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Long Read: Statistical Review of World Energy.

Businessman touching the screen about energy source

BP’s 70th annual Statistical Review of World Energy came out this past week. This data-rich documents is 70 pages of detailed, country by country, statistics about world energy capacity, production, and consumption with commentary. Here are some of the highlights.

Consumption

Due to COVID-19, last year saw the largest decline in energy consumption since World War 2. Consumption fell by 4.5%, primarily due to the shutdown of the transportation industry. Oil consumption fell by 9.2%, while natural gas fell only 2.3%. But renewables — solar and wind — had their best year ever as capacity increased by 50%. BP themselves were surprised by this, saying “we materially underestimated the growth of wind and solar power over the last five years”. But before we break out the bubbly, let’s put that in context. Even with that super result, renewables are still a small fraction of the global energy mix. Non-emitting energy (Nuclear, Hydroelectric, Solar and Wind) are still just 16.8% of the overall energy mix.

OilGasCoalNuclearHydroRenewableTotal
173.73137.62151.4223.9838.1631.71556.63
31.2%24.7%27.2%4.3%6.9%5.7%
Primary Energy Consumption (EJ – Exajoules)

The world is finally weaning itself off coal. Coal generation declined by 405 TWh, which was almost directly correlated to the 358 TWh increase in solar and wind generation. We are truly seeing coal-fired generation being phased out in favor of renewables.

On a country by country basis, the biggest global consumers of energy were the United States (87.79 EJ) and China (145.46 EJ), or 15.8% and 26.1% of global energy consumption. Nobody else comes close, except if you start to combine regions. All of Europe, for example, consumed 77.15 EJ, a little less than the USA. It’s also worth noting that the United States consumed 15.8% of the global energy supply, but has just 4.25% of the population. China consumed 26.1% of the worlds energy, but has 18.5% of the population.

Globally, each human on the planet averages annual consumption of 71.4 Gigajoules (GJ) of electricity. However, Canadians (361GJ), Qataris (594 GJ), Saudi Arabians (303 GJ), Emeratis (423 GJ), and Australians (218 GJ) all are good examples. Or maybe it’s just the weather. Singapore has no natural resources, and Singaporeans use an astonishing 583.9 GJ per person of energy annually, second only to Qataris.

Emissions

Global carbon emissions from energy use also fell, and even more dramatically than energy use itself. Carbon emissions fell by 6.3%, while energy consumption declined by just 4.5%.

Among the big economies, the US generates 18.3% of its energy from non-emitting sources, China 15.7%, and Europe 28.8%. China is still heavily dependent on coal, and Europe has been helped out by a favorable shift to renewable plus the fact that a whopping 36% of France’s energy comes from nuclear. Canada, often in the news because of it’s foot-dragging on emissions targets, does surprisingly well with 35.4% of it’s energy coming from non-emitting sources. This is due to the outsize impact of the country’s hydro-electric industry. Canada, with fewer than 40 million people, is the second largest producer of hydro-electric power globally, only surpassed by China.

The biggest absolute GHG emitters are (in order) China with 9,899.3 megatonnes, the United States (4,457.2), Indonesia (2,302.3), and Russia (1,482.2). Nearly a third of all emissions are from China. This is no surprise, given China’s massive energy appetite, but it’s still sobering nonetheless. Let’s put these into context, though. The US, with 330M people, is a much bigger emitter, per capita, than China. If the Chinese were to pollute the way America does, then their emissions would be close to 19,000 megatonnes. And all of Europe, which is a population of roughly half of China, emits just 3,596.8 megatonnes.

Geopolitics

The geopolitical world of energy stands out clearly in this report.

The United States is well established economically, and has small reserves of oil (68.8M barrels), about 6.7% of the worlds gas reserves (12.6 trillion cubic metres), and almost a quarter of the worlds coal reserves (248,941 million tonnes). At current rates of consumption, the US will exhaust its oil in about 10 years, and gas in 15 years. The US is the “Saudi Arabia of coal”, but most of that resource will stay in the ground.

China, by contrast, sits on a paltry 26M barrels of oil, 8.4 trillion cubic meters of gas, and 143,197 million tonnes of coal. China uses less oil annually than the US, but has only about 4 years reserves remaining. The country uses less than half the gas of the United States today, and thus has 25 years of reserves remaining. And they burn a lot of coal to generate power.

