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ITF analysis finds that societal costs for electric cars and vans range from €7K to €12K more than fossil-fueled equivalents

Crist
Sample consumer and societal break-even curves for BEVs, with data points for a compact diesel for comparison. Source: Philippe Crist — Discussion Paper 2012-03. Click to enlarge.

Electric passenger cars currently cost €4K to €5K (US$5,079 to $6,349) more to their owners than an equivalent fossil fuel car over the vehicle’s lifetime, according to the latest policy brief from the International Transport Forum (ITF), an intergovernmental organization with 54 member countries at the OECD. ITF acts as a strategic think tank for transport policy and organizes an annual summit of ministers. The brief is based on a longer discussion paper published in April.

The analysis, “Electric Cars: Ready for prime time?”, finds that the societal costs for electric cars and vans range from €7k to €12k (US$8,889 to $15,238) more than fossil-fueled equivalents. This additional cost represents what society is willing to pay in order to promote electromobility. The ITF calculation ignores taxes on fuel (as from society’s point of view these are a transfer rather than a net cost); includes subsidies; and accounts for air pollution impacts.

The current generation of electric cars represents a significant improvement over previous ones. Nonetheless, electric vehicles remain more expensive than their fossil-fueled equivalents and may need government assistance to trigger wide-spread uptake. In line with strategic decarbonization goals, governments have provided research and development funding and, in many cases, direct and sometimes substantial purchase subsidies. One reason is the belief that the shift to a low-carbon transport is inevitable but that an early (and assisted) shift to electro-mobility will reduce the overall burden on society.

The “early-shift” rationale stresses that not only is government intervention in electric car markets necessary (on a sometimes large scale) but that society ultimately benefits due to a reduction of the oil import bill (with knock-on productivity impacts throughout the economy). An alternate storyline might highlight the elevated upfront opportunity costs of reducing energy dependency and greenhouse gas emissions via electric cars as opposed to advanced internal combustion engine vehicles and hybrids.

Comparison of fossil-fueled vehicles and electric cars is not always easy as conventional cars rarely have equivalent electric counterparts. Several models marketed in France do, however, exist in both fossil-fuel and electric versions, built on essentially the same body and offering similar comfort levels. Because of the small set of vehicle pairs studied, our findings can only be taken as an indicative snapshot of the relative costs of electric cars though many of the lessons derived from the analysis should be applicable elsewhere.

—“Electric Cars: Ready for prime time?”

The analysis concluded that comparing the costs to own and operate an electric compared to an equivalent fossil-fuel car was highly conditional—depending on the user and on the viewpoint taken (e.g. personal or societal expenses), as well as how far the car is driven and how much the battery costs to produce.

Owners of the electric cars studied can expect to pay €4,000 to €5,000 more than a fossil-fueled passenger car over the vehicle’s lifetime under typical use scenarios (30-35 km/day, 365 days/yr). However, a higher use scenario—say that of a delivery van travelling 90 kms a day during weekdays—would, on the contrary, save its owner about €4,000 over the vehicle’s lifetime. Under high travel scenarios (fleet use, deliveries, taxis), one might expect that a market already exists for electric cars if potential buyers have confidence in the advertised driving ranges and dealer support for these vehicles. Even without the €5,000 purchase subsidy, people travelling longer daily distances would likely already benefit from an electric car.

—“Electric Cars: Ready for prime time?”

In ITF’s analysis, electric passenger cars under typical use scenarios emit about 20 tonnes less CO2 than their closest fossil-fueled equivalents, translating into a societal cost of around €500 to €700 per tonne of CO2 avoided. This is somewhat higher than many other measures to reduce CO2 emissions, the report noted, even within the transport sector.

Other findings included:

  • The uptake of electric vehicles is intractably linked to fuel efficiency improvements in petrol and diesel cars—at least to around 2020. Gains in fuel efficiency will have a greater impact on widening the cost of ownership gap in favor of fuel cars than gains in electric efficiency (both of production and propulsion) in reducing this gap.

  • Electric cars are “displaced emission” rather than zero emission vehicles since electricity production may generate emissions. However, except in some cases where electricity production is highly carbon intensive, efficient electric cars will generate fewer lifecycle CO2 emissions than comparable fossil-fueled counterparts. Exactly how much less depends on the carbon intensity of marginal electricity production used to charge electric vehicles, the full lifecycle emissions (including production) of comparable electric and fossil-fuel powered vehicles (and their fuels) and the relative energy efficiencies of those vehicles.

  • Electric vehicles already promise financial savings for certain operators without subsidies.

