The Green Transition: Easy on the EVs
Weekly analysis of the shift towards a new economy.
Dear Readers,
Happy Friday from the Spotlight on Policy team.
As we go into the final week of the election campaign our coverage is in full swing. There’s no better time to get a full print and digital subscription to the New Statesman. This is your chance to take advantage of our special two months for £2 offer. You know you want to…
Before next week’s Tory implosion and the near-inevitable coronation of the Starmerite Labour Party, we’ve got this excellent piece of analysis from two senior researchers at the Common Wealth think tank – Melanie Brusseler and Khem Rogaly. They’re here to tell you why the industrial subsidy and market coordination route towards electric vehicle (EV) take-up is beset by drawbacks – from shortages of the critical minerals needed for batteries to a lack of proper infrastructure.
We’re about to enter a new world of Labour dominance, with all the twists, turns and policy shifts this entails, not least on EV and transport policy. Common Wealth is one of a network of think tanks producing forensic research and policy projects that could provide ideas and blueprints for an incoming administration. (Its director, Mathew Lawrence, even made our Left Power List for 2024).
So, let’s get right into it.
Easy on the EVs: Why public rather than market coordination is the right path for the transition
By Melanie Brusseler and Khem Rogaly
On Tuesday, Maria Grazia Davino – managing director of Stellantis, which owns among others Vauxhall, Peugeot, Citroën and Jeep – warned that its operations in the UK “could stop”. Davino was responding to the government’s zero emission vehicle mandate, an attempt to guide manufacturers towards selling an increasing proportion of electric vehicles (EVs) each year.
Threats like Davino’s do not show that electrifying the vehicles made and driven in the UK will put jobs at risk, but rather that the government’s industrial strategy for transport has taken a chaotic turn. A more coordinated approach from the government is desperately needed to decarbonise one of the UK’s highest-emitting sectors.
As it stands, government strategy relies on regulation to phase out the sale of new petrol and diesel vehicles by 2035. There is a side-helping of baby carrots (for instance relatively small direct subsidies) as well as tiny sticks to entice manufacturers such as Stellantis to remain in the UK. This is a strategy of market coordination – it depends on private investment decisions made based on the expectation of profit to meet desired outcomes. Delivering the transition in this way leaves the development of a green industrial base in the hands of multinational firms that can move overseas in search of greater returns. Small incentives are of limited value in a highly competitive global economy; since 2016, car production in the UK has fallen by half.
The market coordination approach has also failed to build the infrastructure necessary for the production or use of EVs. Thanks to limited battery recycling resources – needed to manage the lifecycle of EVs – there could be 42,000 tonnes of unprocessed lithium waste in the UK by 2025.
Outside of Scotland and a few local authorities, charging infrastructure has been left mostly to the private sector. Private investment decisions have determined who is able to drive an EV: there are more publicly accessible EV charge points in Westminster than Birmingham, Manchester or Portsmouth for instance. This is like leaving much of the country without petrol stations in the transition towards the motor vehicle.
Most fundamentally though, the market coordination approach to the transition – through the accelerated production and consumption of private EVs – does not provide an effective or efficient route to decarbonisation. By relying on private cars, rather than an expanded public transport system, this market-led strategy imposes the costs and decision-making responsibility for the transition onto people who have already faced brutal cuts to public transport services over the past 15 years.
In resource terms, it is also unlikely that a market-led transition to electrify private vehicles could lead to decarbonisation on a global scale. A 2021 estimate suggested that replacing all of the UK’s cars with private EVs would require three-quarters of the lithium produced worldwide. Although new battery technologies could yet emerge, decarbonisation through expanded public transport would be faster, fairer and more efficient.
In the US, the Inflation Reduction Act (IRA) has deployed public investment at a greater scale – a full-sized carrot – to mobilise EV production and consumption, but it too is undermined by a reliance on market coordination. The IRA depends on the use of consumer tax credits to subsidise a transition to private EVs, but as SUVs account for a big chunk of the vehicles sold in the US, this undifferentiated approach has channelled subsidies towards highly resource-intensive and expensive electric SUVs. The federal government has even reclassified some models of SUV to make them eligible for tax credits to the benefit of better-off consumers. Again, replacing cars like for like in the US context is not a realistic route to decarbonisation – forecasts suggest it would account for half of national electricity demand.
Learning relevant lessons from the explosive growth of China’s green transport sector would be more effective. This would require moving beyond claims that Chinese success is just a matter of subsidies to a recognition of the importance of public coordination to deliver the transition and prosecute industrial strategy. China has deployed a range of policy tools, from public investment in production to targeted procurement to develop local industrial capacity, which are tied to transport need. In Shenzhen, for example, the use of public procurement and state-owned charging infrastructure has produced a fully electric bus fleet, the largest of any city in the world.
This approach – public rather than market coordination – is the path towards a transition in which the needs of an expanded public transport system guide the development of an industrial base, and in which decarbonisation can be effectively tied to thriving green industry.
Today Common Wealth launched two research papers on the EV transition, including one on the effects of private ownership on the development of charging infrastructure. Both papers are available here. Common Wealth is set to publish more research on the need for public planning and coordination to decarbonise the economy later this year.
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