Electric Vehicle Sales Are Surging But Net Zero By 2050 Means Policymakers Must Get Into The Fast Lane

Posted to Energy Innovation: Policy and Technology LLC in the The Energy Collective Group
Anand Gopal's picture
Executive Director of Strategy and Policy Energy Innovation: Policy and Technology LLC

Advancing innovative policy to save our climate. Board Vice Chair at the International Council on Clean Transportation. Board Member at Veloz

  • Member since 2022
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  • Jan 3, 2023

The COP27 international climate talks recently held in Egypt were a breakthrough, with wealthier countries mainly responsible for climate change agreeing for the first time to compensate emerging economies for climate damages.

But despite this historic agreement, countries made little progress toward strengthening pledges to cut greenhouse gas (GHG) emissions—especially in transportation. As action this decade is crucial to stabilizing our climate, the world’s major emitters must get in gear, but what must be done to cross the finish line?

Switching from dirty, fuel-burning vehicles to clean, pollution-free cars and trucks can slash planet-heating emissions, while dramatically improving local air quality for millions of people around the world. Zero-emission electric vehicles (EVs) are a mature and cost-effective technology that are ready to take over our roads. But policymakers must act now to leverage the tremendous climate, health, and savings benefits.

Ambitious policy will speed cost declines

Market, innovation, and policy forces are driving surging EV sales and our ability to transition even faster to safeguard the climate. Our new report, “Electric Vehicles Will Soon Lead Global Auto Markets, But Too Slow to Hit Climate Goals Without New Policy,” urges greater ambition by policymakers in the world’s leading auto markets, aiming for a minimum of 60% global zero-emission vehicle (ZEV) sales in 2030, reaching 100% ZEV sales by 2035.

The global transportation sector must reach these ZEV targets to align with a net-zero emissions by 2050 target, as modeling by the International Energy Agency (IEA) demonstrates. But the good news is it's getting easier and cheaper to meet this target. EV battery prices drop reliably with increased production because of learning curve dynamics, meaning stronger EV policies only accelerate cost declines. In other words, stronger policy will make clean transportation dramatically cheaper than polluting transportation.

Policymakers are taking the wheel. In one of COP27’s most exciting events, the United States joined the Global Memorandum of Understanding (Global MOU) on zero-emission commercial vehicles. This article uses the term “zero-emission vehicle” to refer to all-electric, plug-in hybrid electric or hydrogen fuel cell electric drive vehicles.

Now 26 strong, the Global MOU signatories target a floor of 30% commercial ZEV sales by 2030 and 100% by 2040 within their jurisdictions. Similarly, for passenger vehicles, a coalition of 19 nations and dozens of automakers established the Accelerating to Zero Coalition at COP26, pledging to complete the EV transition by 2040. But we must speed up if we are to save the climate, and with costs falling fast and enormous co-benefits, there is no reason to wait.

EV market status and outlook

Global EV sales are surging, up to 8.6% in 2021, doubling their 2020 share, and jumping again in 2022, expected to reach 13% of new car sales—an incredible 50% year-over-year gain. But while high confidence exists that EVs are on track to become the preferred motor vehicle technology, the timeline of the transition is still highly dependent on policy choices.

IEA’s Net Zero by 2050 report modeled three outlooks for EV sales under different policy conditions:

  1. The Net-Zero by 2050 Scenario requires that sales of new passenger vehicle (cars, SUVs, and vans) reach 31% in 2025, 64% in 2030, and 100% by 2035, in order for the global economy to be on track for net-zero emissions by mid-century.
  2. The Announced Pledges Scenario includes EV commitments even if they are not backed by law or specific implementing regulations, for example assuming all 19 countries pledged to reach 100% zero-emission cars and vans between 2035 and 2040 achieve this goal. This would result in an EV sales share of just 35% in 2030, well below the net-zero trajectory.
  3. The Stated Policies Scenario projects future sales based on transportation policies established in regulation or specified by law. This leads to a mere 22% EV sales share in 2030.
Source: Energy Innovation Policy and Technology LLC®. Our research is accessible under the CC BY license. Users are free to copy, distribute, transform, and build upon the material as long as they credit Energy Innovation® for the original creation and indicate if changes were made.

Transportation electrification has strong momentum, driven by policy advances, major automaker investments, significant technological progress, and falling battery prices of 89% over the last decade. But still, IEA modeling, as well as BloombergNEF and other modeling, indicate current policies will speed the EV transition fast enough for motor vehicle emissions to be on a net-zero pathway. Stronger policies are needed to accelerate an EV transition consistent with a safe climate future.

A three-part strategy to further accelerate ambition

A successful EV strategy has three essential elements:

  1. Make the goal of reaching 100% passenger ZEV sales by 2035 a guiding principle for all policy design.
  2. Use new vehicle sales standards as foundational, ideally setting standards both increasing required ZEV sales and decreasing allowable tailpipe GHG emissions.
  3. Embed vehicle standards in a larger portfolio of policies, including consumer incentives, attending to charging infrastructure buildout, and addressing equity considerations.

