Grand theft auto?

Why we are not solving climate change

No-one seriously doubts manmade climate change, and there is more of a scientific consensus on the range of likely effects than some of the more lurid headlines would suggest.  The cost of the impacts is reasonably clear.  To solve climate change, the technology options are also fairly clear and well costed.  There is also consensus that we need to invest now in the solutions, even if there is some disagreement as to the total net cost over time.

Why, then, is it all proving so hard to see through?

We sit here around the societal dinner table shouting at each other, rather than genuinely discussing, listening and trying to understand each other.  The carnivorous fossil fuel industry goads the vegan environmentalist, who moralises back, while trying to ignore the side-order of climate-denial fruit.

The simplistic answer to why this is proving a hard problem to solve is that there are powerful incumbent interests in fossil energy production and associated industries.  That is not news, although it is an inescapable fact.  We are stuck because we are trying to dislodge the vested interests in a way that is unlikely to work.  We are attempting property appropriation, when we actually need to cut a deal.  We are not on the brink of a political revolution because consumers remain quite happy with their cheap fossil fuels.  Therefore, we need to address the preeminent position of the fossil fuel industry within our social contract, within agreed property rights and with the consent of all sides.  After all, society needs industry for its security and quality of life, just as industry needs social acceptability.

If you think the accusation of property appropriation is far-fetched, consider this.  Cars are a perfectly legal product for consumers to buy and use around the world, but in Europe, in particular, there have been progressively tightening constraints on when, where and how they can be used.  Rules start sensibly, for example with speed limits and highway codes – the safety benefits outweighing the constraint on personal liberty.  Access controls or pricing may deliver urban air quality benefits that society values.  Then we get to blanket access prohibitions, technology bans, SUV-shaming and so on.  For producers, who have equally been trading cars quite legally, they find technologies in which they have internationally competitive intellectual property (for example, internal combustion engines) banned, or assets they have developed (for example, oil fields) become stranded.  It is reported that the European Union (EU) may even ban car rental firms and large companies from buying anything but electric vehicles from 2030.

To any pragmatic reader, the best answer is clearly to strike a midpoint that balances societal costs and benefits.  All sides could probably agree on this, although sub-arguments would undoubtedly run as to where exactly that midpoint was.  In practice what is happening is that each side is competing to extremes: net ZERO, vision ZERO, and so on.  This is such a mistake as bads (such as pollution) tend to exist as by-products of goods (mobility).  The only way to zero bads is zero goods.  So, it is no wonder that the two sides cannot come together and just shout at each other, in a binary struggle for survival.

By virtue of their strong incumbent position, the fossil fuel industry can afford to take a cautious position on any significant changes.  To try and dislodge these entrenched interests, the following playbook is often employed by opposing interest groups:

1. Highlight something undesirable (climate change, road safety), and make it an “emergency”

2. Set a target of zero for the undesirable thing

3. Make it a moral/existential crusade

4. Pick the winning solution

5. Pay “independent” organisations to lobby for your choice

6. Recruit followers and evangelists to pursue a grassroots campaign

7. Impugn the motives of anyone who disagrees with you.

Of the many questionable tactics, it is possibly stage two that is the most damaging.  If you require zero bads then you ask for a de facto ban.  You are appropriating physical and intellectual property.  The constraint on free behaviour is not in proportion with the damage caused by the bad.  Some car manufacturers promulgate the idea of zero fatalities from driving.  As preventing those last few accidents will be so disproportionately expensive, it effectively makes cars infinitely expensive.  A de facto ban.  For society, undoubtedly an undesirable outcome.

The EU is undertaking a more direct form of property appropriation, but it also sits within the broader theme of net zero.  It legislated recently to force car owners to scrap their vehicles when significant repairs are needed.  Classic cars – typically valuable – are excluded but roadworthy older cars that deliver solid motoring but that are worth little in the market are highly vulnerable.  We wrote about this “end-of-life” vehicle regulation when originally promulgated, in Kohlendämmerung.

