of other technologies.
The complacency that electrification is creating leads us to a dangerous place, as other, possibly more sustainable solutions, don’t receive enough attention causing lack of effort and funding. As we’ve all learned from Germany’s botched renewable energy strategy, putting all eggs in one basket never pays off.
All in all, it looks like the commodities consultant François Lambert was right when he said (quoted in The Economist), that the EV industry “is going to be living a big lie for quite some time.” However, we don’t have to take part in the pretense.
