Happy Thursday friends! Here’s my weekly take on the five most interesting developments in future fuels and vehicles trends over the last week:
Industry analysts at Edmunds predict that the upcoming expiration of federal tax incentives for EVs could destroy the market, noting, “Without these credits, this market is likely to crash.” While President Trump did not address federal EV tax credits specifically in his 2018 budget blueprint released last month, he proposed the elimination of funding for the Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) loan program, which would have assisted future EV production. That wasn’t seen as a good sign.
Edmunds’ evidence for the potential crash is a case study of the EV market in Georgia, which looks at how EV sales fared before and after the state’s EV tax credit ($5,000) expired a couple of years ago. As a product category, EVs saw their market share decimated after the state tax credit expired, shown in the figure below.
Georgia’s share of U.S. EVs fell from 17% to just 2% following the expiration. Extrapolating the impacts, Edmunds concludes that we may see the same play out on the national level once the federal credit expires. Edmunds points to the historical underperformance of EVs too, citing President Obama’s prediction that there would be 1 million EVs in the U.S. by 2015. The market fell far short of this target for a number of reasons (see figure below).
Tesla is expected to hit the 200,000 threshold that triggers the phase-out of the tax credit in early 2018.
The EV market in the U.S. isn’t the only one having difficulties. China is as well. As part of efforts to reduce the number of vehicles on its roads, Beijing started a license plate lottery in 2014, according to China Dialogue. If you want to buy a car, you must first enter and win a license plate. The chance of winning is higher if you apply for a license plate for an EV but despite this many winners end up not making the purchase.
In April 2014, there were 1,904 winners entitled to register an EV but only 286 did so, meaning 85% didn’t take up the opportunity (see figure below). The situation has improved since then, as the infrastructure EVs need has developed and licenses have sold well – but failure to purchase an EV is still surprisingly common when compared with traditional vehicles.
Why? The lack of charging infrastructure, charging difficulties, a poor ownership experience, policy uncertainties, and high prices.
The data supports a finding from Dalia Research this week that worldwide, 40% of those planning to buy a car within the next five years say they are likely to buy all-electric . However, 50% of those surveyed think there aren’t enough charging stations, 42% don’t think they could use an EV for long distance travel, and 36% think it would take too long to charge one. 44% of respondents also think an EV would be too expensive to buy. Even in countries with ample charging stations, people don’t think there are enough, according to Dalia. In Japan for example, where the number of electric car charging stations has surpassed the number of gas stations, 64% still think there are not enough charging stations, indicating a need for better and more consumer education even in well developed markets.
Finally, in Germany, the head of Germany’s Federal Environment Agency (UBA) has called for carmakers to be given minimum quotas for the number of EVs they must sell. In an interview with the German weekly newspaper Die Zeit, and summarized by Transport & Environment, Maria Krautzenberger said that, without a fixed share of EVs, Germany will not reach its climate targets. Germany currently has 46 million registered cars, of which just 25,000 are electric. Krautzenberger wants that figure to rise to 12 million by 2030.
Krautzenberger said of the potential for quotas:
“I know this is controversial, but it’s been successful in California, and they’re now introducing such quotas in China. Quotas give the makers security of planning. We’ve done the math: if we want to hit the CO2 reduction target for traffic for 2030, we need 3-12% of the fleet to be electric by 2020, 30-32% by 2025, and 60-70% by 2030.”
Hint: Don’t let people park for free. This piece highlights the influence parking has not only on the shape and design of cities, but how parking spaces influences driving and vehicle miles traveled Parking laws and practices in cities like Beijing, Cupertino, San Francisco, Tokyo, Kolkata and Amsterdam are highlighted to show how these cities have approached the issue and how that ultimately influences citizen behavior with respect to driving and public transport. The article notes:
“Parking can seem like the most humdrum concern in the world. Even planners, who thrill to things like zoning and floor-area ratios, find it unglamorous. But parking influences the way cities look, and how people travel around them, more powerfully than almost anything else. Many cities try to make themselves more appealing by building cycle paths and tram lines or by erecting swaggering buildings by famous architects. If they do not also change their parking policies, such efforts amount to little more than window-dressing. There is a one-word answer to why the streets of Los Angeles look so different from those of London, and why neither city resembles Tokyo: parking.”