Recent legislative discussions have made the proposal less troubling on the surface of it, but more troubling in the detail.  Rather than being forced to scrap a vehicle at the point of repair, it only applies if selling the car, at which point proof of roadworthiness would be needed.  In addition, sales between private individuals are excluded from the requirement.  For vehicles being sold by or to a dealer, or via an online platform, a roadworthiness certificate would be required.  Where a vehicle was in need of repair, showed excessive wear or had leaking fluids, an independent expert would need to be commissioned to opine on whether the vehicle was at the end of its life.  At the end of life, the owner would need to deliver the vehicle to a special facility and obtain a certificate of destruction.  As roughly half of vehicles in Europe are transacted commercially, rather than privately, this can be seen as a material transfer of value – in terms of expert fees – away from the vehicle owner, although you could always circumvent this by selling your car privately.  Nevertheless, there would be inevitable diminution in vehicle value.

So, on the surface, the proposal has been made more acceptable and truer to the objective of avoiding exporting dud cars and aiding resource circularity.  However, worrying terms hide in the details.  It leaves it to Member States of the EU how strictly to implement the criteria listed in Part B of Annex I [of “Proposal for a Regulation of the European Parliament and of the Council on circularity requirements for vehicle design and on management of end-of-life vehicles, amending Regulations (EU) 2018/858 and 2019/1020 and repealing Directives 2000/53/EC and 2005/64/EC.”]  A country could take a pure and extreme interpretation of the “criteria to be assessed.”  Worse, the European Commission can rewrite the criteria whenever it likes, without democratic safeguard:

In order to take into account technical and scientific progress, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of amending Annex I determining the criteria on when a vehicle is end-of-life vehicle.

If the sales of battery electric vehicles lag the key 2035 targets, what is there to stop the end-of-life rules being tightened both to put consumers off buying the last generation of internal combustion engine vehicles at the same time as pushing more existing vehicles off the road?

It is quite striking how far down the road of property appropriation we have already been led, but it has of course been done sliver after slice.  Even so, it is not sufficient to criticise unless a viable alternative to solving climate change can be offered – but there is.  As we have shown, aiming for zero bad entails banning the good.  It’s going too far.  Just to eke out that last benefit comes at a huge cost.  The optimal point is, much more plausibly, the point at which the benefit increase equals the cost of achieving.  This can only be practically achieved by putting a price, by some mechanism, on the pollution.  In this vein, credit should be given to the EU for progress made so far on putting a price on carbon, although there is a long way to go to make the system broad enough in application to be effective.

For cars, there is fortunately a solution at hand, as detailed in a recent book by Professor Felix Leach and Nick Molden called Critical Mass – the one thing you need to know about green cars.  As most unabated pollutants correlate well with car weight, if vehicle taxation were changed to be based exclusively on this factor, a price of pollution would effectively be established.  No bans.  No property appropriated.  Just the driver paying the right price for the pollution created.  The driver will adapt behaviour according to the price, and generate tax revenues to fund wider societal goods.  As an aside, it is paradoxical that many who oppose such pricing approaches are strong advocates for dynamic pricing of electricity for electric cars.

To work out where you on the appropriation-pricing spectrum, ask yourself what the correct question is.  Is it How do we limit driving? or is it How do we limit climate change?.  The latter is the right question.  If you plump for the former, you are using climate change to pursue a separate, car-restricting idea.  And if you are plumping for the former, you will be much more disposed towards property appropriation.  This polarity appears in another incarnation very often: How do we push electric cars? in contrast to How do we decarbonise transport?.  They are not the same thing, and if you put the first question as the primary one, you are more interested in promoting electric cars than you are cleaning up transport.