Consequentially, the US is a net exporter of oil and gas. In contrast China imports nearly all the oil and gas it needs to meet its energy needs, and China’s energy needs are growing at a blistering 3.8% annually.

The Chinese have been reluctant to give up coal electric generation, as the one energy source they have in abundance is coal. It is the one tool they have which gives them a measure of energy independence. It should therefore be unsurprising that China now leads the world in renewable power generation (#1 in hydroelectric, solar and wind), and new renewable capacity additions (in 2020 China accounted for 36% of new global solar capacity, and 38% of new global wind capacity). China has no choice. They cannot continue to generate electricity with coal. The global trend toward net-zero emissions means that Chinese companies risk being cut off from global export markets unless they can show that the carbon footprint of the products they sell is acceptable to their customers. Moreover, China cannot continue using coal to generate electricity at home without polluting its already fouled air even more.

It should also come as no surprise that 44% of the electric vehicles manufactured and sold in the world were sold in China. China is completely dependent on foreign oil. They cannot satisfy the growing appetite for vehicles domestically without an alternative to gasoline. They also cannot build the economy they want without the logistics in place to move goods from one location to another. They need electrified transportation more than any other economy globally.

Nuclear

Nuclear was a surprise. The top producer of nuclear energy in the world today is the United States, despite the unpopularity of nuclear domestically. 31% of the nuclear in use today is in the USA (7.39 EJ), although it is declining. The next largest producers of nuclear energy were China (3.25 EJ) and France (3.14 EJ). Few countries globally are adding nuclear capacity, the most notable exception being China, where nuclear (pre-COVID) was growing at a rate of 16.7% annually. Again, unsurprising that China would be building this capacity.

Conclusions

There are three inescapable conclusions in BP’s numbers.

The first is that there is little economic incentive in the west (Europe and North America) to replace fossil fuel generation. The energy demands of the west’s stable economies are growing slowly, having shifted most manufacturing overseas. The western economies’ focus on emissions are largely domestic politics, centered around climate change risk management. To make the transition from fossil fuel to renewable energy will require deft political skills, regulatory frameworks, and a continuation of the economic incentives we have seen.

The second is that Asia-Pacific, having become the center of global manufacturing, must navigate growing their energy use carefully. Global supply chains originate in Asia-Pacific, today. Consequently the region has a ravenous appetite for energy, but must find ways to meet that appetite and grow consumption while managing and reducing GHG emissions. Expect to see this region lead renewable energy deployment globally for some time, as they deal with the double incentive of managing climate change risk, while rapidly growing economies to satisfy western consumers needs.

And finally, the two remaining superpowers of the world, China and the United States, are quite different in their approaches.

America is divided. America has a substantial fossil fuel export business, many politicians support that business, and American free speech rights permit climate deniers to manipulate the public by spreading disinformation about the severity of the climate crisis, and the value of solutions being proposed. The fossil fuel lobby is strong! However, America has the luxury of being able to dither simply by virtue of the fact that it has secure domestic energy resources, and business seems to be stepping into the leadership vacuum in a way that Washington is apparently not able to.

China, in contrast, has a more immediate crisis and as a result seems to have a more unified approach. The Chinese don’t have the energy independence that America has. As a result, they are simply “getting on with it”, rapidly deploying renewables, building electrified products and industry, and making plans to decarbonize generation by taking their coal plants off line. The pace at which China is weaning itself off coal is slower than some in the west want, yes, but it is happening.

The inescapable conclusion is that China is playing a “long game”, building expertise that will serve it well for generations. The rest of the world already buys much of its wind and solar generation capability from China. It’s not hard to see how cars and batteries will be next.

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“Carbon-neutral” natural gas? Really?

Natural gas liquefaction plant

Can a container ship filled with liquified natural gas be “carbon neutral”? Shell Oil and Cheniere Energy want you to believe that. In May, the two companies delivered a shipment of gas to Europe in which emissions associated with the upstream costs of processing and liquifying the gas were offset by carbon credits purchased from Shell’s portfolio of nature-based projects. Emissions were offset to the “FOB delivery point”. This means that Shell and Cheniere have offset the emissions all the way to the point of delivery, as indicated by this statement in their joint press release.

The companies worked together to offset the full lifecycle greenhouse gas emissions associated with the LNG cargo by retiring nature-based offsets to account for the estimated carbon dioxide equivalent (CO2e) emissions produced through the entire value chain, from production through use by the final consumer (all scopes).

Shell Oil Press Release, May 5 2021

Really carbon-neutral?

