Polestar and Rivian pathway report

woensdag, 15 februari 2023 14:40
Polestar and Rivian pathway report

All industries face a significant challenge over the next decade if we are to meet the goals of the Paris Agreement, and automotive is no exception. Today, passenger vehicle emissions alone account for 15 percent of all greenhouse gas (GHG) emissions globally.1,2 Recognizing this, the automotive industry has taken steps over the past decade to decarbonize. So far, the primary focus for the industry has rightly been on electrification of the fleet, targeting the significant portion (60 to 65 percent for internal combustion engine (ICE) vehicles) of emissions that come from the tailpipe.3

The challenge: when modeling a hypothetical well-to-wheel scenario of aggressive battery electric vehicle (BEV) adoption, powered by hypothetical full switch to fossil-free power sources in parallel, there is still a GHG emission overshoot, unless upstream scope 3 (supply chain emissions) are simultaneously tackled.4

This short report looks at well-to-wheel emissions of the projected passenger vehicle fleet globally to 2050, explores the monumental challenges the industry faces, and outlines a suite of actions that merit collective action. Detail on the modeled scenarios, methodology, data, and assumptions can be found in a longer version of this report.

Not a single year to lose
The remaining global emission budget is estimated by IEA to be approximately 500 GtCO2-equivalent (GtCO2e) before 2050 in order to stay below a 1.5-degree Celsius temperature increase.5 Assuming passenger vehicles maintain an equal share of global emissions (~15 percent, considering total life cycle emissions), this would equate to approximately 75 to 80 Gt of total emissions left for the industry. At the current trajectory this budget will be reached by 2035, which would equate to an overshoot of 75 percent in 2050, based on ICCT optimistic projections (our baseline case)—or larger when applying conservative assumptions.

The numbers above are rightly debated; this is a complex topic. What share of the remaining GHG budget should “passenger vehicles” take? Will efficiency advances in the combustion engine sufficiently drive GHG reduction? What about the energy crisis, the price and efficiency of fossil-free power sources, raw material availability, battery efficiency, and technology yet to be developed?6 Will different regions transition at a different pace? To support this discussion, scenarios and sensitivity analysis are included in the longer version of this report.

However, whichever way it is modeled, the pathway to 1.5 degrees for the passenger vehicle industry is tight. Few reports project a scenario that is achievable without accelerated action. Certainly, the trajectory is too close for comfort. Every year that passes eats up approximately 7 percent of the GHG budget in the baseline trajectory, implying greater subsequent effort and capital requirements just to play catch-up and amplifying the cost to adjust each year (see figure 1).

Figure 01: Approximately 7 percent of the GHG budget in the baseline trajectory is consumed each year
Looking at the total life cycle emissions for vehicles (as per available data) and projecting vehicle fleet demonstrates the following:

Fully switching to BEVs across the entire global car parc will not be enough to stay below 1.5 degrees (lever 1 in this report).
Fully powering this exclusively BEV fleet with fossil-free energy will also not be enough to stay below 1.5 degrees (lever 2).
In isolation, significant advances in sustainable production and manufacturing in supply chain will not be enough to stay below 1.5 degrees (lever 3).
The industry needs to simultaneously tackle all three, at an accelerated pace. This conclusion is supported by the modeling output (referred to in the longer report as scenario 1) in figure 2, that a transition to BEVs (lever 1) will only reduce 75 percent overshoot in baseline to 50 percent. Transitioning to BEVs and charging them only with fossil-free energy (lever 2) will further bring down the GHG budget overshoot to 25 percent. A possible but challenging pathway to remain below 1.5 degrees exists when supply chain emissions are reduced (lever 3) along with the two previous levers.

Figure 02: The automotive industry must take action in several areas in order to hit 1.5-degree targets
Collective action for collective challenges
In circumstances where there is high strategic alignment, strong ambition between parties, and a high value at stake, collective action and partnerships can drive a step change in results. Competition is healthy, but perhaps the industry needs to redefine where to compete and where to collaborate.

