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Electric Cars Are Not the Solution to Climate Change

The debate and advocacy of electric vehicles has been raging for over a century. Before the Ford Model T, electric cars were competitively priced with internal combustion engine vehicles, they were easier and more enjoyable to drive, and even held many speed and distance records. In the late 19th and early 20th centuries, there were even a few battery-swapping services that aimed to create an infrastructure to make up for the relatively limited range of electric vehicles.

Of course, we all know how this story developed. Internal combustion engine technology improved and with the advent of the Model T, consumers could no longer afford the cumbersome prices of electric vehicles. Since then, the electric vehicle has continued to exist as a fringe fascination that enjoys its 15 minutes of fame every time gas prices temporarily shoot up. However, all of that has begun to change in the last 10 years.

The topic of climate change has shifted from the talk of hippies and idealists to one of the main issues of national (and global) policy discourse. People all over the world are seeking to play their part by reducing their carbon footprint, and the markets are responding. According to a survey reported in the Financial Times, three quarters of Americans and U.K. citizens would now consider buying an electric car. Combine this global awareness of greenhouse gas emissions with the recent developments in battery technology and you have an electric vehicle renaissance just waiting to happen.

Many electric vehicle proponents laud this potential renaissance as the solution to climate change. Vehicles all around the world account for 15% of total fossil fuel CO2 emissions. Therefore, if you switch all the cars in the world to electric, then you have basically solved climate change. Unfortunately, this argument fails to consider reality, let alone balance the equations properly.

Electric vehicles, including pure electric and plug-in hybrids, accounted for 0.4% of total vehicle sales in the United States in 2012. These sales are essentially a rounding error for major automotive manufacturers. The question is: how is that figure going to grow in the future? Nissan predicts that by 2020, electric vehicles will account for 10% of all vehicle sales. Of course, Nissan may be biased as the manufacturer of the market-leading electric vehicle, the Leaf. Deloitte, an independent consulting firm, is somewhat more conservative, with a projection of 2-5% of vehicle sales by 2020.

So, where is the disconnect? If electric vehicles could be the savior of the Earth and prevent future flooding, storms, droughts, and countless deaths, then why are consumers not flocking to them in droves?

Deloitte, again, has an explanation. Electric vehicle technology, as it currently exists, meets the expectations of only 2-4% of global consumers. The single largest reason? Over half of consumers are unwilling to pay any price premium for an electric vehicle. This does not mesh well with current reality: electric vehicles are around $5,000 more expensive over their lifetime than conventional vehicles, even after considering fuel cost. Add on the survey result that only 63% of Americans are satisfied with a driving range of 300 miles (current pure electric vehicles offer a range of around 100 miles), and the potential EV market share starts dwindling rapidly.

Fortunately for electric vehicle fans, the news is not all sad and gloomy. Battery technology continues to improve by leaps and bounds, with a 40% reduction in cost expected over the next 10 years or so. The $5,000 additional cost of an EV is expected to switch to a $1,000-$7,000 savings in the next 10-20 years, dependent on technology progression and the cost of oil. Once the equation is reversed and consumers are financially incentivized to switch to EVs, Nissan's 10% outlook may begin to look a little more reasonable.

So, assuming that the optimists are right and 10% of cars driving off dealer lots in 2020 are electric, what does that mean for climate change? According to MIT, electric vehicles currently release about half as much CO2 emissions per mile as internal combustion engine vehicles. Combining all of the math together, you get a 0.75% decrease in total global fossil fuel CO2 emissions. That's less than 1%. Hardly the world savior so hoped for by many.

These anticipated CO2 emission reductions also ignore the continued improvement in internal combustion engine technology. Government standards continue to get stricter, with an expected average fuel-efficiency rating of 54.5 mpg by 2025. MIT makes the comparison easy for us: the 50% advantage of EVs drops to around 30% by 2030. While this advantage is still significant, many consumers report that their interest in EVs would substantially decline with fuel-efficiencies above 50 mpg, again calling Nissan's 10% prediction into question.

Given that the rosiest outlook for electric vehicle sales results in less than a 1% reduction in fossil fuel CO2 emissions, it is clear that it is time to look elsewhere for a solution to climate change. While electric vehicles are neat in their own right and may contribute to any long-term solution, their impact in the next decade or so will be limited.

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