What they’re claiming is that independent of how the customer uses the product they’ve delivered, the product itself has been produced in a carbon-neutral fashion. And, of course, their shipping partners are eager to tout their new green credentials too. Astomos Energy, for example, put out a press release stating that they are now purchasing “carbon-neutral LPG”. The appetite for Cheniere’s new products was strong enough that they posted a 40% increase in revenues from a year ago, and bumped guidance, rewarding investors with a 74% increase in the stock price from this time last year.

Naturally, this has commentators crying foul. Salon labelled it a greenwashing scam. Cleantechnica simply said A tanker full of fossil fuels isn’t carbon neutral. That’s not how it works.

I agree.

Decarbonizing supply chains is hard.

What this illustrates, quite neatly in fact, is the complexity of decarbonizing supply chains. At Davos this year, the WEF unveiled a report titled “Net-Zero Challenge: the supply chain opportunity“. The central thesis was that 8 supply chains accounted for over 50% of the world’s emissions, and that decarbonizing those supply chains would have impact. The energy industry wasn’t one of the eight supply chains named directly. Why not? Energy is an input into every supply chain. You literally cannot decarbonize supply chains without decarbonizing energy itself.

Let that sink in.

It’s good that Shell and Cheniere have taken the small step of offsetting the emissions associated with creating and shipping their polluting products, even if the marketing of those products as net-zero LPG is deceitful. The next step is to decarbonize energy generation itself — Shell and Cheniere’s customers.

Policy is part of the answer

So how do you decarbonize energy itself? Aside from technology solutions, policy is an incredibly important tool. Yesterday the UNEP Net-Zero Alliance, a group of investment managers representing $6.6 trillion of assets under management, released a position paper calling on governments to adopt common approaches on emissions pricing, to apply emissions pricing to every sector of economies (not just the heavy emitters), to swiftly phase out fossil fuel subsidies, and to fund research and create incentives to decarbonize hard-to-abate sectors. This approach — carrot and stick — works. You can see it visually by checking out the current price of European Usage Allocations futures (as at July 7). Emissions in Europe are now nearly $60/ton, up from $20 in April.

EUA December Contract prices, courtesy Ember

What’s next?

We’re still a long way from where we need to be. Analysts say that the price today needs to be closer to $85, rising to $145 by 2030, in order to reach a 1.5C global warming target. Emissions pricing schemes still only apply to 17% of the world’s carbon emissions. So long as emissions prices stay low, and customers exist that aren’t covered by pricing schemes, there will be a market for green-washed inputs like (unfortunately) fossil fuels.

As individuals, there are are two actions we can take.

  1. When emissions trading becomes a political issue in your country, vote in favor of emissions markets, or cap-and-trade solutions. There will always be those who claim that “the market” is the solution. The market is clearly not infallible, as the Shell / Cheniere announcement shows. Vote for emissions trading schemes with teeth, not un-regulated markets.
  2. When you have the option, buy green energy from your local supplier. Do your homework first, though. Make sure that you aren’t being sold green-washed fossil fuel energy, but rather energy from non-emitting sources like wind, solar, or nuclear.

And Shell, Cheniere… we know you have to serve your shareholders, but shame on you for such cynical marketing tactics. We deserve better.

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Electrifying Everything: Farmers

Peruvian Mountain Pass

Both Dave and I were struggling for breath as we hiked across Abra Huacahuasijasa, a 15,200 ft mountain pass overlooking the Sacred Valley of the Incas. We were an unlikely pair — a farmer from western Illinois and a techie from Washington state. The two of us met a few days earlier when we both joined a hiking adventure in Peru. And here we were, experiencing Peru, and sharing details of our lives as we hiked through this magnificent landscape.

Over dinner I learned that his parents had bought their family farm in the 1960’s. The farm they purchased had been 100 acres of mixed use farm land, with both crops and livestock. In the intervening decades Dave and his brother had taken their parents little farm and expanded it to 10,000 acres. Both Dave and his brother were college educated, one with a degree in agricultural science and the other in finance. They had used their educations to expand the family farm into a substantial business.

Today, that farm produces mostly corn and most of the corn they produce is converted into ethanol. The two brothers had doubled down on corn during the ethanol boom of the early 2000’s. They bought up neighboring farms as they became available, invested in equipment to modernize the operation, and used sophisticated trading strategies on futures markets to ensure a steady stream of income, even during poor producing seasons.

