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The Coming EV Debacle
Technology Briefing |
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TranscriptIf you want a foretaste of what banning internal combustion engine vehicles will mean for society, take a trip on California's high-speed railroad. When you get to the unfinished station, you’ll find that this public transit system sets a new standard for high-velocity trafficking of billions of dollars from the pockets of citizens to those of the special interests promoting it. And you’ll be able to get a glimpse of what the “green new deal” offers America and the rest of the world. However, the best available evidence indicates that recent Electric Vehicle mandates will outperform California's high-speed rail program by orders of magnitude. In fact, such mandates are almost certain to transfer trillions while increasing inflation, environmental degradation, and human suffering, as well as diminishing national security and personal freedom. And best of all, this is not some remote dystopian fantasy like Brave New World, 1984, or Fahrenheit. It may already be coming to your street, even as we speak. As of mid-year 2023, a dozen U.S. states, including California and New York, have joined dozens of countries, ranging from Ireland to Spain, in efforts to ban the sale of new cars using internal combustion engine (or ICE) technology. Unless reversed, most of these prohibitions will take effect within a decade. Meanwhile, the U.S. Environmental Protection Agency (or EPA), in a feat of regulatory legerdemain, has proposed tailpipe emissions rules that would effectively force automakers to shift to producing mainly electric vehicles (or EVs) by 2032. This is all designed to ensure that so-called zero-emission EVs play a central role in radically cutting carbon dioxide (or CO2) emissions. To ensure compliance with ICE prohibitions and hide the economic impact on individuals, policymakers are deploying lavish taxpayer-funded subsidies for manufacturers and consumers. Advocates claim that EVs already have achieved economic and operational parity, if not superiority, versus automobiles and trucks fueled by petroleum. Therefore, these bans and subsidies merely accelerate what they believe is an inevitable transition. This top-down action is nearly unprecedented. As Mark Mills of the Manhattan institute reminds us, the U.S. government has almost never banned specific products or behaviors that are so widely embraced. Indeed, there have been only two comparably far-reaching bans in U.S. history. The first was the Eighteenth Amendment, which prohibited the consumption of alcohol and was repealed by the Twenty-First Amendment. The second was the 1974 law prohibiting driving faster than 55 mph. Neither achieved its goals. Both were widely flouted. And both engendered unintended consequences. The idea of banning internal combustion engines emerged from the proposition that an "energy transition" eliminating "hydrocarbon use" is both necessary and inevitable. As a result, hundreds of billions of dollars in taxpayer funds and corporate spending are now being directed at subsidizing and building EVs in concert with near-term prohibitions on the sale of ICE vehicles. This has occurred in spite of underwhelming popular support for such rapid and sweeping change. This is nothing like the internet, smartphone, or television. Until the 2012 introduction of the Tesla Model S, no company had successfully introduced a battery-only option for an on-road car. Nor, in a century, has any new-energy car company succeeded in taking market share from the legacy competition. Notably, the arrival of today's useful EVs didn't happen because of government mandates or incentives. It was made possible by the maturation of two enabling technologies that were invented in the mid1970s. Lithium battery chemistry was first identified by Stanley Whittingham while he was working at Exxon and it earned him the 2019 Nobel Prize in chemistry. The other pivotal invention came from Jay Baliga at General Electric, who invented the IGBT, a new class of silicon transistor which was capable of managing high-power electrical flows. The IGBT made possible the compact, efficient digital control of electrical power critical for all EV drivetrains. Today’s niche EVs are undeniably a significant addition to the pantheon of options available for consumers. But, as Mills observes, the rhetoric and policies about the inevitability of "EVs for everyone" emerged from myths, misperceptions, and hyperbole about the capabilities of the underlying technologies. And as we'll see, concluding that because some people have cleaner, safer, and more affluent lives while using EVs, does not mean forcing everyone to embrace them will create a cleaner, safer, more affluent world. That's as unjustified and demonstrably untrue as saying that physicians are affluent and happy, so the world would be happier and more affluent if we forced every human to become a physician. Even for niche consumers, battery-only EVs are not nearly as desirable as many of their advocates would imply. For example, the International Energy Agency (or IEA) observes that Hybrids accounted for nearly one-third of the 10 million "EVs" sold globally in 2022. Hybrids, by definition, use combustion engines which policymakers are eager to ban. Furthermore, even though the IEA claims that EV sales will have "profound implications" for achieving climate goals, nearly two-thirds of global sales were allegedly made in China, whose current and planned electric grid is coal-dominated; that has profoundly negative implications, which effectively neuter any EV-driven near-term contribution to global climate Annual U.S. Vehicle Miles Driven. Furthermore, millions of China's 2022 electric car sales were to failed "car sharing startups" which have left up to a million corroding EVs abandoned across China. Nonetheless, the 6-to-7 million (non-hybrid) EVs sold globally last year did constitute a huge jump from the 3,000 units sold by Tesla in 2012. And, while only 10% of those EV sales were in the United States, policymakers convinced themselves that the "exponential" growth of EVs will make bans and mandates politically palatable because of EVs' "inevitable superiority." Admittedly, EVs are a practical and appealing new category of vehicle for many drivers. And that's why the world will see tens of millions more EVs on roads even without government mandates. However, by banning ICE cars and mandating the use of EVs in the immediate future, policymakers are explicitly making huge bets on the truth of three crucial claims, which need real world validation.
