Are Electric Vehicles really the future of low-emission transportation? That depends on where your electricity comes from

Stefan Stevanovic, Portfolio Manager Socially Responsible Investment Fund, August 2021

The recently announced Clean Car Discount Scheme made by the New Zealand Government is aiming to address New Zealand’s transport-based emissions. It attempts to incentivise consumers to buy “low-emission” vehicles by offering a rebate of up to $8,625, or to discourage them buying “high-emission” vehicles by charging a fee of up to $5,175.

According to the New Zealand Transport Agency, 47% of domestic CO2 equivalent (CO2-e) emissions come from the transport sector, where two thirds of this stem from the light-vehicle fleet (i.e. vehicles weighing <3.5 tonnes). To reach the pre-committed 2050 net zero CO2 targets, a significant transition from fossil fuel powered vehicles to low emission vehicles such as electric vehicles (EVs) will need to occur over the next decade.

Mass EV adoption will achieve the goal of substantially reducing NZ’s transport emissions.

That is not because EVs have zero tailpipe emissions, it is because New Zealand’s electricity grid is very clean where approximately 85% of electricity is generated from renewable sources such as hydro, wind, solar and geothermal energy. The other 15% comes from burning fossil fuels such as coal and gas, and effectively ensures the lights stay on when lake levels are low and there is not enough wind. Carbon emitted to generate electricity is usually quantified using a metric called an emission factor. New Zealand’s power grid has one the lowest, estimated to be about 0.13kg CO2-e for each kWh of electricity produced. When you can source electricity at such low emission factors, the EV transition then makes a lot more impact in reducing total emissions.

For example, a brand-new Nissan Leaf has a 40kWh battery and a claimed range of up to 270km. For every 10,000km of driving, and using New Zealand’s average electricity emission profile of 0.13kg CO2-e/kWh , the Nissan Leaf would be responsible for 193kg of CO2-e emissions. In comparison, the very popular similar sized petrol-powered Toyota Corolla GX has a claimed emission rating of 139g CO2-e/km. This equates to 1,390kg of CO2-e per 10,000km - more than seven times the emissions from the Leaf EV.

EVs are not the solution – clean energy is.

Petrol cars tend to produce the same emissions regardless of where they are, while EVs do not. As we have discussed above, EV adoption in New Zealand makes a  meaningful impact in reducing transport-based emissions due to the power grid’s low emission factor. However, in a country like Australia that is not the case as approximately 80% of its electricity generation comes from burning coal and gas. The power grid there has an average emission factor of around 0.87kg of CO2-e/kWh . That means, while the Leaf produces 193kg of CO2-e emissions in New Zealand for every 10,000km travelled, it would produce almost 1,300kg of CO2-e in Australia. Almost the same amount of CO2 as the petrol-powered Corolla.

The level of emissions created to generate electricity is not the only issue we need to worry about. Unlike petrol-cars, EVs have batteries that require lots of mined materials such as lithium, cobalt and nickel. These materials are usually refined and processed in various parts of the world and then shipped to large battery manufacturing plants in places like China or Japan. Thousands of small cells, the size of AA batteries, are then packed into large battery packs weighing 200-600kg and then attached to the chassis of an EV. Given the sheer volume of material required and complexity of global supply chains, it is difficult to calculate exactly how much carbon is emitted to make an EV battery. Analysis conducted by Bloomberg New Energy Finance (BNEF) suggests manufacturing a 100kWh EV battery results in 4,500kg of CO2-e embedded emissions. These embedded emissions in EV battery packs are often termed as “carbon-debt”.

Assuming the Nissan Leaf’s 40kWh battery has the same proportional manufacturing carbon intensity as the BNEF study above suggests, it means its carbon debt is around 1,800kg of CO2. Driving the Leaf 10,000km every year in New Zealand, means its total lifetime emissions would achieve parity with the Toyota Corolla (i.e. the carbon-debt would be paid off) in under 2 years. However, in Australia given its carbon intensive electricity generation mix, it would take more than 20 years to pay that carbon-debt. That is far longer than the average length of car ownership.

Clean energy is therefore the crucial ingredient in decarbonising transport. As the global energy mix continues to switch from fossil fuels to clean energy, the argument for EV adoption will only intensify. Hopefully by then, safe and economically viable methods of battery recycling will be developed, but that is an entire subject on its own that we will leave for later.


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