Corn is the largest feed grain crop in the United States today. Close to 40% is used for ethanol production, primarily as a fuel additive.

We know that the move to electric vehicles will impact the oil industry. But how many of us are also aware of the potential impact on the farming sector? In the United States, the ethanol industry generates nearly $30B annually in revenues, and supports almost 70,000 jobs across rural America.

Let’s turn to history to understand the potential impact.

At the turn of the 20th century, historians estimate that there were 8.5 million horses in America — one horse for every 5 people. A substantial amount of American agricultural output was devoted to feeding these mainstays of “modern transportation”.

The post WW1 agricultural boom had encouraged farmers to expand to feed foreign markets as Europe rebuilt after the war. However, the bottom fell out of that market in the 1920s just as the rise of the automobile crushed local feed markets. American farmers were wiped out by the perfect storm of the transition to the automobile, the retirement of the horse, and the drought of the 1930s that became known as the Great Depression.

Texas tenant farmer, Marysville CA, 1929. Library of Congress, Prints & Photographs Division, FSA/OWI Collection

Over the next two decades, the demand for corn is likely to see a steep decline. Extreme weather due to global warming may also impact agriculture, just as it did during the 1930s.

We may not experience anything like the Great Depression. However, as we move to electrify everything, which we must, let’s also plan for the inevitable impacts it will bring.

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Electrifying Everything: the EV Charging Network

Electric Car Charging

The UK automobile industry wants to see 2.3 million publicly available electric car chargers installed in that country by 2030. 2030 is the magic date, because that is the year the UK will end the sale of gasoline / diesel powered vehicles. So an electric charging infrastructure will need to be in place.

2.3 million seems like a lot of chargers, doesn’t it? For comparison purposes, as of 2019 the UK had just over 8,300 filling stations. Even if you suppose that each filling station has 8 pumps, and that recharging an electric vehicle will take 4x longer than refilling a gasoline vehicle, you still only end up with about 256,000 public charge points needed.

The truth is that we have no idea how many chargers are actually needed. In this (now dated) EV charging behavior study 8,300 EV drivers were tracked over three years, and 6 million charge events. The data showed that over 80% of charging was performed at home, even when public chargers were made widely available. This is a completely different behavior to filling a car with gasoline. After all, with gasoline there is no option to fill at home!

Similar circumstances, 1900

In the year 1900 New York City had a population of 100,000 horses on the streets which produced 2.5 million pounds of manure per day that had to be constantly removed. The tonnes of dried and pulverized manure attracted a steady population of disease carrying pests, not to mention the ever present layer of manure stuck to shoes.

Over 40 horses also died each day, and these had to be removed as well. And finally, feeding and stabling 100,000 horses was, in itself, a massive logistics problem.

By 1912, automobiles outnumbered horses on the streets of New York, and by 1917 the last horse car was retired. And with that retirement, the industry that housed, fed, used, and cleaned-up after the horses also faded into history. Disease rates fell, air and water quality improved, carriage houses became first garages, and then later prime Manhattan real estate.

Today’s disruption

We don’t yet understand the consequences of electrifying everything. But we do know that broadly adopted technologies, like the horse and buggy and then the automobile, inevitably create infrastructure to support them. History has also taught us that the infrastructure to support one wave of innovation may not be required in the next.

Widespread adoption of electric automobiles will impact fueling stations, the businesses attached to those stations like restaurants, corner stores, and repair shops, and many others. It will likely drive the cost of electricity higher, at least temporarily, as generation capacity catches up. The adoption of electric vehicles will also drive urban planning / zoning as homes will need to be upgraded to have suitable service to accommodate the extra power draw, and will also need to have suitable high voltage service installed in garages. Electrifying everything will create opportunities, but also eliminate other business types.

And that brings us back to the UK auto industries 2.3 million chargers. The number of chargers needed is, in the words of the recently deceased Donald Rumsfeld, a “known unknown”. We don’t know how many chargers will actually be needed, but it’s going to be a lot. 2.3 million still seems excessive, but who really knows today?

What we can’t see yet are the unknown unknowns. Time will reveal them to us, as well as the opportunities.

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Energy Equity

Solar panel row's

“Energy poverty” is lack of access to modern energy services. I became intrigued by the idea a few days ago listening to an episode of The Energy Gang podcast. The topic was the Equity Outcome of Decarbonization with guest Dr. Destenie Nock.

