How Do Policies Affect the EV Market Development?

Ten million electric vehicles were on the world’s roads in 2020. This year was a pivotal year for the electrification of mass transport. Electric car sales accounted for 4.6% of total global car sales.

Targeted policy support and model expansion in the medium- and heavy-duty vehicle segments will be critical to reducing emissions and making progress towards climate goals.

Policy portfolios to accelerate the transition

For the 2020s to be the decade of the EV transition, more ambition and action is needed from both market leaders and followers. In markets that showed significant progress in 2010, the main focus in 2021 and beyond should be on further enforcement, strengthening, and expanding regulatory instruments. Examples include the European Union’s CO2 regulations for cars and vans, China’s New Energy Vehicle (NEV) mandate, and California’s Zero Emission Vehicle (ZEV) mandate.

In the short term, efforts should focus on making EVs competitive and phasing out purchase subsidies as sales increase. This can be achieved by taxing vehicles and fuels differently according to their environmental performance and by strengthening regulatory measures that will allow the clean vehicle industry to flourish.

In the long term, realizing the full potential of EVs to reduce vehicle emissions will require the integration of EVs into the electricity grid, the decarbonization of electricity generation, the deployment of charging infrastructure, and the production of clean batteries.

Buses and trucks play an essential role

Other modes of transport, especially commercial vehicles (light commercial vehicles, medium and heavy-duty trucks, and buses), have a growing impact on energy consumption, air pollution, and CO2 emissions and therefore require increased attention and policy measures. Medium and heavy-duty vehicles represent 5% of all four-wheeled vehicles on the road, but are responsible for almost 30% of CO2 emissions. In recent years, advances in batteries have led to the rapid commercialization of models with better range in heavier market segments.

Electric truck in a highway. Wirestock (n.d.)

In 2020, California was the first state to introduce ZEV sales requirements for heavy-duty trucks. Advanced clean truck regulations will take effect in 2024. Several countries, including the Netherlands, have introduced zero emission zones for commercial vehicles and are taking the lead in implementation. This is a “hard to knock” industry. While there are competing paths to decarbonization (including hydrogen and biofuels), electrification of medium and heavy-duty vehicles is increasingly seen as a promising way to reduce local pollutant and CO2 emissions. The electrification of heavy-duty trucks has received similar political support and commercial deployment as passenger cars did in the 2010s.

Supported by national and local air pollution policies, electric buses have made their way into major cities around the world. There is a wide range of policy tools available to promote electric buses. They can include competitive bidding, green public procurement programs, purchase subsidies, direct support for the deployment of charging infrastructure, and practical pollutant emission standards.

Electric vehicles market policies

China:

In order not to further hamper the car market in the depressed situation caused by the pandemic, the phase-out of the ‘New Electric Vehicles’ (NEV) subsidy program planned for the end of 2020, has been postponed to 2022, with a gradual reduction of subsidies during this period. The program has stimulated technological improvements in electric vehicles, favoring models with longer range, better fuel economy, and high-density batteries.

India:

State and local governments have initiated efforts to accelerate the electrification of road vehicles. In February 2021, the Chief Minister of Delhi announced the ‘Switch Delhi’ awareness campaign to draw attention to the ambitious ‘Electric Vehicle Policy’ introduced in August 2020, which aims to electrify 25% of cars sold by 2024 and to make 50% of all new buses battery electric by 2024.

Chile:

A new energy efficiency law aims to reduce energy intensity by at least 10% by 2030 (from 2019). It will set energy efficiency standards for imported vehicles (with super credits for BEVs and PHEVs), LDVs, and heavy-duty trucks. The government is offering subsidies for electric taxis and home charging points.

The streets of Chile. Unsplash (2018)

Conclusion:

In the short term, making EVs competitive and phasing out subsidies as sales increase will be key. In the long term, integrating EVs into the electricity grid, decarbonizing electricity generation, and developing charging infrastructure and clean batteries will unlock their full potential.

Commercial vehicles, especially buses and trucks, also need attention. Electrification can reduce their significant impact on energy use and CO2 emissions.

China, India, and Chile are exemplary in promoting EV markets. Their policies are stimulating technological advances and encouraging the uptake of EVs through various measures.

The combined efforts of governments, industry and citizens are essential to drive this shift towards a greener and more sustainable transport future. By adopting innovative policies, we can pave the way for an electrified world for generations to come.

References:

Agency, I.E. (n.d.) Policies to promote electric vehicle deployment Retrieved from: Link