While topics such as portfolio, design, and manufacturing excellence are clear examples of differentiation, tackling scope 3, supporting supply base development, driving consumer shifts, and end-of-life are examples of areas that merit a collective approach.

The following paragraphs outline some of the key areas most significant for all manufacturers. Many are under way already and only need accelerating, some are more accessible than others, and some are new ways of working. None are easy.

Transitioning to zero emission vehicles (ZEVs)
The tailpipe emissions of passenger cars with an internal combustion engine generate 60 to 65 percent of the car’s total life cycle emissions (see figure 3). Accordingly, the most significant impact will come from eliminating tailpipe emissions. While other technologies such as various forms of fuel cell show emerging potential, today BEVs are the dominating technology, feasible to deploy at mass scale.

Figure 03: Tailpipe emissions of passenger cars with an internal combustion engine account for the overwhelming majority of the car’s total life cycle emissions
The scale of the challenge, however, is not to be underestimated. To stay on the 1.5-degree pathway for 2050, BEV share of sales must grow from 6 percent to close to 100 percent by 2032. Beyond the immense operational hurdles to overcome, such an ambition level and radical acceleration would also cause significant socioeconomic implications that vary by region, posing challenges especially in regions with high population density and relatively low disposable income.

On the demand side, charging logistics and range anxiety continue to feature as the top two barriers to adoption for BEVs, with cost coming in a close third.7 Charging infrastructure will be driven by policymakers and broader infrastructure players, but what opportunities exist for manufacturers to work closely with the market players to secure sufficient infrastructure? Partnerships between original equipment manufacturers (OEMs) exist in this area today, demonstrating that collaboration among OEMs and investors can be undertaken to accelerate the infrastructure rollout. How can the industry drive adoption in these harder to reach areas, where zero emission vehicles will drive a disproportional impact? How can better education of the consumer and transparency in purchasing decisions support this?

Fossil-free power provision for use phase
The shift to electric power trains is only as clean as the power source used to charge the vehicle. At a global level, applying today’s global average electricity mix to a new electric fleet generates around 15 to 30 tCO2e reduction (35 to 46 percent of lifetime emission) for an average vehicle compared to an ICE over an assumed 240,000km lifespan, with the degree of reduction varying significantly by region.

The implication? To stay on a 1.5-degree pathway, in addition to driving BEV adoption, the source power in use phase needs to shift from a global average of 39 percent fossil-free electricity to 100 percent by 2033 (referred to as scenario 1, detailed in the methodology section in the longer report; see figure 4). Shifting to BEV and reaching 100 percent fossil-free electricity use by 2033 would enable a reduction of emission overshoot by 2050 from 50 percent to 25 percent. This shift of fossil-free power in the use phase requires additive renewable energy and should take place without the transportation sector using existing renewables from other industries.

Figure 04: In addition to BEV adoption, the source power in use phase needs to shift to a global average of 100% fossil-free electricity by 2033
Vehicle manufacturers have not historically been in the driver’s seat for a fossil-free energy transition but do offer significant consumer-facing opportunities to influence behaviors. Driven by the urgent need for action, some OEMs are looking to ensure fossil-free electricity in the use phase by investing in clean energy, starting up ventures in this space, or teaming up with energy providers. Creative concepts such as bundling vehicle sale with a guarantee of clean energy provision, just as options such as alloys or sound system upgrades are chosen on new builds, is an example of creative thinking not seen today but potentially needed to open up opportunities. How can we link scope 3 with the initial vehicle sale? How might other shifts or re-bundling of the consumer value proposition unlock further progress here?

Beyond this, consumer dynamics are shifting and present an opportunity to drive behavioral change to drive further GHG-emission reduction. There is a potential to engage more directly with consumers to influence emissions related to the use phase, such as smart charging to optimize charging at times of the day with an electricity production surplus, to real-time efficiency feedback on driver behavior and habits. With scale, significant proximity, and consumer loyalty to leverage, OEMs have a powerful role to integrate more behavioral nudges into elements such as the dashboard and interfaces to drive systemic change. Through increasing driver awareness with interactive experiences of, for example, current grid impact of charging, optimal charging times, and high-fossil-free electricity usage locations, emissions can be reduced post-sale. What other opportunities exist for the industry to influence the consumer better with behavioral nudges both in real-time driving feedback and in charging?

