Electrifying the transport sector has been hailed by the Government, the Productivity Commission, and more recently by the Climate Change Commission, as our silver bullet towards our net zero carbon emissions target by 2050.

Essentially, by switching from internal combustion engines (ICEs) to electric vehicles (EVs) we switch from a 100 percent fossil fuel burned in an inefficient engine to 80 percent renewable electricity used in a highly efficient EV motor. If we simultaneously cut the carbs in our electricity system by replacing gas and coal with more wind, sun and geothermal energy, (and maybe the Lake Onslow pumped hydro system): Voilà – we will seemingly cut our transport sector emissions to zero.

However, we all know by now there’s something going on with emissions in the manufacturing phase of EVs and their batteries. From a lifecycle perspective, a car’s carbon emissions come mainly from its manufacturing phase (fossil fuels used in the energy mix of the country where the car is made) and its use phase (fossil fuels burned to move the car). The ratio depends on the country of manufacture (share of fossils in the electricity mix), but also somewhat on the country of use (different emissions or fuel efficiency standards).

For an ICE manufactured in China and used in New Zealand, lifecycle carbon dioxide emissions are roughly 47 tonnes, of which 10 tonnes come from the manufacturing phase. (To compare apples with apples, when we say ICE or EV, we mean 250,000 vehicle kilometres travelled by said vehicle, so we’re comparing the same service provided by a technology, rather than an individual car.)

An EV without the battery pack requires roughly the same amount of energy in the manufacturing phase as an ICE. However, battery pack manufacturing is energy intensive, increasing the EV’s manufacturing-phase emissions to about 16 tonnes if manufactured in China. Use-phase emissions, on the other hand, are significantly lower than for ICEs, roughly 15 tonnes if driven in China, and about six tonnes in today’s New Zealand, which would go to zero as we head to 100 percent renewable electricity. All in all, a Chinese-manufactured EV driven in New Zealand will have just under half the lifecycle emissions of an ICE.

For every ICE we replace with an EV, we reduce New Zealand’s CO2 emissions by about 40 tonnes while increasing China’s emissions by 16 tonnes. While that may be near net zero for New Zealand, it’s certainly not net zero for the climate, (nor for China who will be accountable for those 16 tonnes!). We need to talk about this…

So, what can we do?

If we simply wish to internalise emissions, it would be roughly the equivalent of keeping our ICEs and cutting our driving in half – overall same emissions’ reduction – and we’d take responsibility for the remaining emissions here in New Zealand. In fact, the Climate Change Commission’s (CCC) first recommendation regarding transport is “to reduce travel by private vehicles and increase the proportion of clean public or shared transport, and walking and cycling”.

Now, for those who will still go with the EVs – the CCC’s second policy recommendation – you could buy carbon offsets for individuals at about $52 per tonne of CO2 via a native forest planting scheme. Or you could get away with just $11 per tonne by building wind farms in China – that sounds about right for our dilemma, right? Under the Kyoto cancellation workflow process, a voluntary carbon offsetting system, by planting native forest in New Zealand you would be contributing to additional carbon offsetting, i.e. in addition to the government’s international commitments.

The climate would be happy, but China would still be left paying for the emissions occurring at their end. If you went through the international scheme and chose to build wind farms in China, then more likely you’d be contributing to emissions reduction directly at the source, helping China reach their emissions targets.

But if we’re really going big on EVs, maybe the option of voluntary offsetting won’t quite do the trick. Perhaps the government could require carbon zero certification for all our imported EVs – returning the cost of offsetting the emissions back to us in a more organised approach. However, EVs aren’t the only issue here. This risk of carbon leakage applies to all emissions intensive goods from dairy to solar panels. Which brings us to carbon pricing.

A strong carbon price signal in Europe, and an expected move by China’s national emission trading scheme to set a national price on carbon, are boosting optimism for prices that are high enough to drive credible climate action. Indeed, the inclusion of China (and other major EV manufacturers) in the carbon market club would require some economic costs for policy compliance, but it could be the most cost-effective way to drive economic efficiencies and technological change.

Getting the carbon price right (i.e. high enough to create sufficiently rapid change) in all countries concerned seems like the appropriate way to shift the cost of emissions from producer to consumer. While this would incentivise a transition to low-carbon technologies at all levels of the economy, it would make EVs even more expensive, increasing the barrier for lower income earners to buy one, while simultaneously increasing the petrol price too. So, while we may have the tools and technologies to reach a low-carbon society more or less sussed out, we need extra care and government intervention to make that transition an equitable one, for all concerned.

By Dr Kiti Suomalainen, Dr Mingyue Sheng, both from the Energy Centre at the University of Auckland Business School and Professor Basil Sharp, Director of the Energy Centre.

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