THE ELECTRIC VEHICLE MOVEMENT--HOW POLICY AND REGULATIONS ARE FUELING MOMENTUM AND IMPACTS ON THE GLOBAL ENERGY AND MINING INDUSTRIES

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment (Apr 2019)
CHAPTER 15A
THE ELECTRIC VEHICLE MOVEMENT--HOW POLICY AND REGULATIONS ARE FUELING MOMENTUM AND IMPACTS ON THE GLOBAL ENERGY AND MINING INDUSTRIES
Andrew A. Irvine
Andrew A. Irvine, P.C.
Yellowstone-Teton Clean Cities
Jackson, Wyoming, U.S.A.

[Page 15A-1]

ANDREW A. IRVINE is the Legal and Corporate Engagement Manager at the Extractive Industries Transparency Initiative (EITI) in Oslo, Norway. The EITI is the global standard for the good governance of oil, gas and mineral resources. Prior to joining the EITI this year, Andy was an attorney at Andrew A. Irvine, P.C., in Jackson, Wyoming, where he specialized in environmental and natural resources law. Andy serves on the Board for Yellowstone-Teton Clean Cities (YTCC), the sole regional designee of the U.S. Department of Energy's Clean Cities Program. YTCC focuses on petroleum displacement activities in the Greater Yellowstone Ecosystem (Idaho, Montana and Wyoming), especially promotion of alternative fuels and vehicles through programs such as green fleet consulting, electric vehicle rebates and development of alternative fuels/electric infrastructure. Andy was awarded the 2016-2017 Fulbright U.S. Scholar Program grant to Ecuador to investigate and develop regulatory solutions to problems resulting from artisanal and small-scale mining in the country. He received his B.S. in Geological Sciences from the University of Notre Dame, his M.S. in Mineral Economics from the Colorado School of Mines, and his J.D. from Lewis and Clark Law School, with a Certificate in Environmental and Natural Resources Law. Prior to opening his own law firm in 2014, he was an attorney with the environmental and natural resources group at the law firm of Holland & Hart, LLP in Denver, Colorado and Jackson, Wyoming from 2006 - 2013. He is the Wyoming Mining Reporter for the RMMLF Mineral Law Newsletter, has served on the Mining and Environmental & CSR/Sustainability Committees for the RMMLF's Special Institutes on International Mining and Oil & Gas Law, Development and Investment, and he frequently writes about and presents on environmental and natural resources topics.

ABSTRACT

Fueled by government policy and regulations aimed at reducing reliance on fossil fuels and curbing greenhouse gas emissions, the electric vehicle (EV) market is expanding rapidly worldwide. Sales of new EVs surpassed one million in 2017, expanding the global stock to three million EVs. Conservative estimates indicate the number of EVs on the road will climb to 125 million by 2030. With transportation generating nearly a quarter of the world's greenhouse gas emissions, this transition to electric mobility will appreciably reduce emissions and help countries achieve pollution reduction targets. The uptake of EVs, however, will increase demand for electricity and materials not previously associated with the automobile industry. As a result of this increased demand, there are concerns as to whether the global energy and mining industries will be able meet demand and at what cost.

This paper presents the current growth in the EV market and discusses and compares government policies and regulations being implemented worldwide to grow the market. The paper next examines the impacts market growth is having on electricity and materials demand, particularly demand for nickel, lithium and cobalt, and considers whether materials demand will be a limiting factor for EV uptake. Finally, the paper presents suggestions for industry and policymakers to address impacts of the transition to electric mobility.

I. THE ELECTRIC VEHICLE (EV) MARKET IS EXPANDING RAPIDLY WORLDWIDE

Worldwide sales of new electric vehicles (EVs) reached a record volume of over one million in 2017, increasing the global stock of EVs to over three million.¹ This represents a growth in new sales of 54% compared with 2016.² In Norway, by the end of 2017, every second passenger car sold there was an EV.³ In the next two most successful markets, Iceland and Sweden, EV sales accounted for 11.7% and 6.3% of new car sales in 2017, respectively.⁴ In the People's Republic of China ("China") EVs only had a market share of 2.2%, however, in terms of sheer numbers China accounted for more than half of global EV sales and 40% of the global stock.⁵ Sales in China more than doubled those in the United States, the second-largest EV

[Page 15A-2]

market.⁶ EV uptake is increasing in a number of markets worldwide, especially in China, Europe and the United States, which are the three largest EV markets.