Furthermore, the share of cars bought by yet-to-come-of-age Gen Z consumers has increased five-fold in the past five years. The data also show that once the 2008 recession ended and Millennials found work, they bought cars and took to the roads along with everyone else, restoring and even somewhat accelerating the longrun growth in total vehicle miles driven on America’s roads. Only the shocks of the Great Recession and the subsequent “pandemic lockdown” temporarily disrupted that trend. There has also been a theory that the Internet would cause a decline in car usage as texting, email and Zoom replaced in-person meetings. Yet since the 1990s, there has been more driving, as well as more digital traffic. Another pillar of the so-called “peak-car thesis” is that urbanization diminishes the need for cars, especially the need for people to drive long distances. But as previously explained in Trends, Census data Volvo SUV Life-Cycle shows that the urbanization trend ended around 2010 when net migration to suburban and rural areas began. And that trend even accelerated due to the lockdowns. Furthermore, researchers noted in 2022 that "the de-urbanization" trend could become more commonplace if late-Millennials and Gen Zs confirm preliminary evidence suggesting that a rising share find suburban and small-town life more attractive. And notably, a survey in early 2023 found that two-thirds of Americans would "consider moving to a rural home or a subdivision" if telecommuting was an option. One directly measurable effect of these trends is a boom in "super-commuters," the nearly 5 million Americans now commuting some 90 minutes or longer. Over the last decade, the super-commuting share of the workforce has increased three times faster than the overall workforce. A 2023 survey by Upwork found that 41% of people are planning to move between two and four hours away from their current residences. This implies that telecommuting while living and driving in spread out ex-urban areas, as well as super-commuting to urban areas will lead to a significant increase in the share of America's population living where distances traveled are radically greater than in the city. So, based on the available evidence, it's clear that EV advocates' key assumption about the diminishing role of automobiles in our lives is invalid, at least on a time-scale relevant to banning ICE vehicle sales by the mid-2030s. Now, let's examine the second pillar supporting mandatory transition from ICE vehicles to EVs: the unproven assertion that EVs will lead to "profound reductions" in CO2 emissions. First, as we've previously explained in Trends, the evidence shows little, if any, correlation between global temperatures and manmade greenhouse gasses. Furthermore, even if mankind were to undertake no "mitigation efforts," investigations by Nobel Prize winning scientists, based on the most likely warming forecasts by the UN’s IPCC, indicate that the negative impact on human life through 2100, would be "negligible." But, despite this growing real-world evidence, green zealots insist that the world will come to an end unless we quickly reduce emissions. So, let's assume that Anthropogenic Climate Change is a serious threat to our quality of life and further assume that substantially reducing greenhouse gas emissions would avert the alleged catastrophe. The question then becomes, "Does mandating the replacement of ICE vehicles by EVs in the 2020s and 2030s represent a realistic and cost-effective path to reducing atmospheric greenhouse gases?" Here, the empirical evidence shows that banning cars with Internal Combustion Engines and replacing them with the EVs and related charging technology widely available by the 2030s is analogous to draining water from a sinking ship by drilling holes in the bottom. Put another way, constraints of physics & chemistry coupled with the resources available means that banning ICE vehicles by 2040 would paradoxically lead to higher greenhouse gas emissions and unleash dire unintended consequences across the economy and around the world. To true believers, this makes little sense. An individual EV appears to be more climate-friendly than a comparable ICE vehicle because the EV emits no greenhouse gases when it operates. But few people appreciate the enormous difference in life-cycle emissions associated with manufacturing and fueling battery-electric vehicles and ICE vehicles, at scale. A study by Volvo compared its electric SUV called Recharge (using a 69-kWh midsize battery pack) with its not particularly efficient gasoline-driven XC40 SUV. Like similar analyses by others, this study found that manufacturing and operating the EV resulted in greater total emissions than the comparable gasoline vehicle for the first 80,000 miles of driving, including the average emissions related to electricity supplied by the global electrical grid. But after 120,000 miles, Volvo estimates that its EV produces a cumulative emissions reduction of about 10% vs the ICE