The supply chain
As the transition from ICE vehicles to an electric fleet powered by fossil-free energy takes place, the largest part of the carbon footprint will shift from products in use to supply chain. Today, supply chain emissions for an EV are approximately 35 to 50 percent higher than for ICEs, primarily due to the additional emissions related to the battery (see figure 5).

Figure 05: Currently, supply chain emissions for an EV are approximately 35 to 50% higher than for ICEs
To stay on a 1.5-degree pathway, the manufacturing and supply chain would need to reduce GHG emissions by 81 percent by 2032. This is an enormous task. As indicated in figure 5, the largest footprint comes from batteries, steel and iron, and aluminum used in vehicles, more specifically the amount and type of energy used in manufacturing. The necessary emission reduction in battery production will require 100 percent electrification of cell and pack manufacturing, increased electrification of material extraction and processing, all powered by a fossil-free electricity mix. Other opportunities exist in the development and utilization of low-impact battery chemistries or creating smaller batteries tied to more robust and faster charging networks.

Steel, iron, and aluminum represent 40 to 60 percent of GHG emissions in passenger vehicle supply chains. Fundamentally there are three ways to approach this—reduction in emissions in material production, reduction in the amount of material used (for example, by optimizing material utilization), or replacement with alternative lower-impact materials. While costly, several technologies exist today to tackle production emissions, for example through use of direct reduced iron-electric arc furnace (DRI-EAF), inert anodes, and carbon capture, as well as fossil-free electricity and fossil-free hydrogen. Tackling the quantity and alternative materials requires a rethink of the front end in the value chain, with an increase across the board on design-for-decarbonization and design-for-circularity thinking. So far, many OEMs have entered individual partnerships with entities such as green steel producers. Some have sought to secure both supply and use the surplus of hydrogen from green steel production to power fuel cell vehicles. Co-investments and other forms of support via joint funding and guaranteed orders are other opportunities to support supplier capacity development and investment that benefit the broader community. How can the industry send stronger market signals to collectively demand and support scaling of low-carbon alternatives, not only in green steel but in other materials?

Battery production and end-of-life management remains a challenge. Raw material at the scale needed to drive the accelerated adoption outlined above is not accessible today and extraction is fraught with cost and social challenges. How can the industry commit to raw material extraction at the lowest possible social cost? What are new ways to reuse and recycle resources within and across industries?

Establishing common standards, metrics, and criteria are paramount. Internal tools such as supplier emission evaluation criteria and internal carbon pricing to drive new investment decision options are beginning to be adopted, which can accelerate the pace and prepare those who use it for potential future policy requirements. Can the industry collectively agree on measurements and standards, both in terms of LCA calculations and ESG guidelines in passenger vehicle operations?

Solutions for reducing upstream scope 3 emissions will inevitably be a mix of opportunities that drive a competitive advantage as well as some opportunity for collective action.

A call to action
Numerous challenges—economic, social, and raw material availability—exist throughout this transition. There are many more variables not covered in this report, including mobility mix, effect of autonomous driving, and sharing models. What is clear is that each scenario modeled is tight and disruptive action is required within the next few years.

The historic conflict between sustainability and profitability is diminishing but still looms large. We must assign the right value to sustainability and the cost of inaction.

The investment community certainly is moving, and capital flows are shifting from traditional investment to sustainable investment, recognizing an increasing tie between sustainable transformation and financial benefits. In 2021, global sustainability investments totaled $35.3 trillion, representing more than a third of all assets in five of the world’s biggest markets, growing at more than 15 percent annually since 2018.8

Consumers are also starting to shift, with sustainability becoming an increasingly important purchasing criterion for passenger vehicles—stated by 61 percent of survey respondents in the Global Sustainability Study in 2021, and especially for the increasingly influential younger generation, with 40 percent of Gen Z and Millennials stating they are willing to pay for greener products and will have stronger purchasing power in the future.9 The focus on sustainable solutions is only going to get more critical.