Which brings us to the deal to be done to solve the problem of vested fossil fuel interests.  Much as we might object to the pollution their products lead to, these companies have created legitimate, legal assets.  Moving forward, their products should pay the true price of the pollution created, which is relatively uncontroversial, and is practical as described above.  But this will still reduce the value of their assets, and, to get them to accept this, a level of compensation will be required.  Not full compensation, though, as supporting decarbonisation will give them renewed societal legitimacy.  Just as when the National Health Service was founded in the UK, the doctors were paid handsomely to forego their endowed interests to build a new public healthcare system.  Just as when European slave owners were compensated for the loss of their labour to build a more equal society.  This may be distasteful, but if an endowment is legally obtained, appropriating it will not work.  This is also distinct from vexed discussion of compensation for past injustices, whether that is climate reparations, through first nation peoples, to the 245 cattle given to the Maasai for culturally sensitive artefacts in Oxford.  Rather, we are talking about a conscious deal to allow progress.

In summary, then, we are not achieving our climate change goals because we have postulated zero as the desirable goal, have stirred up moral panic and are heading down the road of property appropriation.  This will not work, not least because so many people have their pensions invested in industrial incumbents.  There is a useful contrast with how so much progress has been made improving urban air pollution.  Zero pollution has never been suggested, solutions have been carefully calibrated to balance societal benefit against cost, incumbent industry has been part of the solution, morals have largely been kept out of it, and air quality is much improved on just ten years ago.  We need to apply this urgently to climate change.  If it means net-minus-80% carbon dioxde and everyone plays their part in the solution, we will be a lot better off than now.

Yet it is so tempting for each of us to the decide the “right” solution and – due to the vital important of the topic – force this answer on others as a moral rather than objective imperative.  Jean-Jacques Rousseau, the French philosopher writing in 1762, believed that people, when acting rationally and considering the common good, would naturally choose to obey laws that promote the overall well-being of society.  Forcing someone to adhere to such laws is, therefore, simply helping them realise their true, rational will.  In the famous phrase, they should be “forced to be free.”  This is very much the theme and philosophy of European governments right now.  It is not so different from how Stalin and Mao sought “moral improvement” of their people.  This is a slope, and a dangerous one if you choose to go down it.

So, we have a choice between an unpalatable deal and a dangerous challenge to liberty.  Put another way: the combustion car is under threat of being outlawed in order to dislodge fossil fuel interests.  The economic, geopolitical and social damage from this may be much greater than a pragmatic deal, and may just hand the economic rent enjoyed by fossil industries straight to a different set of equally uncontrollable industrial and political interests.  

Chose thoughfully, and be careful what you wish for.

The most complex suicide note in history?

Vehicle emissions and grid decarbonisation

The 1983 UK General Election saw the Labour Party manifesto dubbed the longest suicide note in history.  The current policy for decarbonising transport in the UK and Europe may be the most complex one.  For the policy to work, it is necessary simultaneously to switch the grid to green sources and fundamentally change the relationship between consumers and their cars, in order to balance that new grid.  Both are a major challenge, and if either fails, the whole policy fails.  If it does go off plan, we may well end up with undesirable cars being powered by a dirty grid, and an unresolved climate change problem.  Are industry and government locked in a suicide pact?

We are not used to living in age of electricity rationing, but this is a real prospect as we try to clean our grid with a big switch to renewable energy sources.  The UK is already flirting with using its contingencies, even on the existing less intermittent grid, with fewer electric cars and data centres – although at no point so far has the grid come close to shutting down.  On 3 December 2024, headroom was nearly eliminated such that a call for rapid reaction contingencies was initiated.  On 8 January 2025, power had to be called from Norway to preserve headroom.  These are just the first inklings of a problem, and one that applies to many European countries, not just the UK.