vehicle. Admittedly, the EV results could be better assuming an EU-like grid using mostly wind and nuclear; but that type of electrical grid is not going to be deployable worldwide in the 2020s or even 2040s. More importantly, most publicized analyses by Volvo and others are extremely optimistic about EV benefits because they rely on current raw material prices driven by small-scale EV production. A further analysis from the Manhattan Institute looked at realistic numbers involving mining the scarce inputs needed for battery manufacturing at a scale needed to replace all existing ICE vehicle sales by 2040, as well as upgrading the charging infrastructure to handle that number of EVs. This meta-analysis of 50 studies considered variables such as the size of the required mining locations, materials refinery locations, and the ability to improve the efficiency of ICE vehicles. After comprehensively examining the "big picture," the researchers projected far higher emissions for average EVs and substantially lower emissions for average ICE vehicles. The primary driver of this result was that replacing virtually all ICE vehicles with EVs in the specified timeframes would involve refining 50-to-90% of required battery materials in China, using mostly coal-powered electricity. Furthermore, most mining would shift to remote locations which would rely primarily on diesel generators in the 2020s and 2030s. Finally, since 75% of U. S. EVs now have 60-to-90 KwH battery packs, which are two-to-three times as large as the average assumed in the 50 studies, this would be the de facto standard for future EV demand in the U. S. and the EU. This analysis indicates that rather than "profoundly" reducing life-time Carbon Dioxide emissions, EVs available in the 2020s and 2030s are likely to generate roughly twice the total greenhouse gas emissions which would be associated with comparable ICE vehicles. And even in the unlikely case that life-cycle emissions from EVs and ICE vehicles were at parity, the case for coercive replacement of vehicles falls apart. The final question is whether EVs are now, or will soon be, cheaper than ICE cars, as well as operationally equal to them across the relevant use-cases. Unlike the demographic and psychographic issues related to "mobility solutions" or the basic scientific questions about relative emissions levels, questions about cost and utility lend themselves to well-understood business analysis techniques. And here again, the assumptions published by green activists and profiteers don’t stand up to serious scrutiny. To begin with, even green zealots admit that EVs require dramatically more high-value minerals than conventional ICE vehicles. From around 1980 to the present, better methods of mining and refining minerals have largely offset precipitous declines in ore grades for most key metals. However, mandatory adoption of EVs will set off an unprecedented explosion in demand for copper, nickel, cobalt, lithium, manganese, and rare earths. This will force industry to aggressively exploit more remote locations and mine ever-lower grades of ore. And that will almost certainly mean higher costs for all these inputs. This is not speculation. The trend toward declining ore grades is already clearly visible, even though many analysts have ignored the implications. Consider copper from Chile, the world’s biggest supplier. There, the average ore grade decreased by about 25% over the decade from 2003-to-2013 causing total copper-associated energy use to grow twice as fast as the growth in tons of copper produced. Other EV materials like lithium and nickel are also seeing costs rise sharply owing to new requirements to extract the minerals. In theory, technology offers ways to mitigate the rising upstream costs. These solutions include better battery chemistry to reduce the materials used to store energy, more efficient refining processes, electrified mining machines, and clean energy generation at mine sites. However, none of these factors can have a significant impact in the time frames contemplated for expanding EV production as required by the current transition mandates. Admittedly, news reports routinely claim "breakthroughs" in battery technology, but there are currently no commercially viable alternative battery chemistries that significantly change the magnitude of the physical materials needed. According to Mills, meaningfully reducing primary mineral demands would require a nearly 10-fold leap in underlying electrochemistry efficiency. However, such gains aren’t even theoretically feasible. Furthermore, basic materials account for 60%–80% of the cost to make batteries. So, even if labor and capital costs decline, battery prices will inevitably be driven upward by decisions made by global miners and refiners. And the data clearly shows that the mining industry isn’t remotely close to scaling up to supply the materials needed to meet the demand for minerals related to government mandated EVs. Specifically, current global spending