Cleaner Electric Grid Key to Effective Electrification of Transportation

Global efforts to mitigate climate change rely on strategies that dramatically reduce greenhouse gas emissions. The United Nations Environment Programme has assessed that global emissions must drop by 7.6% annually from 2020 through 2030 to achieve the Paris Climate Agreement’s goal of limiting temperature increases to 1.5 degrees Celsius above pre-industrial levels. For this endeavor to succeed, countries must achieve large emission reductions across multiple economic sectors.

According to the International Energy Agency, transportation from all sources accounted for 24% of all global emissions from fuel combustion in 2018, making it a significant component of total global emissions each year. In the United States, transportation accounts for nearly half of national energy usage: the Energy Information Administration reported that the transportation sector was responsible for about 37% of energy-related emissions in the United States in 2019.

Given the transportation sector’s large share in total emissions, it is not surprising that governments worldwide are pursuing strategies to decarbonize their transportation networks as part of their plans to address climate change. According to the IEA’s 2020 Global EV Outlook, 17 countries have announced 100% zero-emission vehicle targets or the phase-out of internal combustion engine vehicles by 2050. Electrification of transportation systems, primarily through the adoption of electric vehicles, is the intended outcome of these policies.

Critically, the greenhouse gas emission benefits of transportation electrification depend on two key factors: (1) the fuel efficiency of the gasoline- or diesel-fueled vehicles displaced by electric vehicle purchases, and (2) the environmental impact of the sources of electricity used to power electric vehicles. Transportation electrification, therefore, presents a complex challenge. It requires a low emission electric grid to achieve large reductions in greenhouse gas emissions, while simultaneously increasing demand for electricity and intensifying the challenge of deploying adequate clean electricity. In its 2020 Global EV Outlook, the IEA estimates that battery-run electric vehicles can generally reduce greenhouse gas emissions compared with internal combustion engine vehicles. However, IEA also estimates that emission reductions due to electric vehicles are not necessarily large given the current global average emissions from electricity generation. In other words, without cleaner electric grids, widespread emission reductions from electric vehicles are unlikely.

A recent National Bureau of Economic Research working paper delves further into simultaneous transitions to cleaner electric grids and transportation systems. This working paper by Erich Muehlegger and David S. Rapson uses data from a California light-duty electric vehicle subsidy program to show that near-term emissions associated with both electric and internal combustion engine vehicles are uncertain. It also states that emission reductions due to the program could vary widely depending on the ‘cleanliness’ of the electric grid as well as the vehicle displaced by a new electric vehicle.

Within individual postal codes eligible for the program, the authors find that although the program increases the average vehicle fuel efficiency, program participants would have purchased a relatively efficient vehicle in the absence of the program. As a result, the program resulted in a lower amount of emission reductions than it would have had the program displaced vehicles with average or below-average statewide fuel economy. The average fuel economy of all vehicles purchased in California during the program period was 22 mpg. Hybrid vehicles that do not plug into the electric grid have a fuel economy of about 37 mpg, similar to the 35 mpg fuel economy that the authors derived for the standard internal combustion vehicle purchases displaced by the subsidy program. Plug-in hybrid and battery electric vehicles are more efficient, with fuel economies of 40 mpg and more than 100 mpg respectively. Moreover, the inclusion of plug-in hybrid electric vehicles along with battery electric vehicles also produced a smaller reduction in emissions than if each of those vehicles were the more efficient battery electric type.

Even more importantly, the authors find that the extent to which an electric vehicle powered by natural gas-generated electricity produces emission reductions is highly dependent on whether the comparison is made to the displaced vehicle or a state average vehicle. While they find that the total electric vehicles purchased through the program reduce emissions compared to average new vehicles by 1,202 kilograms per vehicle per year, these vehicles lower emissions by only 198 kilograms when compared to the more efficient displaced vehicle. This shows that the measured emissions reductions are more than six times greater, simply due to the choice of comparison. Although when Muehlegger and Rapson consider electricity generated by half natural gas and half renewable sources, they find that electric vehicles reduced emissions by 1,934 kilograms per vehicle per year even when compared to the more efficient vehicle.

The sensitivity of transportation electrification emission reductions to power generation sources is particularly important given that the emission intensity of power generation across the United States varies, with many areas still relying on coal-fired power generation while others rely on natural gas and/or zero-emission generation. The variation of emission intensity is illustrated in the accompanying figures based on data from the United States Energy Information Administration.

The available data show that achieving emission reductions in transportation may require a lower emission grid than exists today. This is particularly true where electric vehicles are likely to displace initially relatively efficient internal combustion vehicles. Therefore, progress on low- and zero-emission electricity sources is critical to achieving emission reductions in transportation and effective government investments in transportation electrification. Electric grids must not only add clean sources of energy to serve today’s electricity demand but also prepare to meet future transportation-related electricity demand with clean energy sources. This strongly indicates that transportation electrification and clean electricity are deeply interrelated, and so policymakers must formulate simultaneously relevant policies.

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Muehlegger, Erich, and David S. Rapson. 2020. “Measuring the Environmental Benefits of Electric Vehicles (Relative to the Car That Wasn’t Bought).” National Bureau of Economic Research Working Paper No. 27197. http://doi.org/10.3386/w27197.