One tends to think of energy poverty as a developing nation problem. It’s true, after all, that the vast majority of those without access to energy (759M people) are in developing countries like Nigeria, Pakistan, the DRC, Ethiopia and India. For context, the entire generating capacity for sub-saharan Africa is approximately 58GW, spread across a population over a billion people. Annual electricity consumption is about 488 kWh per person, or about 5% of the United States. 600M people have no access whatsoever.

But is it just a developing country problem?

Dr. Nock challenged listeners to think about energy poverty in a different way. Are you energy poor if you live in a developed country? What if you spend a significant portion of your pay check on the power bill? Put on extra sweaters instead of turning the heat up in the winter? Or, as we have seen recently, suffer the extreme effects of a heat wave due to the high cost of electricity for cooling? Maybe even end up hospitalized, or dead.

Renewable energy, especially solar, is frequently put forward as an answer to energy poverty in the developing world. Off grid solutions promise to decentralize generation, and bring power to places that utilities can’t or won’t serve. Renewable energy also offers a route to weaning the developing world away from fossil fuels, coal especially.

In the developed world, rooftop solar is often seen as a way to reduce the power bill. However, some in California say that rooftop solar households are disproportionately wealthy and white, and have put the burden of the cost of the energy transition onto the shoulders of the poor. “Utilities are cynically playing the equity card”, they claim. The numbers seem to back them up, as wealthy households reap the double benefits of subsidies, and reduced utility costs.

Transitioning to a clean, renewable and global energy economy holds out huge promise. Let’s make sure we get the equity part of that promise right, and lift the neediest up at the same time. After all, if 1.1 billion poor Africans live in countries that are burning coal and oil to generate power, it won’t matter what we here in the west do. The planet will still get hotter.

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GREET your vehicle?

Automotive production line. Welding car body. Modern car Assembly plant

Most people know that the carbon footprint of an electric vehicle, in use, is lower than that of an internal combustion vehicle. Except in the rare case that the electricity used by the vehicle is all generated from coal-fired stations, all of the literature confirms this. But what about the emissions impact of manufacturing an all-electric vehicle compared to an internal combustion engine? Well, that turned out to be a bit of a rabbit hole.

The first thing to know is that neither the automobile industry, nor the research models themselves, report data on emissions solely created during manufacture. Argonne Labs (part of the US Dept of Energy), has a comprehensive model called GREET (The Greenhouse gases, Regulated Emissions, and Energy use in Technologies Model) which seems to be the gold standard for all research at this point. GREET has been in development since at least 1999, and models everything to do with vehicular transport. It specifically separates the world into a fuel-cycle model, and a vehicle-cycle model, and what we’re after is the vehicle-cycle, which includes everything from raw materials sourcing, to manufacture, end-of-life, and recycling if applicable.

There are two challenges with GREET.

  1. The output is a “levelized” model. What this means is that it produces a number which is emissions generated per distance travelled. Even though the emissions we are interested in are generated during manufacture, GREET apportions them over the expected life of the vehicle. It tries to answer the macro question of vehicle emissions, rather than helping us to understand the manufacturing emissions cost.
  2. The model itself is incredibly detailed. Although it contains a (large) database of assumptions for all kinds of vehicle types, these will vary from manufacturer to manufacturer. It cannot know, for example, where one manufacturer sources electricity versus another. Only the individual corporations will know that.

GREET is a useful framework. It is being maintained actively by Argonne National Labs and was most recently updated in 2020. Researchers have published papers which claim to use the models, but also (necessarily) make gross assumptions about sources of materials and fuels. The independent research, therefore, can’t tell us much either.

Some of the manufacturers themselves do appear to use the framework. For example, if you read Ford’s 2020 CDP disclosures you will find that they reference the GREET 2019 model in their calculation of Scope 3 up-stream emissions footprint. They simply do not report the results for individual vehicles, but rather report on emissions in aggregate. However, GM and Fiat-Chrysler‘s filings show that they use completely different methodologies at this point, at least for disclosure.

For me, this is an unsatisfying answer. It does illustrate, however, the complexity of analyzing scope 3 emissions, and the challenge that lies ahead in understanding the true emissions associated with products we purchase. It also begs for a consistent methodology to be used across industries.

