EV Supply Chain And Climate Adaptation

2021 started with a bang, with Tesla announcing that it produced over 0.5 million cars last year. While Henry Ford showed how to mass-produce cars that run on the internal combustion engine, a century later Elon Musk has demonstrated that “Fordism” could be deployed to produce cars that run on batteries.

There is more good news on the climate front. The United States, the main roadblock in the global climate consensus, has elected a pro-climate President. Importantly, twenty-eight countries, along with the European Union, have announced zero-emission goals.  

Zero-emission is now the lodestar for climate policy. It is inspirational and evocative. It helps political mobilization by identifying a measurable target to assess policy progress.

But is it achievable? Just as goals without budgets are delusions, the zero-emission target without a supply chain is a sound bite. Moreover, might a singular focus on zero-emissions lead to the neglect of climate adaptation policies, which have less media appeal? Thus, as we enter the third decade of the 21^st century, climate policy should pay attention to two important but neglected issues: how the electric car (EV) industry will source inputs such as Copper, Cobalt, Nickel, and Lithium; and, because climate change is already underway, how prepared countries and cities are to adapt to different dimensions of climate change.

A Supply Chain to Support EVs

EVs have arrived. Tesla (with only 1.5% US market share) is the most crucial driver of this massive industry-wide transformation. But it is not the only player in the EV race. Many startups and existing auto companies have jumped in. These include Chinese brands such as SAIC Motor, Great Wall Motors, and BYD; European carmakers such as VW, Fiat, and Renault; and the Korean auto giant Hyundai. GM wants to launch 25 new EVs. Even Apple, with no expertise in transportation, has hinted about launching an EV by 2025.

In part, this deep transformation comes in response to the rapidly changing policy context. Specifically, Norway, the UK, Japan, and California have announced that they will phase-out gasoline and diesel cars (as well as minivans and SUVs) over the next 10-15 years (New Jersey and Massachusetts will be joining this group soon).

In 2010, the total number of EVs (including plug-in hybrids) stood at 17,000. Deloitte reports that 2.5 million new EVs (and plug-ins) were sold in 2020 and projects the number will rise to 31 million by 2030.

But is the EV supply chain ready to meet this massive increase in demand for inputs? Take the case of Copper. According to one estimate, a typical electric car requires about 180 pounds of Copper (not counting for Copper needed for charging stations and renewable electricity generation). This means that EVs alone would increase global Copper demand 12-fold.

Or, take the case of Lithium or Cobalt. Every electric car requires 10-20 pounds of Cobalt and 40 pounds of Lithium. How will this demand be met? Will it come from existing mines or new mines? In which regions?

Because mining is environmentally and socially destructive, developed countries impose onerous regulations on new mines. The strong opposition to the Pebble Mine in Alaska illustrates this issue. New mines tend to be located in countries facing governance problems, especially in regions where underprivileged groups reside. There is extensive media coverage of Congo’s poor governance of Cobalt mining and Bolivia’s problems with Lithium mining.

Climate policymakers have not provided estimates of the extent to which recycling and new technologies (such as iron flow batteries) might reduce the demand for these inputs. Even the EU, which seeks to discipline trading partners for their poor environmental practices, has not outlined environmental standards for say, Lithium, 100% of which it currently imports.

Climate Adaptation in the Policy Mix

Climate policy has two pillars: mitigation (reducing emissions and increasing sinks) and adaptation (increasing resilience to climate-induced environmental disturbances). Zero-emission pledges are the key feature of mitigation efforts. But climate change is already in motion. No matter how quickly the world moves to a zero-emission state, countries will need to address the increased frequency and severity of extreme weather events, declining river water flows, ocean acidification, and wildfires.

Shouldn’t there at least be an effort to outline measurable adaptation targets (as opposed to plans and strategies), similar to zero-emission goals? Although adaptation is multifaceted, scholars have developed clear measures (see the work by ND-Gain). Why not work with them?

The lack of concrete adaptation targets suggest that policymakers are underplaying the adaptation challenge. Take the case of Washington State, a climate leader, whose Governor Jay Inslee recently announced the 2021-23 climate legislation plan. Although Inslee referenced the recent wildfires, which burnt about 800 thousand acres in the state, he did not advance any plan to address the wildfire crisis. Nor did he outline initiatives on other adaptation issues such as the irrigation of Eastern Washington’s arid agricultural lands. This omission is surprising given that Washington State adopted an integrated climate strategy in 2012 and has established working groups on issues such as disaster resiliency.

Like mitigation, climate adaptation requires both policy and behavioral changes. For example, governments need to discourage individuals from living in fire-prone areas and require home builders to work with new codes that make structures more fire-resistant. Unfortunately, governments are wary of adaptation policies that impose costs on households and businesses. For example, instead of allowing insurance companies to charge higher premiums for the increased wildfire risk, California has prohibited companies from increasing premiums or dropping insurance coverage for homeowners.

Climate adaptation is crucial for urban areas, where about 55% of the global population resides. Many cities recognize climate change accentuates urban environmental challenges such as the “heat island effect.” Because heatwaves disproportionately affect poor households, cities have embarked on policies such as increasing tree cover, removing asphalt, and creating new green spaces. But cities are not reporting their progress.

To conclude, while the focus on zero-emission targets is welcome, policymakers need to start taking adaptation more seriously. A crucial next step will be to establish measurable targets to guide adaptation activities. Second, policymakers need to dig deeper to figure out the supply requirements to support the electrification of the auto industry. They should make sure that the costs of dealing with the climate crisis are not offloaded onto marginalized communities where mines tend to be located.