This past weekend, we celebrated our 53rd Earth Day. It was meant to be a time to recognize legitimate environmental concerns. What has changed between that fateful day in 1970 and now? For one, there was a concern from the media and some scientists that we were all going to die from global cooling. This was hardly the only environmentalist crisis that has existed since 1970. There have been concerns about overpopulation, peak oil, copper, food shortages, pesticide residues, major species extinction, and the disappearance of the ozone layer. Notice how those fears either did not happen or were exaggerated. There is one other phenomenon that I would like to mention separately because it has dominated our news cycle. It will be brought up throughout today's piece, but the biggest environmental problem of our time that is mentioned constantly by media and politicians is that of climate change.
Environmentalists argue that if we do not significantly reduce the world's greenhouse gas (GHG) emissions soon, the world as we know it will either be destroyed or considerably altered in an unpleasant way. Extreme heat waves, sea level rising, coral reefs disappearing, increase of adverse weather events, massive crop shortages, water drying up, species' habitats being destroyed. It sounds like a scenario in which the world would go to hell in a hand basket. The potential of such calamity is so high that governments are willing to intervene with whatever policies they deem fit to stop it that goes well beyond gas stoves.
What is the the Biden Administration going after in the name of climate change? Gasoline vehicles. A couple of weeks ago, the Biden Administration's EPA proposed "strongest-ever" emissions standards on cars and trucks. How strong? If these proposed standards become law, they would be strong enough where the EPA is estimating that 67 percent of vehicles sales in 2032 would need to be electric vehicles (EV) in order to comply with these regulations.
If we want to go somewhere, we need to know where we are at first. That is not merely for travel, but also sound advice for making progress. According to data analytics firm J.D. Power, less than 1 percent of vehicles in this country are electric and that 6 percent of vehicle sales in 2022 were electric. Trying to get from 6 percent to 67 percent in a decade is quite ambitious. This is not to say there is no demand for EVs. EV sales have tripled in the past three years, but that is a far cry from everyone clamoring for an EV. Looking at February 2023 survey data from AP/NORC, 47 percent are not too likely/not at all likely to purchase an EV, as opposed to 19 percent who would be. While there is demand, there are considerations that make Biden's aggressive, and quite frankly impatient, goals a pipe dream.
Climate change is not a crisis. This is a point I brought up in November 2021, as well as a point that was more recently made by Reason Magazine and Fraser Institute. This is not to say that humans have not contributed to shifts in the Earth's climate or that there are going to be changes in weather patterns that cause problems. What I am saying is that we are not on the brink of catastrophe and the world is not going to end if we do not do something soon. A recent study from Climatic Study shows that people who have better environmental knowledge have less "climate anxiety" and are less likely to succumb to alarmism (Zacher and Rudolph, 2023). If we stopped having models with implausible scenarios and fear-mongering dominate the conversation, we would realize that climate change is a manageable problem. For argument's sake, let's assume that the fear-mongers are correct. Even if we agreed that climate change were an imminent threat, Biden's vehicle emissions standards are still problematic.
Rushing production could slow EV development. As Reason Magazine points out, automobile manufacturers are struggling to get the manufacturing process for EVs to scale. An electric vehicle is still a nascent technology. Like with other technologies, it is going to take time to figure out how to make the electric vehicle more cost-efficient. When the cell phone, television, and computer first came out, they were expensive luxury items that only the rich could afford. Over time, they became more cost-effective.
It took a while to develop the technology and infrastructure to build combustion-powered vehicles. Since electric vehicles are so new, we have not reached that stage in technological development to build EVs at scale. Ford lost more than $2.1 billion on its electric car division last year and is expected to lose another $3 billion this year. Axios noted that battery technology is still evolving, which says nothing about whether we can mine the critical minerals for the batteries. An attempt to rush production could result in putting out an inferior product to market versus a more carbon-neutral option that uses less scarce materials.
Then there is the matter of being able to supply electricity in an already-strained grid system. According to Biden's own Department of Energy, we would need to expand electricity transmission systems by 60 percent by 2030 and triple it by 2050 to meet the demands of renewable energy and greater electricity demand. For this to work, productivity in transmission production would need to increase a whopping twelve-fold from what it was between 2008 and 2021. As long as demand for electricity outstrips supply, EVs are not going to gain traction.
Electric vehicles are more expensive than gas vehicles and have other costs. Aside from buying a house or paying for college, purchasing a vehicle is one of the largest purchases a typical American makes. When criticizing the so-called Inflation Reduction Act's environmental provisions last year, I pointed out that the average electric vehicle is about $16,000 more expensive. The price gap would plausibly diminish over time as the technology progresses. For now, price remains a major barrier to entry for Americans. The AP-NORC survey findings I mentioned earlier rank the cost as the highest obstacle.