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Renewables “On Fire”

Windmills at sunset

The theme that renewable energy is cheaper than some kinds of fossil fuels keeps recurring. The Guardian reported last week that solar and wind are often cheaper than coal, noting that the cost of solar and wind have dropped 85% and 56% respectively over the last decade. Last fall, the IEA said Solar is now the cheapest electricity in history. In January 2021, the US EIA forecast that 84% of new capacity would be zero carbon. In fact, according to IRENA (the International Renewable Energy Association) global installs of renewables last year hit a record. And finally, in the 3rd episode of the Big Switch, University of Texas post doc researcher Dr. Joshua Rhodes talked about how Texas (home of big oil!) now deploys the largest wind generation fleet in the United States.

The energy industry is building zero carbon capacity, and this will be a key factor in the effort to decarbonize global supply chains. Should we expect to see the entire grid become zero carbon? That’s probably unrealistic, for now.

For starters, there will always be a need for a reliable energy source that can be turned off and on at will. Large scale energy storage solutions, such as massive battery systems, will get us part of the way there. However, unless new technology, or new nuclear installs, bring us the instantaneous generation that fossil fuels offer it’s unlikely fossil fuels will go away completely. We will need fossil fuel or nuclear generation, and then appropriate abatement strategies.

In addition to the reliable energy source need, the grid itself is constructed around a paradigm of centralized generation, and then transmission to substations, and then homes. It’s a forward feed system that presumes we will truck fuel to generation sites, generate power, and then distribute the power forward for consumption. The impact of this is that generation tends to be placed close to consumption sites, in order to minimize transmission losses. But you can’t truck the wind, or the sun, to a convenient place to generate power. The other challenge is reverse flow. Feeding energy bi-directionally into the grid from what are today’s consumption sites creates a whole new set of problems. It’s likely the grid itself will need to be updated.

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Batteries Part 2

EV (electric vehicle) Li-Ion battery concept. Close up view. 3d rendering.
rendering.

Last week’s piece on batteries generated questions from readers. Specifically two:

  1. What about the environmental impact of disposing of the battery?
  2. What is the carbon impact to manufacture an electric vehicle (EV)? How does it compare with a conventional vehicle with an internal combustion engine (ICE)?

Let’s start with the Battery Disposal and Recycling. I’ll have more on the supply chain footprint for vehicles in a future post.

Battery Disposal / Recycling

The short answers are that we haven’t needed to dispose of or recycle EV batteries at scale, yet; and we also can’t do it yet, at scale.

Batteries which reach end-of-life as automotive batteries haven’t actually reached “end of life”. Most have between 50% and 80% of their useful capacity left. However the batteries become slower to charge, slower to deliver power impacting performance of the vehicle, and reduce the range. So the batteries are currently being given a “second life”. Manufacturers are using them in applications, like storage walls and utility grid storage.

Recycling is not only desirable, but it also makes sense economically, and most of the battery is recoverable. Up to 90% of the battery can be recovered.

Currently, according to this IEA report from 2020 (page 183) we have the global capacity to recycle 180,000 tons of batteries annually. In the same report, the IEA forecasts the demand will grow by a factor of 50 by 2030, and by a factor of 650 by 2040. So, it’s not a concern for today, but it will be tomorrow. A lot of voices are being raised about this right now. The Union of Concerned Scientists has written calling for public policy to be established, National Geographic has written a lengthy piece about the need to build recycling capacity, and the BBC has also recently reported on battery recycling.

We haven’t needed to do it because EV’s are relatively new to the market, and because the batteries are lasting longer than anticipated. Tesla, for example, warranties their batteries for 120,000 miles. However, according to Tesla CEO Elon Musk himself, the batteries in the Model 3 are good for 1,500 charge / discharge cycles which he estimates to be between 300,000 and 500,000 miles.

Real-world driving has shown these claims likely to be true. It appears, for example, that the Model 3 and Model Y will probably be able to travel 400,000 miles before experiencing degradation of 20%.

But when we do need to start recycling at scale, there are multiple options available, and continuing research to improve.

And the last point, of course, is that we should have confidence that recycling capacity will come on line at scale. Not only does it make sense environmentally, but at $45k/ton cobalt (to name just one of the minerals required) is simply too valuable to discard it.

Last thought: warranties and recycling / end-of-life policies will likely vary by manufacturer. When considering the purchase of an EV, also consider the manufacturers battery disposal policy as you make your decision.

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Batteries

Electric Car Charging

Electric vehicle critics will often tell you that the environmental cost of the batteries is the “dirty little secret” that nobody is telling you about. The claim is that the manufacturing impact of the batteries is so high that we might as well just keep burning gasoline. The origin of this statement is an early and flawed study from 2017.

