I Drive a Tesla, I Do My Part...Right?

been waiting for some time now. Several months back, I was test driving electric vehicles as I was thinking about buying one, and I at the same time as being teased pretty relentlessly, i might add, by a friend of mine, and he kept telling me that I was looking to buy a coal car, so like one of those cars that's converted from a gasoline to a coal fired car. No, not at all, This at a thing. Yeah, yeah, look

it up on YouTube. Well no, actually he meant that because an electric vehicle is actually plugged into the grid, and oftentimes you find coal in the grid, that that is ultimately what was powering it. There is really a lack of information out there regarding electric vehicles and their emissions when you're taking the battery manufacturing part into consideration. So this is B and F chance to clear everything up.

And of course all of this is taking place with air pollution in cities as a part of the backdrop. So what if electric vehicles are actually just moving the emissions elsewhere and they're not coming out of your tail pipe, but they're still polluting and have the greenhouse gases with them as well. Well. Fortunately we have James Frith energy storage analysts and Logan Goldie Scott, who is the head

of the NEF Energy Storage team. They're going to tell us more about what is actually happening with battery emissions and hopefully demystify a bunch of this for us. Please note that benef does not provide investment strategy advice, and we can hear a full disclaimer at the end of the show. James Logan, thank you for joining us today. Thanks for having us. Dana, Thanks Dana. So people that own electric vehicles, are they really doing right by the environment? Yeah, definitely.

We found in this work that electric vehicle produces about half the CEO two emissions over its lifetime compared to an internal combustion engine VIC when you're looking at the same vehicle segments, and that's for vehicles produced and used in Germany. If you look at vehicles that are used on other grids in the world, actually those emissions dropped massively. In Sweden, for example, where the electricity grid there produces about sixteen grams of c O two per killor hour

of energy produced. The lifetime emissions of an electric vehicle about fifty three times lower than that of a standard small internal combustion engine vehicle in Europe. Okay, let's unpack that just a bit. So you're saying that location matters for the lifetime emissions of these cars. Yeah, certainly for electric vehicles, it's so important you have the emissions associated with vehicle manufacturing, with the battery manufacturing, and then crucially

for electric vehicles, with their use over the lifetime. So if you think about an electric vehicle, it charges from the grid, so those grid emissions have a big impact. Whereas for an internal combustion engine vehicle, you're using petrol or diesel, So it doesn't matter where in the world you are, those emissions are going to be the same. It's just going to change by whatever engine you're using. And so just just thinking about about use case and

just to put some put some numbers on it. If you're like, on average, emissions from an electric vehicle will be around lower than emissions from an internal combustion engine. But if you go to a country. If you're driving your car in China, for instance, which is a much more coal on the grid that is only around so location can be incredibly impactful here. Now, is that just taking into consideration when you're actually using the vehicle and

tailpipe emissions? Because in this note you're really getting into a lot of parts of the supply chain in the manufacturing process. What does it include there? That's that's only when we're using the vehicle. That what stood out with this note was really how we could track from extraction of the raw materials all the way through to manufacturing, manufacturing the components, the logistics associated with that, and then

manufacturing the batteries themselves. And what we found overall is that even once you account for that, battery electric vehicles are better from an emission standpoint then are equivalent internal combustion engine Let's isolate the manufacturing part, since we've already talked about tail pipe emissions in the manufacturing process of the battery. How big a part of the overall vehicles life cycle emissions is this? It's actually a lot smaller

than people think. So some people quote it being about of the vehicle's lifetime emissions, but actually we found that it's closer to ten percent. Ten percent's not a ton, but definitely moves the needle. So what's the biggest input that's going to make the battery high or low? From an emission standpoint, there's a couple of things to look at. So the chemistry that's being used has an impact, but

also the conditions you use during that manufacturing process. They can range hugely depending on what outcome you're trying to produce. If you want a high power cell, for example, is used in hybrid electric vehicles, the emissions associated with that are larger than if you're using an energy cell as used in a battery electric vehicle. Oh, so the hybrid vehicles are actually those batteries themselves are worse because you would think they're smaller. So therefore, from an emission standpoint,

it's a win. You can kind of touched on it there. They are smaller, so the total emissions from that is going to be less than for a battery electric vehicle. But if you look on a on a killer what our basis, so a killer what hour of hybrid electric vehicle pack is more polluting than a kilo what hour of battery electric vehicle pack. There are a lot of different battery pack types and compositions, so who's the biggest

