Tatsuya Terazawa Chairman and CEO The Institute of Energy Economics, Japan
Message for December 2024 (II)
In many countries Battery Electric Vehicles (BEVs) are considered the only powertrain toward the pathway for decarbonizing the passenger vehicle sector. But the choice of the powertrain must be determined based on a Life Cycle Analysis (LCA) basis considering GHG emissions region-by-region. This analysis presents a very different picture for the future of passenger vehicles.
<Main Points>
1. BEVs are the favored path by many countries, but is it the only choice?
Many countries are pushing Battery Electric Vehicles (BEVs) to decarbonize passenger vehicles. As the passenger vehicle sector represents a substantial portion of global CO2 emissions, the choice of powertrain is very important. Thus, the choice must be based on sound analysis reflecting the different conditions in each region.
2. Region-by-region LCA based analysis is necessary
In many cases, only a “Tank to Wheel” analysis, which captures the direct CO2 emissions by driving vehicles, is conducted to judge the CO2 emissions of various types of powertrains. This analysis gives a clear verdict in favor of BEVs. But this analysis only captures a small portion of the actual GHG emissions. Furthermore, in some cases, BEVs are considered as “the only option for decarbonization”, without analysis, based on the image of zero direct CO2 emissions by driving the vehicle. The life cycle GHG emissions to generate the power to run BEVs or manufacture the batteries are ignored. The GHGs emitted in the disposal process are not included either. To judge the true impact of passenger vehicles on the climate, we need to conduct an LCA analysis that includes GHGs emitted of all processes in the product life cycle. As the level of decarbonization of the power grid is different among regions and the types of fuels used are also different among regions, LCA analyses must be conducted on a region-by-region basis. My institute, the IEEJ, has undertaken a study to conduct such a comprehensive analysis. I would like to share the results of this study in this month’s Chairman’s Message. The IEEJ study selected four regions for analysis: OECD Europe, Brazil, ASEAN, and India. The study reflects the decarbonization of the power grid of each region as of today and in 2050 assuming the maximum deployment of technologies. The study assumes the substantial penetration of low carbon fuels by 2050. It also assumes that vehicles will be manufactured in each region using the local power grid.
3. In Brazil, ASEAN, and India, promotion of BEVs can be counterproductive today.
The IEEJ analysis shows that the GHG emissions on an LCA basis for Hybrid EVs (HEVs) and Plug-in-Hybrid EVs (PHEVs) in Brazil, ASEAN, and India today are lower than that for BEVs. In Brazil, bioethanol and flex-fuel vehicles are so widely available that driving with E100 is not unusual. The power grids in ASEAN and India are not yet sufficiently decarbonized today, resulting in higher CO2 emissions for BEVs as local power is used for charging and manufacturing the batteries. Figure 1: Current Lifecycle CO2 Emissions by Powertrain (Brazil, ASEAN, and India) (Source) IEEJ (2024). The IEEJ Outlook 2025 The result of this analysis implies that the promotion of BEVs in these regions can be counterproductive for reducing GHG emissions. Based on the power grid of today, it will be better on an LCA basis to promote HEVs and PHEVs in these regions.
4. In OECD Europe, PHEVs can be an alternative to BEVs in 2050.
The IEEJ analysis shows that the GHG emissions on an LCA basis for PHEVs are equivalent to those for BEVs in OECD Europe in 2050. While the current EU policy bans new sales of PHEVs after 2035, such a policy may lack sound justification with a view to reduce GHG emissions on a life cycle basis. Figure 2: Lifecycle CO2 Emissions by Powertrain in 2050 (OECD Europe)
5. Critical minerals must be considered: the “Achilles Heel” of BEVs
As the world proceeds with the energy transition, massive demand for critical minerals will be generated. There are concerns about the sufficiency of supply of critical minerals to meet the dramatic expansion in demand. There are rising security concerns about the dependency on a single supplier for the supply for critical minerals. Extraction and processing of critical minerals will put a substantial environmental burden on the regions. Sustainability should not be limited to GHG emissions—sustainability regarding critical minerals must also be considered. Based on a study by JOGMEC, BEVs consume three times more critical minerals during manufacturing compared with PHEVs. Compared with HEVs, they consume six times more. Considering the importance and scarcity of critical minerals, the use of them must be rationalized and they should be used for BEVs only when there is a strong rationale. Carrying 600kg of batteries, equivalent to the weight of a cow, in BEVs for occasional long-distance driving is not a rational use of critical minerals. Figure 3: Critical Minerals Requirements by Powertrain (Source) IEEJ (2024). The IEEJ Outlook 2025. Given the heavy reliance on critical minerals for BEVs and the projected equivalence of LCA-based GHG emissions for BEVs and PHEVs by 2050, PHEVs could emerge as the preferred powertrain in OECD Europe.
6. Cost matters: HEV as a practical option
As passenger vehicles are purchased by the consumers, cost will be a major factor for consideration. The full cost of fuel, power, and the vehicle must be considered. IEEJ compared the annualized full cost of various powertrains. The result shows that, among HEV, PHEV and BEV powertrains, HEVs are the lowest-cost option in all regions today. Internal Combustion Vehicles (ICVs) can be slightly less expensive, but considering CO2 emissions, HEVs are the practical option in all four regions today. This finding should not be surprising as the market is showing the popularity of HEVs today. Even in 2050, the cost of HEVs are comparable to the cost of BEVs in ASEAN and India. In Brazil, HEVs can be less expensive than BEVs. In these regions, affordability of passenger vehicles is a major issue. HEVs can provide practical solutions to these regions by offering low cost, low critical mineral consumption and significantly lower CO2 emissions than ICVs. Figure 4: Cost of Vehicle Ownership in 2050 (Brazil, ASEAN, and India) (Source) IEEJ (2024). The IEEJ Outlook 2025.
7. Multiple Pathways for passenger vehicles
From the analysis described above, I believe that you can understand that HEVs are the most practical option in Brazil, ASEAN, and India today. HEVs provide lower GHG emissions on an LCA basis today. HEVs consume much less critical minerals and cost less. In those regions, by 2050 HEVs, PHEVs, and BEVs will be comparable with different strengths. HEVs are less expensive and consume less critical minerals but have relatively higher GHG emissions. PHEVs demonstrate comparable GHG emissions on an LCA basis and consume less critical mineral compared with BEV but are relatively more expensive. BEVs emit relatively less GHG and are relatively less expensive but consume more critical minerals. These relative strengths are not necessarily substantial leaving the three powertrains as reasonable choices. The choice may depend on the different conditions of each region and consumer preferences. In OECD Europe, PHEVs and BEVs should have comparable GHG emissions on an LCA basis in 2050. If critical minerals consumption is also considered, PHEVs could be the preferred powertrain in 2050. I believe that it is not appropriate to limit the future of passenger vehicles to just BEVs. Depending on the region and the timing, there could be better or comparable alternatives. There should be multiple pathways for the future of passenger vehicles.
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