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Is the quick adoption of Battery Electric Vehicles a positive turn for our planet?

The pros and the cons of electrification on the roads
David Grivel
Partnership Manager at Swiss Re
Guglielmo Albanese
Data Scientist at Swiss Re

How it all started

Since the first Tesla Roadster was delivered to Tesla founder, Elon Musk, in February 2008, millions of Battery Electric Vehicles (BEVs) have left the production lines. Whilst overall cars sales fell in 2020, mostly as a result of the global pandemic, the purchase of EVs experienced a surge with an increase of 43% compared to 2019 figures. This rise has not only been strongly driven by favourable governmental incentives supporting the purchase of battery-powered vehicles, but also from the recent technology push, which has improved the performance of batteries whilst drastically reducing their cost per kWh of power stored, thereby improving their market attractiveness. Besides their industrial strategic imperatives, the main reason for the government to support the adoption of BEVs is to reduce the environmental impact of the transportation sectors, particularly by accelerating the decarbonisation of the automotive fleet, in line with the 2015 Paris Agreement.
As a result, in recent years, BEVs have become a common sight on our roads, forcing the entire automotive ecosystem, including the insurance industry, to pay closer attention to the wave of electrification. Particularly, motor insurers have been keen to understand the impact of battery powering, which is currently based mostly on lithium-ion technologies, on their motor business and underwriting practices. This constitutes a new landmark in the democratisation of BEVs, as decreasing uncertainty regarding the insured risks may result in increased insurance offerings and acceptability. This, in turn, has the potential to further accelerate the adoption of BEVs.
Entire research projects may (and should) be devoted to explaining the impact of governmental policies, technology push and pull or increasing insurance offering on the adoption rates of BEVs in our society. However, on this Earth Day in 2021, we propose to briefly step back, get some perspective, and ask ourselves: are BEVs a positive turn for our planet or are we just changing (hiding) the environmental burden of our automotive mobility?

Below, we have outlined some of the basic considerations regarding this question. To keep things simple, we have limited our discussion to some key examples concerning the environmental impact across the lifecycle of a core component of BEVs: their lithium-ion batteries.

The environmental cost of materials extraction

Automotive-grade lithium-ion batteries are typically made of materials that require energy-intensive extraction and/or production processes. The most critical materials identified for these systems, as discussed below, are cobalt, graphite (present in the anode) and, of course, lithium:

- Cobalt is mostly obtained as a by-product of copper and nickel mining. Today (April 2021), most of the world's production of cobalt is in the Democratic Republic of the Congo, where child labour and poor working conditions have been reported. Furthermore, mining activities in this country have been linked to serious damage to the environment. Indeed, mining extraction waste contains toxic materials, like uranium, often directly poured into rivers, which pollutes drinking water and threatens the health of local population.

- As for the graphite: the extraction of this material from natural sources causes major air and water pollution issues. This is mostly the case in China, where the majority of production is concentrated. Production is heavily dependent on massive amounts of hydrochloric acid (HCl), used as a leaching agent when processing natural graphite into battery-grade material.

- A large part of the world's proven reserves of lithium are situated in South America, particularly in the so-called "lithium triangle" composed by Argentina, Chile and Bolivia . Following the recent surge in lithium-ion battery consumption, these countries have invested massively into developing their lithium production capacities. Industrial processes to extract lithium require a substantial amount of water. Indeed, according to a Danwatch investigation, up to 2 million litres of water is needed to produce 1kg of lithium (battery grade). In that context, lithium mining activities in Salar de Atacama, in Chile consumes 65% of the fresh water in the region, forcing the local ecosystem and agriculture to adapt or perish.  

The misguiding promises of zero-emission vehicles and the curse of externalities

One of the main benefits of BEVs is the promise of near zero emissions of carbon dioxide and other harmful chemicals. This is indeed mostly true when considering the driving phase (only) of such vehicles. It results in significant improvements in air quality of large cities, where dense, frenetic traffic is slowly transitioning towards electric mobility. However, if the final goal of BEVs is to reduce the total emissions globally and not become a NIMBY (Not In My BackYard) solution for clean cities in a polluted world, then it is necessary to avoid the externalities trap and consider the whole value chain.

In order to measure the actual emissions during the driving phase, we need to consider the resources used to produce electricity and later chemically stored in the batteries. Here, globally, coal remains the largest single source of electricity production. In 2019, 36% of global electricity was generated in coal-fired power plants. Such source of power production is known to be associated with serious air pollution issues, releasing a myriad of chemicals, including; sulphur dioxide, responsible for acid rain and respiratory diseases, nitrogen dioxide, involved in the formation of smog, but most importantly, carbon dioxide, the main greenhouse gas. We could also add the impact of coal mining on the natural landscape and other environmental damage to this list of detrimental effects.
In recent years, the proportion of coal in the global electricity mix has been reducing, and most governments have pledged to decarbonise their grid within the next few decades. However, as long as our grid is still dependent on fossil fuels to produce electricity, we won't be able to leverage the full capacity of batteries to reduce the overall harmful emissions connected with our mobility.

The challenge of recycling batteries

As previously mentioned, batteries contained materials which, when not disposed of correctly, can harm the environment. Unfortunately, only a few processes exist for recycling lithium-ion batteries, all of which are still in their infancy. Despite being very heterogeneous from a chemical point of view, the various types of lithium-ion batteries share a relatively complex product architecture, making the recycling process inherently difficult. On top of this, the material and format (casing) of the different cells in the lithium-ion battery family can vary quite substantially. This is having a major negative effect on the potential standardisation of recycling processes and further cost reductions.
The absence of valuable materials (except for cobalt at the cathode of NMC, NCA and LCO cells) is perhaps the most important factor when it comes to making recycling profitable by reselling the recycled material. The final element acting as a barrier against the emergence of a large-scale recycling scheme for lithium-ion batteries (comparable to what we observe for lead-acid batteries currently) is the division of manufacturing costs. Most of the costs of production of lithium-ion batteries are process-related and not related to the materials used, as production requires specific production conditions and equipment.

Reasons to remain optimistic

Despite the flaw highlighted above, we consider BEVs a first step towards more sustainable and resilient societies, as it is the most techno-economically sound option for increased electrification of the transportation sector. Indeed, the transportation sector, particularly its automotive division, is dominated by fossil fuels at present – damaging the environment, our health and, of course, driving climate change and its overall nefarious impact. The transition towards fully-electrified automotive mobility, however, requires paying close attention to some of the existing negative impacts of BEVs (some of which have been discussed above) and finding solutions to address them.
Our societies should look beyond focussing solely on the economic soundness of BEVs and start considering sustainability criteria over the entire battery value chain. For instance, manufacturers should not only consider driving performance optimisation when designing new batteries, but also consider the implications of the materials used in such designs to minimise damaging mining activities. When absolutely necessary, mining activities should be regulated by international processes, well monitored and aimed at reducing the impact on the environment (and local populations). They should also invest in the development of mining technologies to enable clean(er) extraction.
Such measures may result in increasing extraction costs. However, this would follow the logic of internalisation of environmental costs, and would rectify the market failures that, in the past, have made our fossil fuel-based economy so unsustainable. It would also make recycling materials more economically attractive, as the extraction alternative would prove more costly and, in turn, less competitive. As a market would emerge, new investments in recycling technologies may further reduce the impact and footprint of recycling activities and trigger a virtuous cycle.

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