A high ambition EV transition timetable

A 2035 timeline for transitioning new passenger vehicles to EVs provides an overarching planning principle, and is the first step to recalibrating policy. Policymakers should aim for ZEV shares of new passenger vehicles to reach 60% by 2030 and 100% by 2035, based on IEA modeling. For heavier vehicles, a target of 30% ZEV sales share by 2030 and reaching 100% by 2040 as specified in the Global MOU is necessary.

Bolder policy will actually make the EV transition cheaper for the entire transportation sector compared to less stringent targets because of learning curve effects. These goals are also achievable given the current state of technology and the market. Major markets are increasingly covered by 100% ZEV sales targets, including European Union and California pledges to complete the passenger vehicle transition by 2035.

But while we must set course for 100%, enacting policy to meet a 60% sales target by 2030 is more significant. Given how adoption of superior, new technologies typically work, once sales reach a 60% threshold, they will rapidly move toward market saturation as new vehicle buyers will start to worry about the falling value of combustion vehicles.

Prioritize new vehicle sales standards

Higher ambition must be quickly followed by a refreshed implementation roadmap to secure real results, and new vehicles sales standards are a foundational step toward that goal. Two types of new vehicle sales standards can target ZEV sales. First, a ZEV sales standard is a performance standard requiring automakers to reach steadily increasing fractions of ZEVs in new vehicle sales over time. Second, a tailpipe emissions standard is a broader approach, setting GHG emissions requirements for all vehicles sold. The EU and U.S. federal policy use the tailpipe approach.

Each approach has its advantages. ZEV sales standards connect most directly and simply to the goal of sales acceleration. The broader coverage of a tailpipe standard ensures opportunities for limiting emissions from the combustion vehicles that continue to be sold. Where possible, we recommend using both tailpipe and ZEV standards as is done in China and California. In these regions, ZEV standards were the primary drivers of Tesla’s early success.

Recognize the necessity of a portfolio of policies

An effective strategy requires embedding vehicle standards within a broader portfolio of EV policies, including consumer incentives. Policies to spur public charging infrastructure investment, whether through public funding or by inducing private investments, are also essential.

EVs often cost less to own than a comparable ICE vehicle thanks to lower fuel and maintenance savings costs over the vehicle's lifetime. Before decade’s end most EVs will cost less to purchase than comparable ICE vehicles. Even with a higher sticker price, new car buyers can unlock current EV consumer savings through financing. Still, buyers are sensitive to up-front cost differences and can be anxious about charging options, so financial and non-financial incentives will continue to remain important even after EVs reach price parity. Targeted incentives for low-income consumers and incentives for used vehicles can also help broaden accessibility to a wider range of households.

Crossing the finish line to a safer climate

The extraordinary tailwinds propelling EV sales offer hope that the world can rapidly reduce transportation emissions. But it would be a huge mistake to pull back policy support under the assumption that the transition will proceed fast enough to stabilize the climate. To the contrary, the initial success of EVs is even more reason to lean into ambitious EV policy knowing that bolder action will bring consumers more affordable cars and cleaner air.

Original Post

Matt Chester's picture
Matt Chester on Jan 3, 2023

It's similar to how solar power surged over the past decade-- a great amount of year over year growth, doubling in impressive speed, but also doubling from low penetration keeps you at low penetration. The amount of new sales that aren't electric is still incredibly high, and as you note the other factor is how the infrastructure and industry around prepares (or doesn't prepare) fast enough to meet what growth we should hope to see. So much work left to do!

Jim Stack's picture
Jim Stack on Jan 4, 2023

More electric vehicles are coming fast enough. The Tesla robo taxis will do away with the need for more vehicles. Their Hyperloop will be faster and cost less as well as be safer for travel so that can cut jet pollution. In FACT the Vehicles with V2G Vehicle to GRID along with Home Battery Storage can form virtual batteries.  Along with home Solar and wind we make a big difference. These are the same battery cells that the Tesla vehicles use. The new EV Semi trucks cut more pollution that cars since they are so big and polluting. 

    So adding that all together and we can cut emmissions by a large amount on top of what the passenger vehicles can do. We need to encourage all of these clean technologies to Net Zero. 

Julian Jackson's picture
Julian Jackson on Jan 6, 2023

I also think there is also some "low hanging fruit" for the EV sector in public transportation, which your article touched on but was more about personal transport. There's a lot of buses, minibuses, taxis etc, which could respond to fleet purchasing, by for example city councils or local authorities.  These large purchases would bring the price down. Thus stimulating the market for these vehicles. A beneficial circle.

Todd Carney's picture
Todd Carney on Jan 7, 2023

Very interesting article, how important is actually changing EVs by then, so they do not have other environmental issues?

Anand Gopal's picture
Thank Anand for the Post!
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