Do Humans Dream of Electric Cars?
Written by Shawn Funk
The market for electric vehicles (EVs) is picking up steam.
In 2019, worldwide greenhouse gas emissions (GHG) totalled 50 billion tonnes (Ritchie et al., 2020). In a bid to reduce GHGs, some countries, Canada included, have decided to ban and phase out the internal combustion engine (ICE) for use in passenger cars and light trucks and focus exclusively on EV production by 2035 (Young, 2021). This ban will create a large demand for EVs in the next two decades, leading to a massive shift in resource production and an increase in electricity production (Hopper, 2022). I am skeptical that this plan will have the desired effect, so I have decided to do a little digging to understand just how much of a reduction we can expect from a wholesale swap from the internal combustion engine (ICE) to the EV.
It is important to understand how much GHG is emitted through transport. There are currently 1.446 billion vehicles on the road worldwide (Hedges & Company, 2022). China and the U.S. account for 40 percent of these vehicles, with 315 million and 290 million, respectively (Monica, 2022) (Hart, 2022). In 2019, road transport accounted for 12 percent of global GHG emissions (Ritchie et al., 2020). Light trucks and passenger cars make up about 60 percent of the total emissions from road transport. This means that if every country made the change from the ICE to the EV for passenger cars and light trucks, global emissions could be reduced by about 3.5 billion tonnes per year, or 7.2 percent, if the electricity used to charge the EV is zero emission (Ritchie et al., 2020).
While the mix used to generate electricity varies by country, so does the efficiency of the EV. EVs significantly reduce lifetime emissions over conventional vehicles but still need to be cleaned. Depending on where your battery is produced, it can create around 100 kg of C02 per kWh, higher if it is produced in Asia and lower if produced in Europe or the U.S. (Hausfather, 2021). The battery accounts for about half of the total lifetime emissions of an EV; the rest is emitted through electricity production, which varies in different countries (Hausfather, 2021). Even so, the dirtiest electric cars are still comparable to the lifetime emissions of gas hybrids (Hausfather, 2021). Compared to conventional automobiles, a Nissan Leaf emits a third of the C02; this is one of the smallest and most efficient EVs currently on the market; EVs will have different efficiency levels depending on the performance levels (Hausfather, 2021). It would be fair to say that EVs could reduce passenger vehicle emissions by almost 60 percent, making up about 4 percent of the total GHG emissions. The investment here seems to outweigh the return. EVs are cool but are not the magic bullet to ending the climate crisis.
Generating electricity is the leading cause of GHG emissions worldwide, producing 31 percent of total emissions (Ritchie et al., 2020). Depending on your country’s electricity mix, your EV will generate more or less GHGs. Canada derives around 80 percent of its electricity from “clean” sources: nuclear, hydro, wind, and solar (Statistics Canada, 2022). However, the two biggest GHG emitters in the world are U.S.A. and China, are far behind. In the U.S., 60 percent of their energy is produced by combustible fuel sources. In China, 80 percent of their electricity is generated from combustible fuels, with 55 percent of the total output coming from coal (EIA, 2022 Nov, 1) (EIA, 2022 Aug, 8). As of now, coal is the largest source of electricity, and production continues to rise, producing almost 40 percent of global electricity (Pearce, 2021). The transition from ICEs to EVs will increase the demand for electricity worldwide, which means there will need to be an increase in supply to keep prices steady. This new energy supply must be generated using a mix of nuclear, hydro, wind, and solar to reduce GHGs.
One of the main problems with the production of EVs is the availability of the materials needed to build the lithium-ion battery (LIB), the main component in an EV comprising 40 percent of the total cost of the car. The battery comprises lithium, cobalt, manganese, nickel, natural graphite, and others (United Nations, 2020). Currently, only a few countries produce the raw materials needed for lithium-ion batteries. The Democratic Republic of Congo produces most of the cobalt supply; lithium mostly comes from Australia and Chile, graphite from China and Brazil, and manganese from South Africa and Australia (United Nations, 2020). Demand for these resources has created massive price swings in recent years. For example, between 2015 and 2018, global lithium production soared by 170 percent, triggered mainly by the demand for LIBs (United Nations, 2020). During this time, the price of lithium metal jumped from $ 62 498 USD per tonne to $145 973 USD per tonne, while the price of cobalt soared to $92 000 per ton from just $22 650 (United Nations, 2020). The overproduction of these resources led to a supply glut, sending the price of cobalt plummeting 71 percent by July 2019 and lithium down 39 percent by September 2019 (United Nations, 2020). As demand continues to wreak havoc on the supply chain, the prices for these materials will continue to be volatile, creating economic uncertainty for car manufacturers who will need these materials in large volumes (Foote, 2022).
