By now, everyone has sat in, or wanted to sit in, their friend’s Tesla. It seems as though everyone knows a guy who knows a guy who owns an Electric Vehicle (EV for short), and they all boast about how environmentally conscious it is. A few years back, I worked at a Dodge dealership in southern Alberta. Out there, the idea of an electric vehicle taking over the land of diesel trucks seemed absurd. At the dealership, we never waited for Dodge’s environmentally friendly car to be released, we all wanted to drive the Hellcat, Dodge’s beefed up racing engine. I’m sure it had the environmental impact of two or three trucks, but it was loud and fun to drive!

But I digress…

The current war in Ukraine has brought the topic of clean energy to the forefront of the investment landscape. If you’ve visited a gas station recently, you would have noticed that the price of fuel seemed to skyrocket shortly after Russia’s invasion began. This is because a large amount of the world’s oil comes from Russia. With sanctions being placed on Russian oil, the countries that relied on it must find their oil elsewhere. Canada doesn’t rely heavily on Russian oil, but the oil we do buy just got a lot more expensive.

As countries have seen the cost of oil increase, the shift to green energy has started to take a front seat. What if we didn’t have to rely on oil as a major source of energy in the future? Obviously, the sanctions have exposed a flaw in the current geo-economic supply chain. One possible solution is to fast-track other forms of clean and renewable energy. This may include hydro, solar, or nuclear energy.

As the world shifts it’s focus to environmentally protective alternatives, I think it’s prudent to weigh the pro’s and con’s of change. This is not to say that change is inherently bad, but it’s important to know all the facts before sticking the “I save the planet” sticker on the back bumper. For example, I can get on board that plastic straws are not good for the environment, but if I had known that the alternative was paper straws that disintegrate in your drink, I would have joined the movement to come up with other solutions.

What goes into EVs?

When we look at the environmental impact of anything, we should look at more than just the post-production use. If we only looked at the metrics of EVs once they’ve hit the road, there would be no debate between EVs and gas vehicles. Instead, we need to consider the pre-production, production, and post-production measurables. This would include the development of the batteries, mining of materials, transportation and manufacturing. When we look at comparing this to gas vehicles, there are a few things to keep in mind:

1. EVs are still in their infancy. The technology has been in development for decades, but only recently that the technology has gotten to a point where it has practical uses in cars. This is important, because it ties into other aspects of their carbon footprint, specifically related to infrastructure. Whereas the oil and gas industry has had years to set up pipelines, transportation, and regulations, EV producers, specifically battery producers, have not had the same advantage. There is still a long way to go in setting up the infrastructure and regulation that will bring the carbon footprint down.

2. There is more to producing a vehicle than the environmental impact. I wrote an article a few months back about ESG investing (Environmental, Societal, and Governance). Some people/companies focus on different letters, but I do believe that if the goal of ESG investing is to support the world becoming a better place, we need to keep all three letters in mind. If you’ve ever googled a Lithium or Cobalt mine, you may notice that, along with it not being an environmentally friendly process, it still utilizes practices that would give it a negative societal score. For example, much of the cobalt/lithium that is mined comes from the Democratic Republic of Congo. It’s common practice in the Congo to use child workers and/or child slavery. They also mine, knowing that the byproducts of their business leak into the ground and affect surrounding communities. So when we evaluate the pre-production impact of EV batteries, I strongly believe we have to incorporate the overall cost, not just the environmental cost.

3. The environmental impact can range depending on what electrical grid you live on. If you live on a coal based energy grid, charging your electric car has a greater impact than a city run on hydroelectric or solar/wind power.

There is an ongoing debate between the true numbers when it comes to the carbon footprint of an electric vehicle. Some of the factors surround where a car is being driven while some differ in their calculation of material transportation. Both of those factors swing on geography. Now, that problem isn’t exclusive to electric cars. For example, cold weather makes a car run less efficiently. Also, different levels of air quality can effect engine combustion. Someone running a study in California would get a different carbon footprint than someone in Alaska.

The big question I wanted to ask is, “How far would I have to drive an EV to get a carbon footprint that breaks even compared to a gas vehicle”? It’s a tough question, because there are so many factors that can change the answer, as well as the non-carbon related outcomes that have to weigh on my decision. Reuters ran a study that tried to quantify this question and came up with this answer: 

“Its “well-to-wheel” study showed the typical break-even point in carbon emissions for EVs was about 15,000 to 20,000 miles, depending on the country, according to Vijay Subramanian, IHS Markit’s global director of carbon dioxide (CO2) compliance.”

This means that, in Canada, you’d have to drive 24,000-32,000kms before you hit a ‘breakeven point’. Obviously, there is still a lot of room for error, and some researchers don’t agree with that study. Damien Ernst, a researcher out of the University of Liege in Belgium, believes the number is closer to 67,000-151,000km. 

Let’s use 50,000km (roughly the midway point between 32,000 and 67,000kms). Assuming you drive around 15,000-20,000km/year, it would take close to 3 years of driving to break even. THEN you add on the societal impact and humanitarian rights violations. The question we have to start asking ourselves, is two-fold:

1. What value do we put on human rights violations?

2. How do we advocate for better regulation of those industries?

It’s clear to see that the production of the electric cars and the post-production impact is minimal, but there are still pre-production issues that need to be solved before many can jump on the EV bandwagon with a clear conscious. In today’s age, we would call for the government to regulate the auto industry, to ensure that they have checks and balances in place to protect the people who mine for the minerals. With the EV car industry quickly becoming a major player, I have to wonder how much pushback companies are going to provide, given that any regulation usually means adding expenses.

I’m hoping there’s a future where everyone has moved from a purely gasoline car, to something more sustainable. Along with EVs, hydrogen cell technology is becoming more common, and hybrid technology has been around for a while. Whenever we weigh the value of a solution, we must weigh it against the current state of things. Just because a solution isn’t perfect, doesn’t mean we shouldn’t change anything. The goal now is to realize whether or not the current issues with EVs are better or worse than the current issues with gas powered vehicles. I don’t know what the solution is to electric vehicles, but I know one thing for certain: I hate paper straws.