The underlying challenge is that we are trying to expand grid capacity to meet rising demand, while at the same time decarbonising it.  The chosen primary route to decarbonisation is renewables – specifically wind and solar.  These sources have two limitations.  First, as they are intermittent, they need accompanying storage to save the surplus peak energy and release it during dark or windless hours.  Second, they have relatively low “capacity factors” – the ratio of actual electricity generated in practice compared to the theoretical maximum.  Therefore, it is necessary to “oversize” the installed capacity to generate the same electricity as traditional energy sources.  Together, to make this approach work, it is necessary to install significant amounts of wind, solar and storage.

The UK’s National Energy System Operator (NESO), which runs the electricity grid, has published a number of scenarios for electricity demand and supply through to 2050, in the context of aiming for net zero .  As a measure of the tightness of supply in 2050, even though the installed capacity of wind is forecast to increase by a factor of five and solar by a factor of six compared to 2023, this is not enough to switch off traditional fossil fuel production.  Nuclear is also forecast to increase almost four-fold (which would be great for emissions reduction, but would need enormous commitment to achieve), and interconnections to other countries almost three-fold.  Still, not enough.  

To fulfil the projected 146% increase in annual electricity demand, the vehicle fleet is expected to contribute in two new ways: “demand management” and “vehicle-to-grid storage.”  Demand management and its “smart pricing” seek to shift demand to times when there is surplus renewable power.  Vehicle-to-grid (V2G) or bi-directional charging allows the grid to suck energy out of your car when the grid needs it.  In other words, you will be constrained in when you can afford to charge up, and you might find a lack of charge in your car for your journey.  If, for example, only 20% of cars are plugged in at the crucial time, those connected could lose 3 kWh each hour based on NESO projections.  Of forecast peak capacity in 2050 of 119 GW, smart pricing reduces demand by 12 GW and V2G could provide 20 GW of power.  Therefore, the vehicle fleet is expected to contribute 27% of peak demand to make the numbers add up.  This comes at the cost of constraining personal freedom and the inherent attraction of the motor car.  On most days, it will be fine, but consider those dark, still, winter Dunkelflaunten when your car will be an expensive brick.  This will reduce the utility of a car, and so the willingness of consumers to pay.  Fewer cars will be sold, at lower prices, with damage to the industry and personal welfare.

Some, however, would say that such an outcome would be good if it reduces demand for private motoring and leads to a shift to public transport.  The bigger problem that remains is that, even with demand management and V2G storage, grid capacity might still fall well short of growing demand.  Of the 116 GW of installed capacity in 2023, 36% of this is to be shut down to meet net zero – primary gas and biomass sources.  If we take NESO’s “Electric Engagement” scenario where almost the whole fleet is electrified by 2050, 386 GW of installed capacity is needed.  In other words, the “clean” part of the grid in 2023 would need to be increased more than five-fold by 2050.  344 GW of new capacity would need be installed that did not exist in 2023.  Just 19% of the forecast grid in 2050 was already in place in 2023.  Although the UK in particular has made good progress in decarbonising its grid so far, future infrastructure requirements for 2050 are large and risky.  If, for example, we fall 25% short of the target for new build-out, it would leave a supply gap of 68 GW in 2050.

At the same time as we face the risk of falling short on supply, demand could rise more quickly than expected.  This is not just speculation, as the question is being forced on us by a seismic change since the vehicle electrification policy was enacted: Artificial Intelligence (AI) is taking off in a way that exceeds the expectations of most.  As a result, the well-understood increase in electricity demand needed to support a BEV fleet (around 28 GW in 2050 with unmanaged demand) has now been joined by rapidly growing – and somewhat unpredictable – demand from AI.  Just one example, as reported in The Guardian recently, is an application submitted for a new data centre in the UK that would “…cause more greenhouse gas emissions than five international airports.”  It is forecast to consume 3.7 bn kWh [3.7 TWh] of energy per year when running flat-out, releasing 857,254 tonnes of carbon dioxide (CO2), based on the current average grid mix.

