The world faces an energy security crisis and higher gas prices triggered by the Russia-Ukraine conflict and compounded by the ongoing pandemic. In the race to transition to zero emissions against these challenges, countries are confronted with the dual tasks to close the energy gap and decrease dependence on fossil fuels.
One major opportunity to make strides toward these goals is in the transportation sector. Some countries are placing a lot of recent attention on the pathway to electric vehicles (EVs). In the U.S., the Inflation Reduction Act passed a provision for $7,500 in tax credits for owning an electric vehicle, and nearly $370 billion in clean energy spending total, while California followed with a gasoline phaseout by 2035. In Norway, Oslo city planners are targeting a fully electric public transport system by the end of next year. Kenya plans for 5% of car imports to be EVs by 2025, and Namibia is expecting 10,000 EVs on the road by 2030. Experts are eyeing the EV opportunities in these markets for buses, motorcycles, and even boats.
Can EVs chart a path out of the challenges of energy insecurity and towards a net zero future? Such a transition is explored in this Q&A with Jacob Kincer, the Hub’s Senior Policy Analyst.
Kincer analyzes the adoption of technologies like EVs in global markets. We talk about the rise of EV policy in the U.S. and its rippling effects across the world, especially in African and Asian countries. He also highlights countries to keep an eye on as they make their EV transitions, and what to watch out for ahead of the COP27 climate negotiations next month.
Mariel Ferragamo: Tell me a bit about what Energy for Growth Hub works on in the EV space, and why the team got into this work.
Jacob Kincer: The EV transition is going to be critical for transitioning to net zero. We’re already seeing it take off in rich countries— in Norway, 60% of cars being sold are EVs. But we’re not seeing the transition happening nearly as quickly in less developed countries in Africa and Latin America.
We are trying to coordinate researchers and scholars and develop analyses directly targeted at making electric vehicle transition work in Africa. A lot of the work being done right now is on those rich countries of the United States, Norway, etc. and less is being done in Africa, so these countries are forced to rely on recommendations that really aren’t tailored to them. The ultimate goal is to make sure that Africa is not left behind in another global energy transition.
Ferragamo: Starting with some of those countries where the transition is growing more quickly: the U.S. has seen significant efforts from the Biden Administration on EVs, with incentives in the recently passed Inflation Reduction Act, and state governments following with policies to bring on a transition, like California’s new gasoline ban. As EV policy attention grows here recently and in other rich countries— where do you think this is coming from?
Kincer: In rich countries, two fundamental things are driving the EV transition. One is just the need to move towards a zero-emissions world. Transportation is a big part of that. So, countries like China, Norway, and the U.S. have provided a lot of support for electric vehicles financially— for example, the U.S. supported Tesla with significant loans and provided tax credits to buy electric vehicles in the Inflation Reduction Act, and similar funding for charging infrastructure.
The other thing that we’re starting to see, is for example in Norway, historically, gas is expensive because of taxes, and power is cheap because they use hydropower. So there’s actually just a flat-out fiscal logic to transitioning to EVs versus gas. Now, with global fossil fuel supply chains being constrained by the Russian invasion of Ukraine and COVID-19, I think we’ll start seeing more and more where it makes more sense to charge your car rather than fill up with fuels.
Ferragamo: Do you think the uptake in these countries will have international effects, whether that be other countries following suit on policies, or market changes in industries like raw materials, or automobiles?
Kincer: Yes and no. I think U.S. support for electric vehicles will probably over time drive down global costs, especially as big manufacturers like Ford and Toyota move into the EV space. That being said, a lot of cars made for the U.S. market or even the European market are not really appropriate for the African or Asian market, so I think it’ll have a somewhat limited impact from that perspective.
And, critical minerals being as scarce as they are, prices have gone up three or four times. We might also see where rich countries can afford the batteries made from them without a problem, but less developed countries can’t. Already in Latin America and Africa, it’s really common for cars to be secondhand, imported from Europe, Asia, and the United States. So, unfortunately, without some policy interventions, what we might see happen is actually all of the secondhand internal combustion (IC) engine cars being exported to these countries, while richer countries uptake the EV industry.
Ferragamo: You mentioned that the cars used in the U.S., and other Western countries’ EV transition won’t be suitable for other emerging economies. What makes EV markets in those countries unique? What will the EV transition look like there?
Kincer: There are a couple of key differences. One, the cars that we make aren’t appropriate. In the United States, the most owned car is the Ford F-150. These gigantic trucks can cost $60,000, wildly more than the average disposable income really anywhere outside of the United States. They’re also not really fit for actual use. Most vehicle ownership in Africa and Asia is in crowded urban environments, so small cars or two- or three-wheelers make more sense there.
Two, the power systems are fundamentally different. In the U.S., you can take your EV home and plug it into the wall, and trust that it’ll charge. Same thing in Europe, same thing in China. But with the reliability of power being so poor in a lot of regions, that’s not really the situation for them. Other alternatives might be battery swapping: where you instead have a single form factor battery and swap it out in your two-wheel vehicle at a station.
So it’ll be different— but most of the big players are not thinking, ‘how do we market to people in Cameroon?’ Rather, it’s ‘how do we market to people in California?’ There’s just not much investment in figuring out how to make it work there.
Ferragamo: You also alluded to another possible constraint, how the energy security crisis from the Russia-Ukraine war and COVID-19 pandemic has affected interest rates, and prices of oil and gas, and renewables— are there also implications for EVs?
Kincer: EVs aren’t traditionally extremely affordable. Right now, we could be heading into a global recession, so people may choose not to buy new cars at all, let alone EV or IC. And supply constraints on metals and minerals are keeping prices inflated.
On the other hand, gas prices have gone through the roof. It’s become apparent that relying on certain countries for the basis of your economy is a bad idea. So, at the individual level, there will be a lot of headwinds to EV adoption based on availability, costs, etc. At the country level though, there are a lot of really obvious strategic and economic reasons why you would want to support a transition to EV technology.
Ferragamo: Lastly, looking ahead as we move into the COP27 negotiations, what would you like to see from participating countries’ net zero plans? Are there any in particular you think could be one to watch on the EV uptake trend?
Kincer: I imagine EVs will play a more significant role in countries’ net zero plans, and some car companies around the world will be making more promises around the transition to EVs. In Africa, and Asia especially, I would like to see more coherent plans about actually making that happen. COP27 is in Egypt, so in Africa, I would be looking at Kenya, often a bellwether when it comes to energy transitions, with geothermal power and electric vehicle startups. Rwanda also has Ampersand, one of the more successful EV startups. Ghana and Nigeria are looking at this issue as well. But it’s a long-term transition. It’s going to take 30, 40 years, probably, so we want to start seeing people laying the groundwork.