The article notes, the more spread out and car-oriented a city, as a result of enormous car parks, the less appealing walking and cycling become. If someone can park for free wherever they go, there is no reason not to drive. “The ever-growing supply of free parking in America is one reason why investments in public transport have coaxed so few people out of cars.”
Look for this to change in the coming years as cities begin to abolish ordinances requiring buildings to have a certain number of parking spaces. That has already been happening in cities like San Francisco.
Last week a California appeals court upheld the state’s cap-and-trade program, finding that it does not constitute an unconstitutional tax, as some business groups had claimed. The court ruling is available here. The 2-1 decision from the 3rd District Court of Appeal in Sacramento does not eliminate all the legal and political questions that have dogged the program, which requires companies to buy permits to release greenhouse gases into the atmosphere. There well could be an appeal to the state’s Supreme Court by the California Chamber of Commerce and the Pacific Legal Foundation, which brought the case.
The cap-and-trade program has been selling carbon allowances since 2012 under California’s economywide ceiling on 1990 emissions levels by 2020. Meantime, state lawmakers are debating whether to extend cap and trade into the future, a step that could require a two-thirds vote in both houses of the legislature — the threshold for approving tax measures — to bulletproof the program from any additional legal uncertainty. My bet is that that could happen, not only cementing the cap and trade program, but also the LCFS and ZEV programs.
The Times article notes that legal uncertainty has dogged the program for the past year, dampening demand for permits and reducing state revenues. The state has received about $4.4 billion in auction proceeds since trading began in 2012, but only about $500 million over the past year. However, carbon traders responded to the ruling immediately, driving up prices for allowances on the secondary market. Current prices for allowances representing 2017 emissions rose 38 cents to $13.99 per ton, according to ICIS U.S. Carbon Markets.
Gov. Jerry Brown and lawmakers have been spending the money on the state’s high-speed rail project, affordable housing near transit and other programs linked to emissions reductions.
This op-ed by a staff member of the ICCT notes that the India Supreme Court’s recent decision barring the sale of motor vehicles that do not comply with BS IV exhaust emissions standards after Mar. 31, 2017 effectively makes these standards national rather than regional, a change made possible because low sulfur fuels are now available countrywide. The op-ed notes that while a crucial step in the direction of cleaning up vehicular emissions and solving India’s “terrible air-quality problems” more needs to happen. Specifically, that means focusing on real-world emissions, removing older commercial vehicles and buses from service and launching a strategy to promote electrification in the country.
The focus on real-world emissions is not just a “European thing” or some idea from a group of progressive city mayors. It’s a serious global push that is going to continue (see Jan. 17 post) and this op-ed is the latest to highlight the issue. The same goes for electrification. This op-ed might focus on the India situation, but the strategy suggested here could (and will be) applied to any other country. The op-ed notes:
“Since April 1, manufacturers in India are required to disclose vehicle emissions performance as measured under laboratory conditions. But in order to keep the manufacturers honest, India will have to start a programme of in-use emissions testing using remote sensing equipment and portable emissions measurement systems. That testing must be accompanied by a mandate to recall vehicle models that are shown to be systematically falling out of compliance over time with exhaust pollutant limits.”
The Detroit News reports this week that at a panel of auto industry insiders at the New York Auto Show, both the Trump Administration and the auto industry have no intention of “rolling back” fuel economy standards with Mitch Bainwol, president of the Alliance of Automobile Manufacturers, noting, “The pressures to meet fuel economy goals are global. The question is whether the slope is consistent with consumer demand.” Read more about it here.
Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.