Giving gifts to the rich to reduce CO2 is inadequately expensive

The government's plan to donate taxpayers' money to wealthy people to buy a new car lacks one section - how this gift will contribute to the goal of decarbonising Latvia and how much it will ultimately cost to reduce CO2 emissions by adding 2,222 new electric cars to Latvia's fleet. These costs turn out to be striking, at 364 euros per ton of CO2.
03.09.2021. Imants Vīksne
©Mārtiņš ZILGALVIS, F64 Photo Agency

Andis Vaičulis, an environmental expert who professionally deals with emission calculations, drew the attention of Neatkarīgā to how uneconomical this is. This source can be trusted, as his calculations previously served as a basis for the government to amend the "Regulations on the Limitation of Air Pollution from Combustion Plants". The Ministry of Environmental Protection and Regional Development (MEPRD) had incorrectly calculated the emissions from wood in small boiler houses. Vaičulis noticed that the government had calculated that firewood is more harmful than coal, and Neatkarīgā published that “Heating may become more expensive due to emission recalculations” and the defect in the rules was corrected with lightning speed.

Decarbonisation by electrification

A similar situation is currently emerging with regard to the government's plan to subsidize the purchase of electric cars. Neatkarīgā has already reported that "The government will give gifts to wealthy people" up to 4500 euros. Only the calculations of the MEPRD are not very erroneous this time, because there are none at all. The return on investment to achieve the set goal - CO2 reduction - is not calculated.

The main document justifying the intention to spend 10 million euros on electric car grants is the informative report “On support for the purchase of zero-emission and low-emission vehicles” prepared by the MEPRD and supported by the government. It summarizes various facts about the transport sector, which is the second-largest source of greenhouse gas emissions and accounts for almost a third of Latvia's total emissions. Meanwhile, car transport is the largest source of emissions in the transport sector. And "although the decarbonisation of the transport sector cannot be achieved by a single solution, in general in the future the decarbonisation of the transport sector will be largely linked to its electrification".

What was not written by Kašs and Plešs

In the following text, the author of the report Raimonds Kašs and its signatory - Minister Arturs Toms Plešs get to the calculation of the necessary funding to increase the share of light battery-powered electric vehicles (LEV) in the total fleet:

"Assuming that the aid for the acquisition of an LEV amounts to 4500 euros, in order to reach 1% of LEV's share of the total passenger car balance, ~27 million euros would be needed." The government has agreed to allocate 10 million. The Ministry of Environmental Protection and Regional Development plans to organize an open project tender competition "Reduction of greenhouse gas emissions in the transport sector - purchase of zero-emission and low-emission vehicles", with a very important nuance: "The aim of the tender is to promote GHG emission reduction." However, nowhere in the report is it stated to what extent greenhouse gas emissions will be reduced. Although it's not very difficult to calculate. Environmental expert Andis Vaičulis finds the obvious:

"Plans are being made, funds are being allocated, but in the end, they do not know how effectively the money will be invested in achieving the goal of reducing CO2 emissions." Such calculations, even if made, are unlikely to be published, as they prove that subsidizing electric cars is an absolutely uneconomic measure.

So, how much will it cost to reduce 1 ton of CO2 emissions by promoting/subsidizing electric cars?

Andis Vaičulis' calculation

"We will do the work for the MEPRD. Let's calculate only the reduction of CO2 emissions that occur when using an electric car. Let's not take into account the CO2 emissions of car production, which are higher in electric cars than in conventional cars.

The calculation algorithm is as follows:

1) we determine how much CO2 is emitted by a diesel car;

2) we determine how much CO2 is emitted by an electric car;

3) calculate the reduction of CO2 emissions when using an electric car;

4) calculate the cost of 1 ton of CO2 reduction.

Let's use CSDD data. Let's assume that a new diesel car consumes 7 l per 100 km, CO2 emissions are 185 g CO2/km.

Let's assume the electricity consumption of electric cars is 150 Wh/km, which is one of the lowest electricity consumption. CO2 emissions from electricity generation in Latvia are 0.15528 t CO2/MWh. CO2 emissions from electric cars amount to 23 g CO2/km. Looks good - 8 times less. Using an electric car reduces emissions by 162 g CO2/km. The MEPRD report plans that electric cars must travel at least 15,000 km a year. During the year, emissions are reduced by 2.43 t CO2. Assuming a car lifespan of 10 years, after which the battery may have to be replaced, the CO2 reduction during the car's lifetime will be 24.3 t.

That means that the MEPRD plans to pay 4,500 euros to reduce 24.3 tons of CO2 emissions. A reduction of 1 ton of CO2 emissions will cost 185 euros. This is the visible part, direct aid, but there is also indirect aid in the form of uncollected excise duty. In 10 years, a car with a diesel engine will consume 10.5 m3 of diesel fuel. Excise duty on diesel is 414 euros per 1000 liters. The budget loss amounts to 4347 euros in 10 years.

The total cost of CO2 reduction (direct aid for car purchase and indirect aid in the form of uncollected excise duty) is 364 euros/t CO2."

A useless CO2 reduction measure

Andis Vaičulis has not included private investments in his calculation, only public funds. Even with all the state support, a new electric car will cost at least about ten thousand more than a conventional car with an internal combustion engine. Taking into account these costs as well, the CO2 reduction measure by investing in 2222 electric cars will be inadequately expensive. The expert acknowledges that, in addition to these calculations, the fact that electricity costs are lower than diesel should be taken into account. Other assumptions can also be discussed. For example, electric car batteries will last for 10 years or more, and maybe there are other factors. "The most important thing, however, is that public money must be spent efficiently and effectively. This can only be demonstrated by providing estimates of the cost of reducing 1 ton of CO2 emissions. At present, subsidizing the purchase of electric cars seems to be one of the most expensive and ineffective measures."


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