plans for expanding or adding new mines are only roughly 10% of what will be required by 2030 to meet forecast green energy mineral demands. So, forget about normal learning-curve assumptions like "Wright’s Law." Rather than becoming less expensive in the way we’ve seen with airplanes, automobiles, and especially computers, costs for EV batteries can be expected to soar over the coming 15-to-20 years. Beyond the cost of ownership, there is still a question of whether EVs will soon be as good or better for serving the diverse set of requirements Americans have for their vehicles. Based on evidence presented in prior Trends issues, we argue that EV will not reach parity with ICE vehicles in the next decade. Beyond total-cost-to-own, mass market EVs will continue to have issues with range, charging times, access to charging, and vehicle reliability. With respect to these criteria and many more, consumers are being coerced to give up a proven solution and embrace another which is likely to remain inferior for the time being. So, what’s the bottom line? By banning ICE vehicles and mandating the use of battery powered EVs, green zealots and profiteers have set up a bitter and ill-conceived confrontation between themselves and ordinary citizens. The result is a battle which will be fought in the marketplace and at the ballot box. And it's likely to play an enormous role in shaping the New American Consensus which will define society, commerce and values for the balance of the 21st century. Given this trend, we offer the following forecasts for your consideration. First, demand created by EV mandates will drive explosive mineral mining and processing around the world, undercutting U.S. national security. During the era of hyper-globalization North American capabilities related to production of rare earths, lithium, nickel and cobalt atrophied, while China established itself as the world’s preeminent mineral refiner. Shifting suddenly from ICE vehicles to EVs promises to make U.S. supply chains less resilient, because it implies total reliance upon extended and questionable supply chains. As politicians and the general public become more aware of the implications, controversy will escalate. Second, radical expansion of global mining and refining of battery-related materials will lead to a surge in environmental degradation. Mining is a messy and hazardous business and refining can be even worse. Because it’s not in their "backyards," green activists often forget the environmental and human costs associated with exponentially expanding these activities. Once this ramp-up begins, expect to see global push back from beyond the green profiteer community. Third, surging prices for EV minerals caused by implementation of the mandated EV transition will create inflationary pressures offsetting the disinflation created by AI and other technologies. The quantity of minerals needed for ubiquitous EV adoption by the mid-2030s will quickly outstrip existing mining and processing resources. A likely 10-fold expansion in capital investment will lead to a focus on tertiary locations with poor ore quality and non-existent infrastructure. Minerals extracted from these sources will be extremely expensive. Fourth, contrary to the projections of green zealots, implementation of a worldwide EV transition will cause a transitory surge in CO2 emissions from at least 2025 to 2040. As explained earlier, producing the mandated wave of EVs and charging infrastructure will cause an enormous surge in CO2 emissions. In fact, emissions associated with the mining and refining of minerals needed to eliminate ICE vehicle sales by the late 2030s will fully offset 21st century emission benefits from EVs. Fifth, full implementation of the coercive transition to premature EV adoption will cause a misallocation of resources away from nuclear and fuel cell technologies which could realistically deliver "net zero" sometime after 2060. Small-scale nuclear fission reactors based on Uranium or Thorium could provide abundant, safe, clean, and low-cost electricity almost everywhere by 2040, if we commit the needed capital. Then, we can use that electricity to turn air and water into ammonia which can fuel emission free fuel-cell electric vehicles. Wasting time and money on battery-electric vehicles is simply a dangerous, expensive, and counterproductive diversion. And, Sixth, in a great victory for common sense, implementation of the mandatory EV transition will be scuttled as part of the broader regulatory reform mandate. Perhaps the biggest benefit of EV mandates is in motivating apolitical citizens to reject the Green New Deal in total. So-called independent voters are traditionally ambivalent about these policies because they don't directly feel the implications. However, EV mandates will soon result in side-effects which threaten mainstream pocketbooks. Ideally this will become relevant in the timeframe of the 2024 election cycle. |
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