The same NESO scenario as above assumes electricity demand from data centres to be 54 TWh in 2050.  One of the more bullish forecasts is from the BloombergNEF, at 3,700 TWh globally.  As the UK is approximately 3% of global GDP, that would imply 111 TWh in the UK.  This would reflect 39% of 2023 demand and 16% of forecast demand in 2050.  If correct, this would create 57 TWh, or almost 7 GW running constantly, of extra demand on top of the Electric Engagement scenario forecast.  For comparison, Wood Mackenzie, a consultancy, is already tracking 134 GW of new data centres in the US, which would be 17 GW if pro-rated to the size of the UK.  The BloombergNEF projection may, therefore, turn out to be cautious.

So, we can see that persuading customers to buy BEVs is only part of the challenge.  Even if we electrify everything, our demand forecasts must be accurate, supply capacity build must happen, and car owners must be willing to engage with behavioural change.  If these conditions are not met, we may not have the capacity necessary to meet demand.  On plausible scenarios we could be at least 75 GW short, or 19% of the forecast installed capacity in 2050.  In this case, what would happen?

The first instinct would be to “manage” demand further.  The 75 GW shortfall assumes the maximum use of vehicle smart charging, so that is not an option.  Authorities could move to a harder rationing of electricity for motor vehicles, which would be possible by restricting use of public chargers and more aggressive use of V2G storage capacity.  It is likely that authorities would prefer to limit motor vehicle use than home heating or electricity, or industrial activities.  With remote working now commonplace, driving would be the first activity to be cut, for all but essential purposes.  The alternative would be to keep fossil fuel power generation going for longer, which would be politically highly embarrassing.  

Despite the embarrassment, it is possible that governments may keep fossil power stations so people could keep driving.  In this case, it would be fair to see vehicles as powered by marginal, “dirty” electricity.  At present, the marginal CO2 per kilowatt-hour (kWh) of electricity is 350 in the UK, compared to an average carbon intensity of 124 g/kWh.  So, almost three times dirtier at the margin.  The European Union (EU) marginal rate is around 550 g/kWh, compared to an average of 244 g/kWh.  In Poland, the values rise to 880 and 662 g/kWh respectively.  This illustrates that the cleaner the average grid becomes, the greater the proportionate uplift at the margin is likely to be.  It is worth noting that France’s current grid carbon intensity is 24 g/kWh on average but 510 g/kWh at the margin; even 18 nuclear power plants with 57 reactors is not always enough.

In future, the carbon intensity of the grid at the margin is likely to remain similar to today, at 350 g/kWh.  Applying Emissions Analytics’ own real-world testing and decarbonisation modelling, we see the following.  The second column covers all the up- and down-stream carbon in making and ultimately disposing of a vehicle, and liquid fuel production.  The second column covers the tailpipe CO2 and the same emissions from electricity generation.  Each powertrain/grid combination can then be compared over the life of a car compared to the gasoline ICE baseline.

The “average grid” scenario reflects the situation today, where there is sufficient grid capacity to power the new BEVs, but the sources of energy are mixed, including significant fossil fuel gas.  The “marginal grid” scenario is similar to NESO’s Electric Engagement scenario, but where capacity growth falls materially short, vehicle-to-grid does not work, or demand growth is even greater than expected.  In other words, the new BEVs are being powered entirely by the marginal, fossil fuel energy.

On the current grid mix, BEVs already reduce lifecycle CO2 by 49%, whereas in the EU it is only 32%.  In the worst case scenario, having invested so much in electrifying the fleet, the UK might find only a 16% reduction in CO2 emissions.  The EU could be in any even worse position, with CO2 rising by 13%, although this is unlikely to happen as the current marginal sources derived from coal would likely have been replaced by gas by 2050.