and who's the smallest in terms of emission size. So definitely the lowest polluting ones that we came across were lithium and phosphate based batteries, and these are the type that are commonly used in electric buses, whereas the types that used in electric vehicles are increasingly using more nickel in those batteries, and some of the emissions associated with extracting and processing nickel is quite high, so that increases the emissions of those trees. So nickel's the worst offender

and all of this it's not great for it. There are some other considerations around aluminium and copper, but let's say nickel for the moment, it isn't nickel demand for the battery growing. What's replacing cobalt, right, Yeah, precisely. So there is more and more nickel going into these chemistries. So the emissions are increasing, but there's also work that's being done by the battery manufacturers to reduce those emissions,

particularly in the manufacturing process. We're seeing companies like north Vault, who are based in Sweden. They're trying to become a net zero emission manufacturer. Should I know. North Vault there are a startup at the moment, but they've been making big waves recently in the battery world. So they've signed a joint venture with with VW and they recently secured a billion in funding from the European Investment Bank amongst

other people. And they're going to be Europe's first gigga scale homegrown battery manufacturer and based in Sweden because of the emissions, so their flagship plant will be based in Sweden and it's those lower emissions is one of the reasons why they chose to base the factory there. They've also going to have at least one more plant in Germany at the moment and that will be paired up

with VW. Just on the previous point around looking at technologies and how they compare from an emission standpoint, it's just so important to look at company strategies as well. So automakers, battery manufacturers, they are all investing heavily in their supply chain sustainability and so regardless of the technology of choice. Actually we're seeing a huge amount of progress on this front, but it depends by company. Almost more

than anything else. Why are they incentive to care about sustainability? Is it from a pr and attracting consumer standpoint or more attracting investor standpoint? I think probably more more of the latter. They're they're looking at sustainability in order to

improve efficiency UM and mitigate climate and transition risk. And this is something that was seeing increasingly at the forefront of investor as minds um and coming up on stead of on shareholders calls fairly frequently within the automotive and battery space, and and and much broader as well. I

think i'd add to that as well. When we're thinking about this from the public perception point of view as well, the question that we had at the start, are internal combustion engine vehicles more or less polluting than electric vehicles? I don't want to buy an electric vehicle if I think it's it's not as it's not better for the

environment than in the internal combustion engine vehicle. And so manufacturers are also listening to what the public says, especially when at this point in time they are more expensive. The cheapest electric vehicle you can get is still way more expensive than the cheapest internal combustion engine you can get. So if you're paying a premium, you want to pay a premium for something that's going to hopefully achieve what you think in your mind you're trying to achieve, which

is lower emissions. Just on that front, though, where at the moment that is that is true for most for

most vehicle segments. The recent success of models such as Tesla's Model three, which came out in this sort of a second half of eighteen, have demonstrated that appetite for for a more competitive, for a more sort of a for a more competitive sort of vehicle in consumers minds um and when when we look at battery technologies and battery prices going forward, actually on an upfront basis, we believe that you start seeing electric vehicles actually become more

attractive and a lower cost option than internal combustion engine vehicles depending on country, depending on segment. But by by the mid early to mid twenties, and so we're only a few years away from that description of yours just just no longer no longer being correct. So these batteries are getting cheaper and they're getting more range as well, which assumes then that the battery packs are getting a bit larger. Does that have a big impact on the

emissions profile. So we'll have an impact on the emissions profile. But I think if we're looking for the future. The other thing that we've got to bring up here, of course, is that actually grids around the world are getting greener. There's CEO two emissions pecular hour of energy produced are falling. And so when you look at the use of an electric vehicle over say a ten year lifetime, actually every time you charge it, almost the energy going into charging

that battery is cleaner. And it's similar for manufacturing. As the batteries get bigger again, the grids will have got greener, and therefore the emissions associated with the battery and the vehicle will have fallen. By we expect wind and solar to make up of total generation globally, and that's up for less than ten percent or so today, and that just speaks to that change. Change to James's outline, my

question really revolves around recycling. Is it going to end up being cheaper or better or worse from an emission standpoint to actually look at these existing batteries and do something with them at the end of life, or are they going to become power walls in our houses. So I think that is a really interesting question and the answer isn't clear. So recycling battery is clearly going to be vital in the future because we don't want to put them into landfills. But they might have a second life.

