Falling battery prices and the electrification of transport systems in emerging markets is expected to reduce dependency on oil imports and subsequently “decimate” demand for oil, according to a new report published by independent financial think tank Carbon Tracker.
The new report, entitled Nothing to lose but your chains: The emerging market transport leapfrog, highlights the pending choice for emerging markets between importing expensive oil at rising prices and growing dependency, or domestic electricity produced by renewable energy sources which is seeing prices continue to fall over time.
Not only are the economic impacts up for grabs, however, but so too the dramatic health impacts of a reliance on oil imports.
According to the report, “Emerging market oil importers spend 2% of GDP on oil imports, have a high and rising dependency on imported oil, and suffer premature deaths of 285,000 people a year from pollution linked to transport.”
Conversely, the report explains that “The electrification of transport and falling battery prices enable electric vehicles to compete directly on purchase price with ICE vehicles whilst reducing the cost of energy imports per vehicle by at least 90%, cutting the number of premature deaths from air pollution linked to transport by at least 75%, and lowering the cost to consumers by at least two thirds.”
Worth noting, however, is that the somewhat overeager claim that EVs are able “to compete directly on purchase price with ICE vehicles” holds true only in certain income brackets and socioeconomic classes.
In Australia, at least, new EVs are still a toy for the upper-middle class and, at least on purchase price, are priced outside the range of many of us.
This is unlikely to be true forever, however, which highlights the importance of government action to provide a clear pathway for the development and rollout of electric vehicles and their attendant infrastructure.
Not least of all, the cost of EV batteries continues to plummet, having fallen 20% a year since 2010 and with costs expected to continue to fall from $US135/KWh to below $US100/KWh – the point at which, according to Carbon Tracker, “EVs become as cheap to buy as conventional vehicles.”
By 2030, Carbon Tracker expects EV batteries to be cheaper still, pointing to forecasts from Bloomberg New Energy Finance which predict a battery price of $US61/KWh, while carmakers such as VW and Tesla reportedly predict prices as low as $50KWh.
The Carbon Tracker report concludes that a switch to EVs in emerging markets could save governments $US250 billion a year in oil imports and cut expected growth in global oil demand by 70% – which shows just how reliant upon in-flux presumptions is the oil and gas industry.
Carbon Tracker believe their report to be the first to reveal that transport in emerging markets accounts for over 80% of all expected growth in oil demand up to 2030.
The report shows, however, that emerging markets such as China and India are already reducing their dependency on oil and actively moving to support EVs as prices continue to decline.
“This is a simple choice between growing dependency on what has been expensive oil produced by a foreign cartel, or domestic electricity produced by renewable sources whose prices fall over time,” said Kingsmill Bond, Carbon Tracker energy strategist and report lead author.
“Emerging market importers will bring the oil era to an end.”
“A switch to EVs in emerging markets would see oil importers alone cut growth in global oil demand by over 70%.
Factor in the war on plastics hitting petchem demand and rising EV penetration in developed markets, and it becomes ever more likely that we have seen peak oil demand in 2019.”
Unsurprisingly, China is leading the switch to EVs, with sales accounting for 59% of bus sales and 61% of 2-wheeler sales in 2019.
China’s dominance at the top is due not only to its economic power but also the country’s support for its EV industry.
Supporting its national EV industry has helped China on its path to reducing oil dependency and establishing itself as a leader in emerging technologies such as EVs and batteries.
China’s plans currently expect one in five cars sold by 2025 will be an EV, and President Xi Jinping’s recent commitment to achieve net zero emissions by 2060 implies that all car sales in China will need to have an EV drivetrain by 2035.
Importantly, the Carbon Tracker report also makes the case that a shift to electric vehicles will pay for itself, as the huge savings made by reducing oil imports will help facilitate the growth of a necessary EV infrastructure.