In addition to electric cars, electrification of other forms of transportation, especially two-wheelers (motorcycles, mopeds, etc.) and buses, is also developing rapidly. In 2017, sales of electric buses were about 100,000 and sales of two-wheelers were an estimated 30 million, with the majority of these sales occurring in China.⁷ The global stock of electric buses in 2017 was around 370,000, while two-wheelers numbered around 250 million.⁸ More than 99% of the stock of both buses and two-wheelers is in China, though numbers in Europe and India are rising.⁹ This paper focuses on electric cars, herein referred to generally as "electric vehicles" or "EVs," but the overall transition to electric mobility involves a wider variety of transportation modes.

To date, EV adoption has been driven mostly by policy, including targeted low- and zero-emission vehicle regulations, consumer incentives, charging infrastructure deployment, and local promotion activities to break down prevailing EV barriers. Not surprisingly, the main markets by volume (China) and sales share (Norway) have strong policies encouraging EV uptake. These nations and others are also sending clear policy signals to further encourage EV uptake. For example, China and the State of California set EV mandates, the European Union proposed stringent carbon dioxide (CO₂) emissions standards for 2030 and the government of India announced new electrification targets.¹⁰

Additionally, a number of countries have signaled even more rigorous emission standards by proposing deadlines to end sales of vehicles with internal combustion engines (ICEs).¹¹ Norway outlined the most aggressive target, banning the sales of such vehicles by 2025.¹² Others, such as Germany, India, Ireland, Israel, and the Netherlands, have proposed a 2030 target, while Britain, France, Taiwan, and the State of California will ban fossil fuel cars in 2040.¹³ Paris, Rome, Madrid, Athens, and Mexico City will ban diesel vehicles in 2025.¹⁴ China will no longer approve any new fossil fuel car projects.¹⁵ China is also working on its plan to ban fossil fuel cars and will soon phase them out on the island of Hainan in a test run.¹⁶

[Page 15A-3]

Automakers have responded by announcing hundreds of new EV models and more than US$150 billion in investments to achieve collective production targets of more than 13 million EVs annually by 2025.¹⁷ This is likely to be more than 10% of global light-duty vehicle sales, based on publicly announced plans.¹⁸ With these announcements, many automakers, including Volkswagen and the Nissan-Renault-Mitsubishi alliance, have now stated their EV deployment is likely to reach 20-30% of total production by 2025.¹⁹ Several automakers have also made statements about EV profitability and cost parity with their conventional vehicles by 2025.²⁰ Although heavy-duty EVs have not yet hit the market in force, estimates indicate EVs for construction, agriculture and mining will be a US$87 billion market around 2030.²¹

While policymakers are fueling demand for EVs and consumers and automakers are responding, there is speculation as to whether the global energy and mining industries will be able to meet the increased demand for electricity and materials at prices that can sustain such growth. In particular, the rapid upsurge in demand for lithium and cobalt, which are primary constituents in EV batteries, may pose risks to a smooth transition to electric mobility. This paper discusses the current policies and regulations driving the worldwide demand for EVs and compares the effectiveness of these policies across regions and countries in stimulating EV uptake. In following, the impact of EV uptake on electricity and materials demand is examined. Finally, the paper discusses potential limitations on EV growth and provides recommended policy solutions to address such limitations to enable a smooth transition to electric mobility.

II. POLICIES AND REGULATIONS PROMOTING EV UPTAKE

China, Europe, the United States, Japan, and South Korea account for nearly all global EV production. China's production was highest with 50% of global production in 2017, followed by Europe with 21%, the United States with 17%, Japan with 8%, and South Korea with 3%.²² Numerous policies and regulations, especially across the regions with the highest production of EVs, are helping to overcome barriers to EV uptake of limited model offerings, cost and convenience. In particular, consumer incentives are playing a critical role in reducing EV costs in the near term as EV offerings increase and production moves to higher volume. With regard to production, China has comprehensively promoted domestic and foreign investment in EVs and EV batteries with both its central planning and local policy. On the other hand, policies in Europe and the United States to spur similar EV battery investments have been limited. The recent policies and regulations promoting EV uptake in each of the three major EV markets--China, Europe and the United States--are summarized as follows.

[Page 15A-4]

A. China

China is leading the global EV movement with aggressive policies to promote EV adoption and production.²³ McKinsey & Company's Electric Vehicle Index, which assesses the e-mobility performance of 15 key countries around the world, shows "China remains firmly in the lead."²⁴ China's policies not only appear...