  • It is also not clear that households will buy electric vehicles as “like-for-like” replacements for fossil-fueled cars; a two-wheeler or other small, purpose-built, low range, agile, easy-to-park and congestion-beating urban electric vehicle may be the EV of choice—as is already the case for electric bicycles in China.

  • The current market for electric cars is uncertain; overcoming this uncertainty is the rationale for government intervention.

Some commentators argue that the costs of intervention will be more than compensated by future savings (on reduced oil imports and avoided environmental costs). Others suggest that high levels of government support for electric cars diverts attention from other, possibly more cost-effective investments. Are direct purchase subsidies for electric cars a “good bet” for society? Our analysis does not conclusively answer that question but cautions that in those cases where electric cars already compare favorably to fossil-fueled vehicles, subsidies may be superfluous and that where they do not compare favorably, the onus is on demonstrating that subsidies represent value for money.

—“Electric Cars: Ready for prime time?”

Resources

Comments

Davemart

From the diagram their 'baseline cost' at the start is with oil at $90/barrel:

'Our baseline assumption for fuel costs is based on an oil price of $90 Bbl. Is this a reasonable assumption? London Brent oil prices had traded consistently above $120 Bbl at the time of publishing this paper (April 2012) and had not dipped below $90 Bbl since December 2010. Oil price variability has been a steady feature of international energy markets in recent years and there is no evidence that this is likely to change much in the
future, especially as the slow and sometimes erratic nature of the post-2008 crisis recovery continues. Nonetheless, despite variability, it is generally assumed that oil prices will increase over the next 15 years (IEA, 2010). For the purposes of our calculation, we assume that prices will increase 6% per year -- consistent with the
assumption in (Prudhomme, 2010). This means that oil prices will reach $203/Bbl at the end of the life of the vehicles examined in this paper. We assume a constant Dollar/Euro parity over the lifetime of the car for convenience.'

http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP201203.pdf

Arne

I wonder if they accounted for the healthcare cost savings? Especially converting urban delivery vans from diesel to electric has a huge health benefit. From the article this is not clear.

As the German EEG has kickstarted true mass production of PV to the benefit of all inhabitants of planet Earth, it makes sense to support a promising technology to mature more rapidly.

The number of cars sold is still very small, so the overall cost to society is very low. There are very good reasons to believe the EV can become competitive. Even if 5 manufacturers fully claim the $7500 plugin vehicle incentive for the maximum of 200,000 vehicles, that still amounts to $7.5 billion. Peanuts compared to the potential benefits.

Davemart

Anne:
Check out the full paper that I referenced.
Not only no health costs, but no depreciation, and I did not spot maintenance in it on a fast reading.

Since they are using Renault vehicles for the comparison, battery depreciation obviously does not come into it, so I would expect the vehicle to last longer than an ICE.

OTOH they have ignored the very substantial taxes that an ICE pays in fuel.
I reckon break even in respect of fuel costs occurs including taxes at something like £2/litre if electric vehicles are taxed equivalently.

Herm

I thought the Renault Fluenze and Zoe were at cost parity with similar diesels when you lease the battery.. is this not so?

Darius

Sounds tricky "taxes excluded". Do VAT, profit tax and other related taxes excluded as well?

Why taxes should be excluded? In Europe high fuel taxes representing fuel social costs and future risks related to tremendous oil price spikes. In US no fuel tax makes unfair playground for cleaner and less price risky transportation methods and not covering costs securing oil supply. One can say that Europe is in much more captive and dificult situation than US having no domestic oil and gas with no possibility of being self sustanable without energy imports therefore must be much more agresively taxed. Partialy its true. US with $300 bln anual oil imports could survive such prices and further price increase. By reducing oil import volume and US is doing so it can maintain oil imports cost at $300 bln level.

kelly

By 1990, the USSR imploded and the US military/industrial complex needed an enemy.

Saddam may have invaded a county-size country, but Decider I occupied Middle-east OIL(US bases/Arab soil) FOR DECADES.

Papa Decider could have wiped Saddam and the Republican guard away with an extra day of "the 100 Hour War" but that was never his intent.

Finally, after a decade, the Arabs attacked US soil for Decider II.

Wa la - a scary international enemy(terrorists) the government, military, and it's contractors need more than ammo itself.

Add the $trillions these ongoing oil wars cost and ALL light EVs, not just "high travel scenarios (fleet use, deliveries, taxis)" cost less than ICE.

Herm

Think of all those oil fields we could have annexed.

HarveyD

This study, with SO many USEFUL exceptions, managed to favor ICE machines and Big Oil?

As biased as it is, it seems that an Electric vehicle would be currently advantageous for us (70 Km/day) with Oil at over $60/barrel which is the case for now and the foreseeable future

With Oil over $100/barrel, 80+% would gain with EVs using current primitive costly battery technology.

ai_vin

Kelly, I suggest you watch "The Power of Nightmares" aka The Rise of the Politics of Fear. It's a three part BBC documentary film series, written and produced by Adam Curtis.