The human and environmental costs of mining are steep. New mines will need to be put into production to meet the new demand for lithium and cobalt, which will put a strain on sensitive areas of the environment. Lithium mining uses approximately 1.9 million litres of water to produce one tonne of lithium (United Nations, 2020). In Chile, it is estimated that 65 percent of the groundwater in the Atacama is used in the lithium mines, forcing locals in the area to migrate from their ancestral lands for lack of adequate drinking water (United Nations, 2020). Moreover, most of the world’s cobalt is produced in the Democratic Republic of Congo, where workers use crude hand tools and shovels to unearth the resource, scattering the landscape with sulphur-rich tailing ponds that produce acidic compounds in the air (United Nations, 2020) (Frankel, 2016). DNC companies are notorious for employing children in their mines (Frankel, 2016). Because of these flagrant human rights abuses, some manufacturers are attempting to create batteries that use less or no cobalt in their chemistry. However, it is still a major component of high-performance LIBs. Still, mining is the most dangerous job in the world; about 12 000 deaths are recorded every year in the industry, with much more unreported (Lang, 2010). Given the increase in demand for battery materials and electricity, we can expect those numbers to increase as the number of mines increases.
Here are my two cents. Given the above information, I think the ban on ICE is excessive. I am not saying that we should continue to use ICE vehicles indefinitely. Instead, I am suggesting that the rush away from them is not reasonable, given that replacing our ICE vehicles with EVs will only reduce global GHG emissions by a small percentage. Further, the ban will create artificial demand for the resources used in LIBs, which can destabilize the markets for these resources and lead to wild price swings as companies rush into the sector, bringing with them market speculators that hope to cash in on the volatility. Volatility is anathema to large companies that rely on accurate forecasts to budget accordingly and remain profitable. Supply needs to be met sustainably and under the power of the free market. Government interference leads to the misallocation of capital, creating bubbles in the market. Remember what Elvis said, “fools rush in.” Rapid growth can result in an oversupply which causes prices to crash.
Conversely, undersupply of these resources will drive up prices and create long wait times for new vehicles, much like we are now seeing in the auto sector. Take a drive past any dealership in town and notice how empty the lots are. We need time to grow these sectors sustainably, and they need to be driven by free market exchange rather than artificial demand created through government policies. The environmental and human costs will increase as demand increases, putting more pressure on the environment and the people who live in proximity and work in the mines that produce materials for LIBs.
Instead of trying a big hail Mary with a brand-new industry that is riddled with uncertainty and hardly exists yet, (EVs make up about 2.2 percent of total vehicles on the road), might we be better off focusing on the biggest emitter, which is the production of electricity, and allow the EV market to develop organically as the infrastructure for these vehicles is built-up over time. Passenger cars and light trucks only account for around 7 percent of GHG emissions. In a perfect scenario, only a fraction of that 7 percent can be reduced because of manufacturing and electricity generation emissions. This reduction is minuscule compared to the easy gains we can make working on our global electricity mix. I will attempt an analogy here for all the gym bros out there. If you want to gain muscle fast, you must work the biggest muscles in your body with big compound lifts. Your workout routine will not be effective if all you do is work on your biceps; those are small muscles that can be developed after you make the big gains doing squats, deadlifts, and various presses using the largest muscles in your body, mainly the legs. Want to make easy gains? Work on your squats!
Similarly, why focus on the 7 percent of emissions that comes from passenger vehicles and light trucks when we can make real gains focusing on the 31 percent that comes from electricity generation while creating the much-needed electrical infrastructure that will be needed to power our cities and a fleet of over 1 billion EVs. When we have built the low-emission power stations, then we can work on electrifying everything else, but until then, aren’t we just putting the shoe on the other foot as we move our emissions upstream, creating new problems in other resource markets that are not ready for a massive spike in demand in the coming years?
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