As you point out, they may be using your house beforehand, for example, and if you do that, if you use them in the second life application, you're spreading the emissions with manufacturing that battery over more years of use, so you're reducing the average per cycle energy use. I think the honest there is on companies that are developing second life second life projects to prove that this really works in practice. In theory, this is this is a really nice idea, but at the moment we've yet to yet

to see this deployed commercially. I think the other thing to add on that as well, when we look at recycling, one of the tricky things there is that actually the economics are heavily tied to the price of commodities when you're doing that recycling. So if cobalt or lithium is very cheap, then actually maybe it doesn't make sense to recycle that battery at that time, and so a second

life application might be more beneficial. My question when I looked there at a figure on your exact sum was, Okay, so Poland has high graded emissions intensity, but do they

really manufactured batteries? There really full four electric vehicles for electric vehicles because I hear LG and I hear phones individual consumer electronics, and actually that's a it's such an interesting overlap because I think you guys pointed out at a previous summit that there is this intersection between consumer electronics and our phones and our computers, and then energy storage on the grid and then vehicles. You have all of these really big companies who've got skin in the

game on making this work. So they are really caring a about increasing the amount of supply and be on decreasing the cost of batteries. But are they playing a part in that though as well? Are they driving emissions down just by improving their manufacturing process. I think one of the things to point out is that they are

driving emissions down by improving the manufacturing process. But there's also the option for manufacturers are perhaps located in areas with dirtier grids to use things like p p as or unsighte renewable generation to reduce their CEO two emissions. So let's say hypothetically you're sitting on a dirty grid and you're making this battery, but more of the supply is near you, so you don't have emissions as high

associated from actually transporting things to you. Because I think you pointed out and here at one point that seven percent of the emissions for batteries manufactured in China can just come from physically getting the raw materials to them. Are we talking about a delta of enough that it would make sense to localize and manufacturing even on a dirty grid, or is it better to be on a clean grid and then have to transport things to you? So I think there's a couple of different questions and

points to make. Certainly that transportation emissions can be quite high, but it really depends what you're transporting. So in that example, we were looking at when companies transport what's called concentrates, So this is material that's been mind but it hasn't

been turned into a metal yet. And when you're transporting that material from say Australia to China or maybe somewhere in Africa to China, what you find is that concentrate only contains maybe six percent of the material you actually want and then material that you don't need, and so the emissions associated with transporting that can be quite high.

But if you were to process that material on site, So using the example of Australia, if you were to mine or in the ground and convert it to the lithium form that you need, such as the lithium hydroxide and transport that lithium hydroxide to China, actually those transportation emissions are gonna be a lot lower than if you're transporting that concentrated material. Is pilots are going to play

a factor in any of this. Policy has the potential to be incredibly important on this front, where at the moment, around three quarters of battery manufacturing capacity is located located in China, and what we expect to see in what we're beginning to see the early signs of his battery manufacturing moving much closer to demand centers such as here

in Europe or in the United States. A big part of that is likely to be policy where the European Commission and policymakers across the world are increasingly aware and concerned around life cycle emissions, not just tail pipe permissions, and they would like manufacturers to prove that they have acceptable life cycle emissions to be able to participate in

the market, because otherwise it would defeat the purpose. And so it's not unreasonable to expect that the European Commission or other policymakers will actually demand their manufacturers meet increasingly stringent life cycle emission standards in order to operate in a in a market, and that could incentivize manufacturers to set up plants in Europe rather than rather than incur these additional sort of carbon costs by having to import into that into the trade block. I think that could

be interesting as well. When we're talking about manufacturing in Europe, then how the country or the region that you choose to manufacturing affects the price if you're having to buy carbon credits to offset some of the emissions that you're producing. On top of that as well, different countries within the region will have different electricity costs. So again using the example of Sweden, because they have a lot of hydro there, electricity is quite cheap in comparisons somewhere like Poland or

Germany where the costs are higher. So doing this study put you into a debate. I mean, it puts you in a discussion with academic groups you know, and other organizations around the world. Usually when these groups do these studies, they'll do another one. So what's next for you guys

in this line of research. I think the most important thing in terms of in terms of this publication and what we found when we reviewed all the other literature was actually the lack of transparency was really holding holding

back the dialogue. Now, what we have done here um is we we will be releasing the model over over the next month or so, because, as we've talked about, there were so many different things that can change the ultimate emissions, whether it's the manufacturing process, or the country of location or the technology. So by releasing the model to our clients, we want to be able to let

them make those decisions and understand the sensitivity. And I think that that's a big that that is a big shift to what we've seen so far in the literature. So the next step is to get the model out there. Huh exactly. So, James, we better wrap up the podcast and send you back to your task. James Logan, thanks for joining us, Thanks for having US, thanks very much. Bloomberguin e F is a service provided by Bloomberg Finance

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