Subjects: NPT, SVY, ECO, ENI
Report: US Vehicle Electrification Will Be a Protracted, Decades-Long Process
Major Transition Risks for Private and Public Investment Ahead
NEW YORK, Sept. 12, 2023 /PRNewswire/ -- In 2022, the share of electric vehicles (EVs) sold in the US hit a record high of nearly 6%. A new study from The Conference Board projects that even if new EV sales rise gradually to 100% by 2040, 40% of all cars and trucks on the road in 2040 might still be powered by fossil fuels.
According to The Future of US Vehicle Electrification and GHG Emissions, businesses must be prepared to manage their operations in a bifurcated and rapidly changing market environment.
"EV adoption is set to surge in the coming decade, but new vehicle sales tell only part of the story," said Alex Heil, Senior Economist at The Conference Board. "Americans are holding on to their cars longer than they once did, with the average age of light vehicles exceeding 12 years in 2022. As a result, the US may need to support both a rapid ramp-up in EV charging and continued operation of fossil fuel infrastructure for decades to come?unless private investment, policy incentives, and consumer demand can spur even faster EV adoption and vehicle replacement."
Among the report's key insights:
EVs are likely to reach 50:50 parity with fossil-fuel vehicles in 2038.
- In this scenario, EVs account for 66% of new cars and light trucks and 25% of new medium and heavy trucks by 2032, before reaching 100% of all new vehicles by 2040.
- The transition to EVs will create a bifurcated transportation fuel system that persists for at least the next three decades.
Reaching net zero by 2050 will be doubtful without accelerating electrification of the transportation sector:
- If EV sales reach 100% by 2040, annual greenhouse gas (GHG) emissions from fossil fuel vehicles would fall by 51% based on current performance standards?a dramatic drop, but still far off the US goal of net zero in 2050.
- Indeed, a sizable portion of GHG emissions would remain in the absence of greater efficiencies for fossil fuel vehicles and potential adoption of alternative fuels like hydrogen for difficult-to-electrify subsectors.
Businesses face a transition risk in the decades ahead until near-complete electrification has occurred.
- In the interim, investments in fossil fuel infrastructure?including refineries, storage tanks, and fueling stations?would still be necessary, despite the decline of the gasoline and diesel markets in general.
- The rate of decline will determine the profitability of any such investments, integration of charging and refueling stations, and the willingness of businesses to commit financial resources.
EV Transition Will Require a New Policy Framework for US Infrastructure Funding
Among the serious complexities of electrification is its impact on the federal Highway Trust Fund (HTF), which has historically funded the maintenance and replacement of US road and transit through gasoline and diesel taxes.
In a supporting brief, EV Adoption Could Exacerbate Transportation Infrastructure Funding Shortfall, The Conference Board finds that fuel tax revenue could fall by 60% assuming EVs reach 100% market share of new vehicles by 2040. This will exacerbate challenges to the HTF?which is already chronically underfunded because gas taxes have not been raised since 1993.
Ultimately, an alternative funding mechanism may be needed to ensure the viability of US transport and supply chains:
Businesses might have to prepare to pay for new costs such as fees based on vehicle miles traveled (VMT) or on electricity used for charging.
- While HTF revenue is paid today when motorists purchase fuel, a future system may be based on peak demand or specific impacts on infrastructure during use.
- This shift to a new system, while not entirely costless in itself, could open up new efficiencies via better route choices or time-of-day planning.
Data security will become a critical issue for businesses and households.
- A new system of telematics?data collected from vehicles via sensors or smart devices for pricing and revenue collection?would be needed to implement a more dynamic charging and cost recovery system.
About The Conference Board
The Conference Board is the member-driven think tank that delivers Trusted Insights for What's Aheadtm. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c)(3) tax-exempt status in the United States. www.ConferenceBoard.org
SOURCE The Conference Board
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