Which leaves an interesting dilemma.  If we push ahead with a best case scenario that gives 85% CO2 reduction thanks to a clean grid, but we fail to make the grid work or demand soars unexpectedly, we could easily end up in a scenario that would be worse than the low risk option of converting the fleet first to plugless full hybrids, which would allow us to bank 29% CO2 reduction quickly and for low cost.  Put another way:  if we want to convert the fleet to all-electric by 2050, we must be certain that the grid can accommodate such a fleet cleanly.

The optimal strategy, we would suggest, is to push for hybridisation of the fleet simultaneously with grid decarbonisation, and only push on to fully electrified vehicles when the clean grid capacity is secure.  This would be a more robust mix of risk and outcome.  It would not meet net zero by 2050, but it would reduce delivery risk, and reduce CO2 more quickly in the early years by avoiding the high manufacturing emissions caused by largescale battery production.  As readers of many previous newsletters will recall, Emissions Analytics believes that the data points to hybrids – especially full hybrids, with a decent battery size but no plug – being the best way to decarbonise transport for the next decade.  After that, fostering technology-neutral competition between rival technologies would be optimal.  During the coming decade, investment should be sharply focused on decarbonising the electricity grid, rather than subsidising well-off people to buy expensive (and heavy) pure electric cars.

If we mess this up, we might yet end up living the joke of having to charge up our electric vehicles with a diesel generator.  (The AI-generated image above probably cost us 5 grams of CO2 emissions…)  Having just recovered from a recent visit to an unnamed low carbon vehicle show that involved entering through unmistakable clouds of diesel fumes from the backup generators running the stands, this is clearly undesirable.  At Emissions Analytics’ most recent conference, called Off-Highway Powertrain & Fuels and which we hosted in Chicago, a session stood about these static power sources.  Demand is soaring for utility-scale, diesel-fuelled generators, most notably to power data centres to fulfil the already-voracious appetite AI systems have for energy.  

Has the suicide note already been signed?

Postscript

We have taken a largely UK and European perspective in this newsletter, but similar arguments are playing out in the USA.  For an insightful read from that perspective, we would recommend the article U.S. Energy Policy Undercuts EVs to Make Way for AI by Tammy Klein published recently in Transport Energy Strategies.

Can hybrid electric vehicles beat diesels on mpg?

Hybrids have always had a miles-per-gallon advantage in urban driving but new EQUA Index data shows that they are gaining on diesels in motoway or highway driving and, if current trends persist, hybrid electric vehicles (excluding plug-in hybrid electric vehicles) are set to take the lead in 2017.

The dotted trend lines in the above graph, representing motorway mpg for diesel vehicles and gasoline hybrids tested by Emissions Analytics, are converging. While the downturn in diesel mpg may be due to a change in manufacturers’ focus from fuel economy to NOx emissions, what is more striking is the improvement in gasoline hybrid performance on the motorway as a result of technological advances.

The step change in technology is even more noticeable when European EQUA data is compared to North American EQUA results. The graph below shows gasoline hybrid performance in the US is particularly impressive on our combined cycles. With this level of fuel economy it seems unlikely that diesel vehicles will ever make a significant impact on market share in the US. With the mpg penalty of some NOx aftertreatment systems, perhaps it was to gain a fuel advantage over hybrids that Volkswagen resorted to using a defeat device when bringing their diesel models to the US market.

Another noticeable effect of the different product mix in the US is the level of carbon monoxide emissions. Both regular gasoline cars and gasoline hybrids have much lower CO emissions than their European equivalents, with regular gasolines 30% lower and gasoline hybrids 64% lower. This is despite the fact that the US have a less strict limit, at 2.1g/km, than the EU’s, 1.0g/km limit.

When we last wrote about hybrid vehicles back in October 2014, we concluded they were delivering “good but not best-in-class fuel economy, but [were] typically the cleanest, and if you are a light-footed, congested town driver, they are ideal.” Two years on hybrids, particularly in the US, have really upped their game. They are still a cleaner drive than a diesel and may soon offer better fuel economy wherever you drive them but heavy-footed drivers should still exercise caution.