Let’s examine their claim in more detail.

Battery trends

Battery technology is advancing rapidly. You can see this in the price curve. In December of last year, Bloomberg NEF reported the first instances of vehicle batteries priced at below $100/kWh. At $100, most analyses show EVs priced equivalently to internal combustion engines. For comparison, a decade early that price was $1100/kWh. That means that 10 years ago, the price of the 53 kWh battery in Tesla’s original roadster was over $50,000. It’s no wonder those early Roadsters were so expensive!

The environmental cost of manufacturing vehicle batteries is also falling. A recent study estimated the manufacturing impact of current battery technology at 75 kg CO2e/kWh of battery capacity, down from 89 kg in 2019.

Analysis

The assertion made by the EV industry is that the increased environmental impact of manufacturing the vehicle is offset by the decreased impact of using the vehicle. Is that true?

To figure out the answer to that question, we need to know the CO2e impact of running a conventional vehicle vs an EV. Then, let’s add in the CO2e impact of the battery pack, divided over the expected lifetime of the battery, and we should have our answer.

For the sake of simplicity, let’s assume that the manufacturing impact of a conventional vehicle and an EV is roughly the same, excepting that the EV has the added impact of the battery pack. It’s not entirely true, because the conventional vehicle has a higher carbon cost to build than the EV (without the battery), but for the sake of simplification, let’s assume that they are the same.

My previous vehicle, a 2015 Ford Fusion, averaged about 23 mpg in actual usage. Ford rated it for 28 mpg, but I tracked my gasoline purchases over the lifetime of the vehicle, and it was roughly 23 mpg. I may have a bit of a lead foot. Gasoline combustion produces an estimated 18.95 lbs of CO2e per gallon used. Annually, I drive around 10,000 miles, which means that car was producing 8,226 lbs of CO2e annually.

My new vehicle, the Tesla Model Y AWD, is rated by the EPA for 28 kWh / 100 miles of driving. The Tesla should use about 2,800 kWh of electricity to drive the 10,000 miles I drive in a year. Now all we need to know is the CO2e costs to generate the electricity. According to the EPA, in the United States, the electricity industry as a whole produced an average of 0.92 lbs of CO2e per kWh of electricity generated. So, assuming that my power utility emits the same CO2e as the EPA average electrical utility, my CO2e costs will be 2,576 lbs. More on that in a minute…

FordTesla
Miles Driven10,00010,000
Electricity Used0 kWh2,800 kWh
Fuel Used435 gal0 gal
Unit Emissions18.95 lbs / gal0.92 lbs / kWh
CO2e Emitted8,226 lbs2,576 lbs
Annual operating emissions comparison

So for me, my old Ford emitted 5,650 lbs more CO2e annually than my new Tesla does.

Now let’s get back to that battery pack. Recall that the manufacturing CO2e impact of a battery is about 75 kg CO2e / kWh of capacity. So manufacturing the Tesla’s 75 kWh battery will emit about 5,625 kg of CO2e, which converted to lbs is 12,375 lbs. And then we have a simple calculation. 

Years to "break even" = Battery Manufacturing CO2e / Annual CO2e savings.

So, for me, it will take about 2.2 years before the manufacturing impact of the battery is recovered completely.

My Utility is PSE

I buy my energy from Puget Sound Energy here in the King County, WA area. PSE’s generation mix is roughly 1/3 renewable, 1/3 coal, and 1/3 gas.

SourceEmissions
Coal2.2 lbs / kWh
Natural Gas1.0 lbs / kWh
Renewable0 lbs / kWh
Blend1.06 lbs / kWh

Compared to the national average, PSE is actually a pretty dirty utility. My Tesla driving will generate 2,968 lbs of CO2e annually. And my emissions “payback” will extend to 2.35 years. What a calamity!

Fortunately, PSE has a green energy option, which we have chosen for our household. For an extra $.01/kWh (about $15/mo) we buy an energy mix which is generated 95% from solar and wind, and 5% from biogas. Biogas has about the same emissions profile as NG, which means that the PSE clean energy option produces about 0.05 lbs CO2e / kWh. Some folks consider biogas neutral environmentally, but let’s leave that for another day. In any case, my new Tesla’s CO2e footprint using PSE green energy is now reduced to just 140 lbs CO2e annually, and the “pay back” time for the battery is now just 1.5 years.

