These days, when discussing sustainability in the automotive industry, it’s impossible not to focus on the rise of electric vehicles (referred to as EVs or BEVs). Many see EVs as the answer to the automotive industry’s path towards a more sustainable supply chain and future. Though this may be true, it is worth looking into the environmental challenges with EVs which mainly revolve around scope 3 green gas emissions, sourcing of resources, battery production, and recycling.
Emissions on the map
Considering that according to a study by the European Environment Agency (EEA) “71.7% of the EU’s total CO2 transport emissions in 2019 came from road transportation”, with cars being responsible for 61% of that amount, a major move towards sustainability in the automotive industry is indeed the electrification of powertrains. But what are powertrains? EVObserved describes powertrains as “the systematic arrangement of different components that drive the vehicle by providing it with the required power.” And just how are these contributing to lower emissions for EVs? As explained by Anushree Ramanath in his piece for EEPower in 2021, EV powertrains can achieve “reduced emissions and the highest degrees of fuel displacement”. While EVs are considered more sustainable compared to other vehicles, there is a challenge when considering how the electricity required for battery production is sourced, as in several countries it may come from fossil fuel power stations. A report in the Massachusetts Institute of Technology (MIT) Climate Portal, quotes that about 77% of the lithium-ion batteries used in EVs “are manufactured in China, where coal is the primary energy source” and they pose a significant challenge at multiple stages in the supply chain.
But what are powertrains? EVObserved describes powertrains as “the systematic arrangement of different components that drive the vehicle by providing it with the required power.” And just how are these contributing to lower emissions for EVs? As explained by Anushree Ramanath in his piece for EEPower in 2021, EV powertrains can achieve “reduced emissions and the highest degrees of fuel displacement”. While EVs are considered more sustainable compared to other vehicles, there is a challenge when considering how the electricity required for battery production is sourced, as in several countries it may come from fossil fuel power stations. A report in the Massachusetts Institute of Technology (MIT) Climate Portal, quotes that about 77% of the lithium-ion batteries used in EVs “are manufactured in China, where coal is the primary energy source” and they pose a significant challenge at multiple stages in the automotive supply chain.
The challenge of EV batteries
It is important to note that, for the moment, due to the emissions caused by battery production, building an electric vehicle is more carbon intensive than producing an internal combustion engine vehicle. As underlined by Bloomberg in 2021, “compared with traditional internal combustion engine, or ICE, vehicles, greenhouse gases released while manufacturing battery-electric cars account for a higher portion of life-cycle emissions”. However, over time, if an electric vehicle runs on green energy sources, its carbon footprint would end up being lower than a traditional internal combustion engine.
The supply chain of batteries is the classic example of scope 3 emissions, defined by UN as “all indirect emissions that occur in the value chain of the reporting company, including both upstream and downstream emissions”. Scope 3 emissions, often have the highest share in a business’ GHG emission footprint so it is critical to deeper investigate and identify improvements to reduce their scope 3 emissions.
Many of the issues and impacts of battery production are not transparent today – next to environmental risks it also poses social externalities. To take smart actions towards sustainability across the automotive supply chain, it is crucial to create visibility. Initiatives like the Battery Passport address these transparency gaps to enable more sustainable decision-making processes around battery production and logistics.
So, to unlock the full potential of sustainability in the automotive industry with electric vehicles, there is evidently also the need to change towards sustainable processes in battery production and available charging infrastructure.
Paving the way for more sustainable logistics around EVs
An important step to foster better sustainability within the EVs automotive industry is certainly its logistics. Transporting an electric vehicle or its components upstream on fossil fuel-heavy transportation is counter intuitive but unfortunately rampant. Switching to more sustainable logistics options is already possible for implementation today. These can be, for example, moving cars using green fuel ships – which would mean using fuels or energy that have low greenhouse gas emissions on a life cycle basis - or choosing better options for other parts of the supply chain such as solar powered warehouses, electric trucks, and forklifts, etc.
Interestingly, when looking into ways to make the EVs battery’s supply chain more sustainable, temperature seems to be a key challenge. Temperature and humidity can have a negative effect on the EV battery. When transported across the world, the battery can experience one to three percent performance loss. According to Monta, “EVs are designed to heat or cool off the battery for the battery to perform at its best. And because the optimal temperature for most batteries is between 15 and 30 degrees Celsius, part of the energy is used to cover this need.” This means that any temperature or humidity issues during transportation can cause a dramatic loss in battery life in a short span of transportation time.
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End-of-life batteries and role of supply chain
Today, most of batteries for EVs are produced in China. The raw materials needed for producing these batteries are rare, not found universally, and intensive to obtain (through mining); with 15 tonnes of CO2 emitted into the air for every tonne of mined lithium. Moreover, there are also issues surrounding working conditions, child labour, freshwater consumption, biodiversity impact, etc. that are indeed additional arguments for mining as little raw materials as possible and instead reusing batteries.
All these data points make a strong case for the urgent need to create a more sustainable supply chain for end-of-life batteries. According to the International Energy Agency (IEA), at the end of 2021, there were a total of 16 million electric vehicles on the road, “consuming roughly 30 terawatt-hours (TWh) of electricity per year”. In the same year, “electric car sales more than doubled to 6.6 million, representing close to 9% of the global car market”.
Following this trend, by 2032 we could be looking at five million plus batteries to be replaced and recycled. As per Statista, the global Lithium-ion battery recycling market was worth about 1.3 billion U.S. dollars in 2019 and is expected to reach 11 billion U.S. dollars by 2027.
Today, as explained by Smart Energy International, when an EV battery is reaching its end use, “the battery can either be repurposed for a second-life in alternative applications” or, in the case of end-of-life, it can be recycled to extract the raw materials (nickel, cobalt, copper and lithium) and re-introduce them into the EV battery supply chain.
Some players in the industry, think that “giving the retired batteries a second life by reusing them in less-demanding applications, such as stationary energy storage, may create new value pools in the energy and transportation sectors”. Others say that a robust end-of-life supply chain can elicit multiple benefits – it can bring down the emissions during mining and upstream transportation, as well as avoid a landfill of hazardous materials.
On a long road to sustainability in the automotive industry
The way towards a sustainable automotive supply chain is a long but fast paced one, both when considering emissions or the use and recyclability of components. Regarding scope 3 emissions, in their 2021 comparative analysis of global automakers’ decarbonisation, Greenpeace reports that “given that the supply chain of the carmakers includes many industries and thousands of companies, decarbonising the supply chain is a systemic problem. Therefore, implementing a comprehensive and holistic decarbonisation programme targeted at the upstream supply chain is urgent and necessary for the automobile industry’s transition to electric”.
When looking at EV batteries, IDTechEX writes that according to their predictions “by 2040 the global Li-ion battery recycling market will be worth $31 billion annually”. To build a sustainable and scalable recycling infrastructure, a study from the University of Warwick illustrates a range of challenges that need to be addressed; such as working on multiple research and development gaps, designing better batteries, and making recycling more commercially viable. Judging by the rate of its growth, the supply chain for EV and their batteries will not be the same as it is today. According to Forbes, “the battery value chain will do much more than power vehicles” as providing second lives to the batteries will be an even more important challenge to tackle. As EVs become more widespread, we need new ways to recycle their components in a sustainable way.
“Automakers, material manufacturers, and customers all have a part to play in smartly managing resources and innovation” stated Fortune. It is only by establishing strong partnerships between industry players that it will be possible to make a mark and change the level of sustainability in the automotive industry while keeping the ambitions of establishing true integrated logistics.
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