A D

It cost more then that because they forgot many costs. They forgot to take account of the electric charger cost. Maybe they just calculate with the basic level one charger that take 8 to 12 hours, if so then they might add hidden cost for innocupancy cost like a bev that is off for 12 hours before it can roll again. Level 2 and level 3 chargers cost have been ommited and many level 3 charger charge as much money for a recharge as a fill up with gasoline. also they omitted the used car market where there is 1000x the choice on ice cars then bev because bev are not for sale used because peoples buy them only for the subsidies. If you take account of the subsidies then bev cost even worst then 10 000$ more, something like 17 500$ more is more realistic. Also bevs needs a dedicated spot for recharging and that spot amount to pretty high cost and gasoline ice cars can be parked everywhere. In europe this is especially important. Many car owners park the car onto the street where there is no charger. All in all this article omit many hidden costs and limitation of bev and they forget the difference between the volt electric car and pure ev.

PhilippeC

Good to see people read our reports. Responses to comments and (some) misconceptions:

@Anne: "I wonder if they accounted for the healthcare cost savings? Especially converting urban delivery vans from diesel to electric has a huge health benefit. From the article this is not clear." Yes insofar as the monetised air pollution cost derived from the (official) Boiteux Report in France assigns a cost due to air pollution that is dominated by health effects.

@Davemart: "Not only no health costs, but no depreciation, and I did not spot maintenance in it on a fast reading." Health costs are included, all costs are in Net Present Value so depreciation included - BEV depreciation less than ICE because wear-and-tear is likely less and BEV residual value remains high due to Battery leasing vs. battery owning. Maintenance cost differential in favour of BEV is included.

@Davemart: "they have ignored the very substantial taxes that an ICE pays in fuel" Taxes are included when calculating consumer costs (and yes, ICE taxes are substantial), not when calculating societal costs are per standard economic appraisal methodology.

@Herm: "I thought the Renault Fluenze and Zoe were at cost parity with similar diesels when you lease the battery.. is this not so" No, this is not so -- check the cost tables in the papaer that include pre-subsidy pricing for equivalent models on the French market.

@ Darius: "Sounds tricky "taxes excluded". Do VAT, profit tax and other related taxes excluded as well?"
As noted above, taxes are included in the consumer cost calculations, not in the societal cost calculations as per standard economic appraisal methodology -- hey, I didn't make up the rules ;-)

@ HarveyD: "This study, with SO many USEFUL exceptions, managed to favor ICE machines and Big Oil?" Assumptions are clearly explained in the paper as are their rationale - the analysis holds for these but readers are free to play around with other assumptions. The study doesn't favour big oil, it just finds that if you aren't driving a lot, the current generation of EVs in France don't really represent good value for money and subsidising their purchase doesn't really change that. It also shows that EVs make sense for high mileage users within range constraints ... that's a pretty positive message isn't it?

@A D : "It cost more then that because they forgot many costs. They forgot to take account of the electric charger cost. " No, charger costs are included (home box charger + installation) as is the cost of the dedicated cable (rather expensive...). Public charger costs are discussed.


kelly

ai vin, I'll check "..Nightmares" sometime.

We do live in absurd times.

Any child over the age of six can try looking at a corporation(headquarters, product, paperclip,..?) and notice, "That's not a person!"

But our '9 wise men', bought and true, rule that a financing scheme is a flesh-and-blood person, perhaps to "love, honor, and cherish" forever.

So, 100's of millions of US dollar corporation person 'campaign' contributions per month go into buying a part $million a year Presidency etc. - 'for the people'.

From ICE or EV, crooks and whores are easier to spot than spell.

danm

"The current generation of electric cars". The most rabid supporter of EV's would not argue that the points made in this article. Everybody knows current EVs are more expensive than most ICE vehicles, and are being subsidized. Duh.
It's what's coming in the next ten years that should be compared.

HarveyD

es danm....it is rather unfair to compare a starting new technology with an 120+ years old mature technology. In 100+ years, nobody will remember the age of ICE machines. It will be history long time before.

HarveyD

PhilippeC...I understand that the assumptions accepted or refused will determine the end results. IT IS SO EASY THE ARRIVE AT THE NUMBERS WANTED.

Normally, all meaningful factors are and/or should be included with or without weighting.

Currently, it is almost impossible to arrive at the real total cost of fossil and bio-fuels burning. The long term environmental and health cost may be 1000+ times higher than we currently think. Who can cost the multiplication of autism and cancer cases?

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