Transport Electrification – Assumptions vs. Technical and Economic Reality

The global strategy of achieving climate neutrality is largely based on the paradigm of electrifying the transport sector, which is currently identified as a key pillar of net-zero policy. The transition from internal combustion engine vehicles (ICE) to battery electric vehicles (BEV) is no longer treated solely in environmental terms, but has become a critical geopolitical imperative. In an era of uncertainty in energy commodity markets, reducing dependence on fossil fuels has become a cornerstone of national security strategies for many countries. Transport, as one of the main emitters, has a decisive influence on the pace of global warming and the depletion of the ozone layer, which directly contributes to the destabilization of polar ecosystems. The current legislative momentum stems from the urgent need to halt these processes; however, the success of this transformation depends on a precise understanding of technical and economic constraints that often diverge from the original, idealistic assumptions.

Original Plans and Assumptions of Electrification Policy

Strategic emission targets and the narrative of operational “zero emissions” formed the foundation on which market mechanisms supporting BEV adoption were built. Early policy assumptions were based on the belief that strict tailpipe emission limits would force manufacturers to rapidly accelerate technological innovation. Data from 2020–2024 confirm this trend in the European Union, where average emissions from new passenger vehicles decreased from 130 g CO2/km in 2020 to 108.1 g CO2/km in 2022. The BEV segment demonstrated particularly strong momentum, recording a 28.3% increase in registrations in 2022, while the plug-in hybrid segment (PHEV) grew by only 1.21%. The primary drivers behind these changes were expectations regarding declining battery technology costs and the rapid expansion of public charging networks aimed at eliminating so-called range anxiety.

The introduced regulatory frameworks impose increasingly strict requirements on the automotive sector, as illustrated in the following comparison of projected emission limits, which serve as reference points for production strategies across the industry.

Projected Greenhouse Gas Emission Limits for Passenger Vehicles (2025–2034)

These limits, however, primarily focus on emissions measured at the “tailpipe,” which necessitates a deeper analysis of the real carbon footprint across the full vehicle life cycle, including the energy intensity of manufacturing processes.

Real Carbon Footprint and Life Cycle Analysis (LCA)

The strategic importance of life cycle analysis (LCA) arises from the need to monitor the phenomenon of carbon leakage, where theoretical environmental benefits during the operational phase may be offset by significant emissions generated during production. Studies on electric vehicles assuming a lifetime mileage of 200,000 km indicate that the ecological balance depends heavily on the energy mix of the electricity grid and the location of battery cell production. In extreme cases, charging BEVs from coal-dominated electricity grids may result in emissions up to 17.98% higher than those of the most efficient ICE vehicles. From a materials engineering perspective, the location of battery manufacturing plants is a key factor that directly determines the vehicle’s initial carbon debt.

Comparison of Lithium-Ion Battery Cell Production Carbon Footprint by Location

From the standpoint of cell design, the evolution from NMC 111 chemistry toward NMC 811 has enabled emission reductions due to optimized cathode synthesis. An important technological breakthrough is represented by sodium-ion batteries (SIB), which eliminate the need for scarce lithium. From an engineering perspective, SIB technologies offer substantial cost savings by using aluminum foil as a current collector instead of expensive copper foil, reducing the cost of this component from approximately 210 USD/m to only about 70 USD/m. Additionally, recycling process analysis indicates that the pyrometallurgical pathway currently shows lower emissions (reducing the carbon footprint to around 60 kg CO2-eq/kWh for NMC811) compared with hydrometallurgical methods (approximately 67.7 kg CO2-eq/kWh). The high emission intensity of production in provinces such as Tianjin (119 kg CO2-eq/kWh) means that in regions with coal-dominated energy mixes, such as the US Midwest or Poland, the ecological breakeven point for consumers may be significantly delayed.

Economic Dynamics: Private and Public Perspectives

The effectiveness of the transport transition depends on the alignment of private economic incentives with marginal social benefits. However, the operational savings associated with BEV usage show strong geographic variability. The most favorable economic scenario currently exists in the Pacific Northwest, where abundant hydroelectric power and low electricity prices allow users to save approximately 400–500 USD annually. In contrast, in New England, due to high electricity prices, annual savings often fall below 200 USD. Even in California, despite high gasoline prices, relatively expensive electricity limits the financial attractiveness of switching to electric vehicles without external support.

The issue of subsidy additionality presents significant analytical challenges. Information asymmetry between regulators and consumers means that a substantial portion of public funding goes to buyers who would have purchased electric vehicles regardless of financial support. This phenomenon is particularly visible in the Tesla vehicle segment, where the fraction of purchases actually induced by subsidies is significantly lower than for other brands.

Subsidy Additionality Analysis Depending on Demand Elasticity

These data suggest that the current subsidy model generates high costs for each additional electric vehicle introduced to the market, which may require policy adjustments focusing on segments with higher demand elasticity and lower informational barriers.

Charging Infrastructure and Battery Circularity

The development of charging infrastructure must consider technical differences between Level 2 charging systems and Level 3 fast chargers. From an engineering perspective, frequent use of high-power charging accelerates cyclic degradation of battery cells, negatively affecting their lifespan. A key parameter in the design of battery energy storage systems (BESS) based on second-life batteries is the Energy-to-Power Ratio (EPR), which determines the system’s ability to provide specific grid services.

From an economic perspective, analysis of the Levelized Cost of Storage (LCOS) indicates that the so-called Owner Scenario is significantly more efficient than the open market model. This results from the fact that the original fleet owner, by avoiding acquisition, logistics, and transportation costs associated with used modules, can significantly reduce entry barriers for energy storage systems. However, LCOS calculations for second-life battery systems remain highly sensitive to discount rates and allowable Depth of Discharge (DoD), both of which directly affect the economic durability of such projects.

LCOS Cost Comparison: New vs. Second-Life Batteries

Although LCOS costs for second-life batteries remain higher than those of new systems, their Total Capital Costs (TCC), ranging from 64.3% to 78.9% of the cost of new units, make them an attractive option for specific applications where lower investment thresholds are more important than optimal efficiency.

Policy Recalibration and Future Directions

Conclusions derived from technical and economic analyses suggest the need to move away from uniform nationwide subsidies toward localized and time-adaptive policies. Rationalization of electricity and fuel pricing is necessary so that prices fully reflect uninternalized externalities and the marginal social cost of emissions. Technical challenges related to circularity are becoming catalysts for new regulations, such as the European Union’s recycling mandates for 2036, which require the recovery of lithium (12%), nickel (15%), and cobalt (26%).

The implementation of a circular economy is a crucial tool for reducing dependence on primary ores, the extraction of which is associated with significant geopolitical and environmental risks. The future of transport electrification is inseparable from the pace of decarbonization of electricity systems. Only clean energy combined with a sustainable battery supply chain will allow the environmental promises of electric mobility to be fulfilled, transforming it from a political instrument into a durable component of sustainable technological development.

Sources:

• Corporate Climate Lobbying - Global Research Alliance
• World Electric Vehicle Journal (2025)
• National Center for Sustainable Transportation / UC Davis (2021)
• Rapson, D. S., and Muehlegger, E. (2022). "The Economics of Electric Vehicles". NBER Working Paper Series, No. 29093.