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Around 60% of worldwide demand for oil arises in the transportation sector, mostly to power road vehicles but also for aircraft, ships and trains.
Replacing oil demand
It may eventually be possible to replace oil demand in road transport with electric vehicles.
Battery technology is the key and there have been forecasts that costs are reducing fast enough to make the replacement of diesel and petrol road vehicles feasible within a few decades.
Impact of technology
Aside from cost reduction, the technology would need to increase the range of the vehicles and ensure rapid battery charging.
There have been false dawns before and electric cars are yet to make serious inroads anywhere in the world, despite generous subsidies in many countries.
But the technology optimists could be proved right in time, at least for cars and even for heavy trucks.
It is more difficult to envisage battery-powered ships and aeroplanes, barring some technological miracle. If electric road vehicles eventually replace cars, buses and trucks, oil demand will contract sharply and you will hear no more about “peak oil”, the fashionable scare story just a few years ago.
Electirc cars reducing emissions
Electric road vehicles could also reduce carbon emissions, provided electricity is generated and delivered with lower full-system emissions than petrol and diesel combustion in vehicle engines, which is entirely possible.
Serious money has been mobilised for research and development and the vehicle industry is prepared to spend more. Countries with vehicle manufacturing industries are also putting taxpayers’ money into R&D.
In Ireland
In Ireland, there are very generous subsidies for electric cars, about €10,000 per unit between the reduced purchase tax and the Exchequer-funded price discount.
In addition, the ESB provides free electricity at its charging points around the country and there is a steep discount on the annual vehicle tax.
For a standard vehicle doing typical mileage, the Irish subsidies amount to roughly €3,000 per annum over the life of the car. They cannot be maintained at current levels – if everybody chose to take up these generous offers, both the Exchequer and the ESB would go bust.
Slow take-up
Thankfully, from their standpoint the take-up has been slow and there are only about 3,000 all-electric cars on the road. They are still pricey even with the up-front subsidies and the range limits are a serious disincentive for many potential buyers.
The ESB is already beginning to regret its free electricity scheme and has been muttering about introducing a monthly charge.
Incentive
Since Ireland has no vehicle manufacturing industry, there is no incentive to promote the advance of electric cars, other than their potential contribution to emission reduction.
So are the subsidies currently on offer purchasing emission reduction at a reasonable cost to the State?
The correct price for carbon dioxide emissions, if there were a universal carbon tax, would be at least €30/t
The typical petrol or diesel car driven for 15,000km produces about 5t of carbon dioxide per annum. The correct price for carbon dioxide emissions, if there were a universal carbon tax, would be at least €30/t, and some experts would prefer to see prices much higher, perhaps €80/t or €100/t.
The European Commission’s ineffective Emissions Trading Scheme, which levies a charge on power generators and other heavy industries, is currently yielding a price of only €6/t, which just about everybody thinks is far too low. At €30/t, all-electric cars would justify a subsidy of about €150 per annum. At the higher level of €80/t, a subsidy of €400 per annum could be justified, on the basis of the amount of carbon emissions saved, and ignoring the fact that electricity generation also involves carbon emissions.
In a nutshell, there is no plausible set of parameters which could justify the current very generous subsidies in Ireland.
The amount of carbon emissions being avoided, per vehicle, is simply far too low to support public subsidies of around €3,000 per annum.
Unless the Irish Government has a soft spot for Toyota and the other foreign manufacturers of electric cars, this is a highly inefficient way to cut emissions.
Meanwhile, the Government subsidises peat-fired power stations, the worst emitters per unit generated, which operate at a substantial loss and produce many times more emissions than will be saved by electric cars for the foreseeable future.
Principal benefit of electric cars
The principal benefit of the electric car subsidies appears to be the provision of speech material for ministers, always anxious to establish their green credentials.
Of course there could be a technological revolution coming in automobile propulsion: if electricity can be produced with genuinely low-emission technologies, and if the car industry succeeds in producing better and better batteries, we could all be driving electric cars 20 or 30 years from now, without price subsidies, purchase and annual tax reductions and without free electricity.
In the meantime, there are many cheaper and more effective options for reducing carbon emissions in Ireland.
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