Multipolar World

Reduction of fossil fuels in road transport

Jorge Costa Oliveira

According to the IEA, in its World Energy Outlook 2023, energy demand in transportation increased by 4% in 2022, with oil accounting for 90% of this growth (although mainly driven by aviation). Oil use in road transport is responsible for 45% of global oil demand. It currently totals 41 million barrels/day (mb/d), with cars accounting for 21 mb/d and trucks for 16 mb/d.

Also according to the IEA, sales of internal combustion engine vehicles using fossil fuels (ICEV) grew by an average of 3.4%/year from 2010 to 2017, reaching a peak of 85 million in 2017. Electric vehicle (EV) sales increased from 3 million in 2020 to >10 million in 2022 – 14% of all new cars sold in 2022, compared to 9% in 2021 and <5% in 2020.

Three markets dominated global sales – China (60% of global EV sales), Europe (EV sales grew >15% in 2022), and the USA (EV sales grew >8% in 2022). By 2030, total car sales are expected to increase >30 %, reaching 100 million. About 2/3 of this figure comes from emerging markets and developing economies, especially China, India, and Indonesia. For the IEA, the rise in EVs means that ICEV car sales are not expected to return to their 2017 peak.

The Boston Consulting Group (and BloombergNEF) do not endorse this forecast and highlight multiple uncertainties (affecting EV sales projections): (i) rising battery prices; (ii) increasing electricity costs; (iii) changes in government subsidies; (iv) insufficient guarantees of raw material supplies for batteries; (v) insufficient supply of essential metals at stable prices. We can further add: (vi) the limited number of EVs produced; (vii) problems with high-capacity charging systems; and (viii) the [still high] cost of EVs, especially in low-income countries.

The “incentives” for the shift from ICEV to EV involve increases in current taxation on ICEVs, specisl “green” taxes, on top of [unrealistic] deadlines for the ban on the sale of new ICEVs. These punitive “incentives” for ICEVs assume that technological advances will make EVs competitive. However, EV batteries remain expensive (and huge, heavy), most EVs do not have a great range, and high-capacity charging systems have problems.

The [expensive] price of EVs and the low available income of the vast majority of families (especially in developing countries) will slow down the pace of new EV purchases. At the same pace, control of oil supply by OPEC+ is expected to keep fuel prices high. If new green taxes significantly increase fuel prices (e.g., 3€/liter), there will be riots.

Providing generous financial support to families and companies for the replacement of ICEVs with EVs is only within the reach of a few countries (e.g., Norway). It is more likely that governments will continue to define prudent policies on the assumption of the long-term continuity of ICEVs. In summary, the reduction of fossil fuels in road transport is being, and is expected to continue to be, much slower than the wishful thinking underlying the net-zero scenario by 2050.

Jorge Costa Oliveira

Categories Multipolar World Opinion