Over the 5 years I owned the Fusion, I estimate my emissions at about 41,000 lbs CO2e. I expect the Tesla to be a third of that. Automobiles have a lifetime of about 200,000 miles. Over 200,000 miles the Ford will emit 165,000 lbs CO2e. And if I own the Tesla that long? 15,000.

Your numbers will vary, but the calculation is not hard to do. And no matter how you do the numbers, there simply is no case that the environmental impact of EV battery manufacture outweighs the benefit of not burning gasoline to run a vehicle.

Case closed.

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Replace Carbon Taxes with Emission Trading

“Why not just put a tax on carbon?”, asked my Dad last Sunday. It was Father’s Day. We had organized a family video call, and somehow ended up talking about climate.

Economists believe pricing schemes are an important tool to fight climate change. They advocate for the use of market mechanisms which reduce emissions by pricing the costs of those emissions at the source. In other words, polluters should pay for the negative impact their emissions have on the planet.

According to the World Bank, at the start of 2021, globally there were 61 carbon pricing schemes in operation or planned. The largest planned is in China, which will come online fully in December of this year. As you might expect, the sheer number of schemes means there are many variations.

Carbon Pricing Approaches

There are two broad approaches to pricing carbon that are in common use today. These are carbon taxes, and emissions trading systems.

Carbon taxes are consumption taxation models. They encourage consumers to choose products that are more emissions efficient by levying a tax on those that aren’t. Need a litre of fuel? Maybe it will cost an additional 15% in tax. The taxing jurisdiction promises to put that money back into energy efficient or climate transition projects, further accelerating the transition to a decarbonized economy. In some jurisdictions (British Columbia, Canada for example) the carbon tax collected is offset by a reduction in other taxes. The promise is that the carbon tax will be revenue neutral, which satisfies at least some of the folks who object to new taxes.

Emissions trading systems (sometimes called “Cap and Trade” systems) use a different approach to driving emissions reductions. Emissions trading systems price the emissions directly. The government sets a cap on the total emissions permissible in a given period, and then allocates emissions quotas to companies that need them. Stiff penalties are imposed for exceeding the quota. Companies can then choose to become more emissions efficient, or continue to emit. If they continue to emit, they can purchase unused quota from another emitter who may be more efficient or pay the penalty. Over time, the government reduces the cap which creates pressure to be more efficient.

Sometimes emissions trading systems are also connected with an auction, as I wrote about Nova Scotia last week. When an auction is used, the quota allocation is done via auction rather than through some other scheme, which should lead to more optimal outcomes. An auction also has the benefit that it raises money for the government to spend on climate transition or energy efficiency projects, just as a carbon tax does.

Which is better?

So why choose one over the other? There are some major differences.

  1. Carbon taxes are easy, broad, blunt tools. If you’re buying fuel, they make a lot of sense. But how do you tax the carbon content of a new home, a car, a pair of jeans, or even a carrot? Each will have differing Scope 1,2, and 3 emissions depending on the efficiency of the producers supply chain. To tax the carbon content of a consumer product accurately, you need to know the contributions at each stage of the manufacturing process. We can’t do that accurately today. Emissions trading systems overcome that limitation. Each company in the supply chain has a quota for emissions, and has to live within the quota. (note: in today’s early stage emission trading systems it’s common to only make the largest emitters comply. Hopefully that will change.)
  2. Carbon taxes may also not be an accurate reflection of the true carbon emissions cost of a given product or service. They are simply implemented as a percentage of the end retail price. An emissions trading scheme allows the market to set the price. To return to the Nova Scotia example from last week, the government set a reserve price of $21 per ton, but the actual price paid was 74% higher, reflecting market demand.
  3. Carbon taxes are also impractical to implement across borders. How should we tax two vehicles, one made in China in a factory powered by coal/electric, and the other made in Detroit? One of China’s competitive advantages has been their willingness to use cheap, and dirty, coal power to power industry. Again, emissions trading schemes make this easier, since they target the emitters directly.
  4. And finally, carbon taxes do not create direct incentives to reduce emissions because there is no cap on emissions. With a carbon tax, you could conceivably have a rapidly growing economy with growing emissions. So long as the rate of growth is high enough, then the emissions tax is simply another tax. In a cap and trade emissions market, the government sets the amount of carbon allowed, and reduces that allowance each year, which creates incentives for companies to emit less.

For those reasons, emissions trading systems are preferable to carbon tax systems. Your thoughts?