The price gap between an electric and gas vehicle goes beyond the initial purchase. Electric vehicles are more expensive to repair and insure. Many states have additional registration fees. Electric vehicles do not fare as well in cold weather. There are still costs to charging an electric vehicle. Maintenance expenses are fewer on an electric vehicle because they have fewer parts than a combustion engine vehicle. Even so, there still are maintenance costs. The lack of a charging station infrastructure, long charging time, and limited driving range relative to a combustion engine vehicle also create doubt in the consumer's mind (AP-NORC). Charging time, range, and overall cost of an EV have improved over time. Odds are they will still get better as time passes. At the same time, the current limitations are still prohibitive enough where they create barriers to purchase, especially for those living in rural areas.
5-3-2023 Addendum: An analysis from Manhattan Institute reminded me that electric vehicles are not only going to cost a lot now. If Biden's regulations pass, the cost of vehicle ownership is going to increase. To comply with the regulations, automobile manufacturers can increase the cost of internal combustion vehicles. Two, increased demand for EVs is going to increase the inputs of EV manufacturing, especially the battery. Three, electricity costs will increase.
Electric vehicles have their environmental impact, too. It is true that electric vehicles do not consume gasoline or produce tailpipe emissions. That does not mean that electric vehicles do not come without environmental impact, as even the Left-leaning Slate concedes. There are multiple carbon-intensive inputs of manufacturing EVs, especially when it comes to the battery. According to the International Energy Agency (IEA), it takes six times the amount of minerals to manufacture EVs than it does for conventional vehicles.
Mining for these rare earth metals for EVs gets complicated by the fact that as of the end of 2022, China accounted for 70 percent of the world's rare earth metals market (Statista). Sino-U.S. relations are not exactly great at the moment, but let us assume that China decides to cooperate. There are other minerals that need to be mined for that create environmental costs.
Then there are the emissions from transporting the batteries from China to the United States. I am not here to say that EVs do not have the potential to have a net positive impact on carbon emissions, especially in the long-run. After reviewing a detailed piece from RealClear Investigations entitled 'Zero Emissions' from Electric Vehicles? Here's Why That Claim Has Zero Basis, I do know that manufacturing EVs is far from being a zero-carbon process. What I would contend is that the environmental impact of EVs is contingent upon some major factors, including the two below:
- The electricity for the electric vehicles has to come from somewhere. The origin of that fuel source has a huge impact as to whether the electric vehicles lower carbon emissions. As of February 2023, 60.2 percent of electricity comes from fossil fuels. If the electricity comes from carbon-neutral sources, then it will be better in terms of carbon emissions than if it were to come from fossil fuels. The catch is that demand often exceeds supply for clean energy sources, which is why fossil fuels (at least for now) will play its role in charging EVs.
- There is the question of battery life. The technology is new enough where automakers have not had too many opportunities to replace depleted batteries. We do not have adequate data to answer this question. EV manufacturers are optimistic in saying that they can last 15 to 20 years. However, if it ends up being closer to 10 years or less, the financial and environmental cost of an EV can change, and not in the environmentalists' favor.
Postscript. In summation, Biden's proposed emission standards to incentivize (or rather, force) EV purchases is misguided in a number of ways. Whether it would be beneficial to the environment, certainly enough to significantly curtail carbon emissions, is in question. Since climate change is not the calamity that EV proponents make it out to be, it is as if the Biden administration is trying to implement a solution in search of a problem. If anything, it is a power-grab of the Biden administration because if GHG emissions are an existential threat, it would basically give carte blanche to the government to regulate the economy as they see fit.
Then there is appreciating the irony that Biden's impatience could result in there being fewer EVs. You can throw all the money at a problem and create all the incentives (e.g., tax credits, subsidies, emissions standards) you want. If EVs really were cheaper and more efficient, you would not need to be forced into purchasing one. The truth is that EVs are currently more expensive than conventional vehicles because they are not as efficient or cost-effective to manufacture. I think of LED (light-emitting diodes) lights and how that took time for LEDs to replace the incandescent light bulb. They were expensive at first, but the price did drop and came with more performance improvements such as being more durable and lasting longer.
I made a similar argument about electric stoves last January, and the truth is that EVs are not a viable option for many Americans. If the technology for EVs improves and EVs become more affordable, that is one thing. That would be market forces moving in a direction more favorable instead of government fiat essentially stating that most vehicles need to be electric. If EVs are truly meant to be a thing of the future, it will happen on its own time. As I have brought up numerous times on this blog, competition is what leads to innovation, not government edict. Consumers should be deciding whether purchasing an EV is right for their household, not the government. For the sake of American consumers, I hope this proposed regulation does not become law.
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