The Hidden Benefit of Electric Vehicles: Choice

A tank of gas is always a tank of gas, while a battery is a platform.

An electric car is recharged at a loading station in Frankfurt am Main, central Germany, on September 13, 2017.


If anything demonstrates the wonders of capitalism, it is sheer choice. How else do you explain that insane cereal aisle in the supermarket?

Which brings us to electric vehicles.

Earlier this week, I took a stab at comparing the life-cycle emissions of greenhouse gases from an electric vehicle and a traditional one with an internal combustion engine. Even factoring in China's electricity mix -- which has a weighting to coal that the current U.S. administration can only envy -- the electric vehicle looks slightly better on this score, based on my assumptions.

The bigger point, though, is that the electric vehicle gives you choice. A tank of gasoline is always and everywhere a tank of gasoline. A battery, on the other hand, is just a storage device; the shelf on which you arrange the different flavors of energy available.

This matters because tastes for energy are changing. This is happening at different speeds around the world, but a confluence of environmental, security and technological considerations are likely to provide continued momentum.

China's recent, sort-of announcement that it might ban traditional vehicles at some point sent a shiver through the oil world. But if Tuesday's report that the country might allow foreign automakers to build wholly owned electric vehicle plants there comes to fruition, then that would represent a much more serious boost to the market. Long-term bans are fine, but encouraging investment in new manufacturing capacity has a more tangible impact on the market, and sooner, too.

To get a sense of how the battery enables choice, I ran an analysis of how the greenhouse-gas emissions from a theoretical U.S. electric vehicle would change as the country's mixture of power sources shifted. The Energy Information Administration's annual outlook forecasts that mix out to 2050:

Apart from the reference case, the EIA projects side cases, with higher or lower weightings for coal, natural gas, renewables and the rest. The chart shows annual emissions under three scenarios. It assumes 6 percent transmission losses on power and that our electric vehicle gets 3.5 miles per kilowatt-hour, drives 13,000 miles a year, and somehow can last through 2050 (it couldn't, obviously; this is just to show how annual emissions change over time):

To put those changes in context, though, you have to set them against the emissions from a traditional vehicle. Let's assume this one gets 31 miles per gallon::

The gasoline-powered vehicle's emissions are essentially fixed. It's true that, over time, the emissions from producing and refining the gasoline might fall, especially if the electricity supplying the refinery turns greener. But since 80 percent of the fuel's emissions come from burning the stuff -- and chemistry dictates those don't change -- that's a marginal consideration. The outcomes for the electric vehicle, on the other hand, are structurally lower and have infinite potential outcomes when it comes to emissions.

The vehicles themselves will change over time, of course, getting more energy-efficient. Which means an electric car purchased in, say, 2025 will have different emissions not just because of the energy mix but how it uses it. The gasoline vehicle should also produce lower emissions.

Let's assume efficiency improves by 2 percent a year for each vehicle. Factor in, too, that electric vehicles are more carbon-intensive to manufacture, due to the battery. Let's assume building the regular vehicle adds about 9.7 tons of greenhouse gases to the atmosphere, while its electric counterpart adds almost 17 tons. Using those, and the reference case for the U.S. power mix, the chart below adds up for the full, life-cycle emissions for each vehicle bought at different points in the future, assuming each one is owned for 12 years:

It's worth noting that life-cycle emissions for the 2035 model of the gasoline vehicle are 25 percent lower than for the 2018 model, so it is worthwhile encouraging continued efforts to improve the efficiency of those vehicles. Even so, the potential to not only improve the electric vehicle's efficiency at the micro level but also shift its sources of power at the macro level represent a decisive break when it comes to addressing emissions.

One conclusion from this is that any policymaker minded to encourage the roll-out of electric fleets for the sake of reducing greenhouse-gas emissions cannot do so credibly in isolation from a broader policy seeking to shift their region's energy mix overall.

Building a whole new aisle for the customer is fine, but you have to fill it with more than just corn flakes.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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