The pathway below 1.5 is not easy and all industries face an uphill battle. The passenger vehicle industry has an opportunity to reframe the challenge, reconsider competitive parameters, and step up collective actions to halve GHG emissions by 2030. Debate will continue regarding time frames, data variances, and long-term targets, but the case for action is clear.

This report calls for OEM leaders to jointly come to the table to discuss where opportunities might exist to collaborate on the greatest challenge humankind has faced—the pathway below 1.5 degrees. Every year that passes without significant reductions is an opportunity lost and a setback from which we will have to work even harder to recover. We need to come together to create a plan to tackle the challenge and deliver on that plan as quickly as possible.

Reframe the challenge, invite partners, and accelerate action. The path to a sustainable future lies ahead, and it is up to the industry to set the pace at which one shall travel it.

Example agenda for the first roundtable discussion
Proposed agenda for collective discussion
Agenda item #1: Transition to ZEVs
This lever is inherently crucial for value creation and competitive differentiation for the industry and typically does not lend itself well to collaboration. However, some opportunities exist to facilitate demand of EVs and other low-emission vehicles. Example topics to discuss include:

1.1 Opportunities to proactively drive electric vehicle charger rollout (especially in developing countries
1.2 Opportunities to increase education and transparency on purchasing decisions on lower-emission vehicles
1.3 …
Agenda item #2: Fossil-free power provision for use phase
This topic is traditionally an area driven outside of the automobile community, by energy and utility companies. The question here is can OEMs play a greater role in enabling fossil-free power that will support adoption of zero emission vehicle sales and drive carbon reduction. Example topics to discuss include:

2.1 Opportunities to offer new value propositions that cover or influence use phase emissions (for example, bundle green power contract with electric sales, through utility agreements or offsets)
2.2 Opportunities to nudge consumer behavior in driving and real-time feedback (for example, dashboards and interfaces to drive systematic change in post-sale emissions)
2.3 Opportunities to nudge consumer charging behaviors (for example, partnership with charging app providers to prompt consumers to charge at low-intensity time periods)
2.4 …
Agenda item #3: Reduce supply chain emissions
Arguably the most influenceable topic for OEMs, this area presents predominantly “under-the-skin” opportunities, both collective actions (listed below) and individual efforts (for example, design-for-carbon reduction/circularity, internal carbon pricing, and sustainability KPIs in performance management). Example topics to discuss include:

3.1 Opportunities to establish common standards, metrics, and criteria for, for example, LCA measurements, carbon intensity, ESG guidelines in sourcing requirements and supplier agreements, leveraging consortiums that increase cooperation among key players, and transparency across the value chain
3.2 Leverage strength as a consortium to send stronger market signals to suppliers, providing longer-term demand and support scaling of low-carbon alternatives. Further investments in strategic partnerships and co-investment with suppliers to accelerate carbon reduction in low-carbon production of battery, steel and iron, aluminum, and other materials
3.3 Opportunities to collaborate on end-of-life material management, recycling and reuse of batteries and other valuable vehicle componentry
3.4 …


1. Calculated life cycle emissions compared to IEA stated global CO2e emissions in 2021 based on Kearney model
2. Include all GHG emissions and measured in CO2e throughout the report
3. Green nCap, ICCT, Volvo
4. Emissions from supply chain of fuel extraction and electricity production included
5. IEA Net Zero Emission scenario, budget from 2021 and onward based on IPCC’s 50 percent probability of staying within the 1.5-degree target, assuming 40 GtCO2e in carbon capture within 2050
6. Renewables (wind, solar, hydro) and nuclear power
7. EY Mobility Consumer Index (MCI) 2022 study
8. “Sustainable investments account for more than a third of global assets,” Reuters (July 19, 2021)
9. The Global Sustainability Study 2021, conducted by Simon-Kucher & Partners on more than 10,000 people across generations and countries

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Laatst aangepast op woensdag, 15 februari 2023 14:48

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