The first is the ambition of the post-2020 car CO2 standards. It is no accident that Europe leads the way on electric cars. Ambitious EU targets forced carmakers to invest in electric. If Europe continues the growth rates seen in countries such as the Netherlands and Sweden once their markets hit the 10% mark, we would reach an 18% plug-in share this year and 36% in 2022, across the whole continent. This is way above the ambition levels required in the current CO2 regulation up until 2029. So, unless carmakers’ voluntarily produce more electric cars than the regulation requires – something experience shows does not happen – it is the very EU regulation that propelled Europe into the lead in 2020 that will derail the progress in the 2020s.
New name, old tricks
The second comes from the European Commission president’s desire to extend the European cap and trade system (EU ETS) to road transport. Economic models show that if fuel prices go up, consumers switch to clean alternatives. So on paper this looks like a good idea. But in practice people on low incomes cannot always afford to simply switch cars, meaning emission cuts don’t materialise and all you are left with is unrest like the gilets jaunes protests.
Many in the car industry have asked for such carbon pricing instead of vehicle CO2 standards for as long as the EU car regulation has existed, knowing that it wouldn’t demand much from their car business. So, in reality, this would slow down transport electrification, not support it. Now the idea is back again under the new initiative for the European Green Deal, supported by CEOs like VW’s Herbert Diess. You might have guessed it – the car CO2 legislation at the heart of the current transformation does not get a mention.
Sugar beets vs cakes
The third roadblock comes from the alliance of oil companies and automotive suppliers who favour e-fuels. These are made using renewable electricity via Fischer-Tropsch reactions between hydrogen and carbon monoxide to produce synthetic hydrocarbons similar in nature to today’s fuel that can be burned in conventional engines. Ulterior motives around conventional engines aside, using e-fuels in cars is nonsensical for a number of reasons. First, such fuels are still a far-away possibility and will require significant amounts of energy and capital to manufacture. Requiring just 10% of new cars to run on such fuels will increase the electricity demand by at least 30%. Second, and more crucially, Europe will need these low carbon fuels in sectors such as aviation and steel where no easy alternative to decarbonise exists. Using them in cars will steal the limited green electrons needed elsewhere.
Third, these fuels are also the most costly route to decarbonise road transport. We have a cheap option: batteries. Plunging battery costs mean that battery electric cars will be the cheapest compliance route with future emissions rules. Complying with e-fuels instead would increase fuel costs two to threefold, on top of requiring four to five times more electricity. Proponents of e-fuels claim that these are needed for the existing fleet. But drivers are likely to pay at least double what they pay at the pump today – hardly an affordable option. Getting a cheap second hand electric car or retrofitting one’s own clunker with an electric motor seems far more plausible.
Fourth, it does not make sense from a regulatory point of view. Because carmakers do not produce fuels or control where drivers fuel their cars once they are sold, rewarding carmakers for low carbon fuels is like regulating the sugar beet industry through cake standards. E-fuels should be addressed under the EU fuels regulation, notably the EU Renewable Energy Directive which is also up for review in June. Allowing e-fuels as a potential route to meet 2030 car CO2 standards will remove the current investment impetus and only delay the inevitable switch to electric vehicles.
Europe had a strong head start in electric cars in 2020, but the roadblocks of weak regulation, road cap and trade system and – above all – detour into e-fuels all stand in the way of Europe’s ambition on zero emissions mobility.
Overcoming these will require political courage. The prize will not just be a climate success, but the lead in one of the 21st century’s key technological races.