One of the most conspicuous demonstrations of one’s commitment to the fight against climate change is owning an electric or hybrid vehicle. Fully or partially propelled by an alternative to fossil fuels, these vehicles represent a proactive step in reducing carbon emissions and greenhouse gases.
However, looks can be deceiving—at least in part. The actual environmental benefits of electric and hybrid vehicles depend on several factors, including the energy- and resource-intensive nature of the vehicle production and electric generation processes. To ensure that the ultimate environmental impact is a net positive, these elements are important to grasp for owners and impact investors alike.
Analyzing Impact beyond the Tailpipe
Greener vehicles are identified in two ways. Battery electric vehicles (BEVs) rely solely on electric power. Plug-in hybrid electric vehicles (PHEVs) rely primarily on gas-fueled engines but also feature an electric motor. BEVs generate zero direct emissions while in operation. Although PHEVs do not emit greenhouse gases from the electric motor, they do release emissions from the gasoline engine.
A complete measure of a vehicle’s overall environmental impact considers its full life cycle emissions. Use is only one part, joining the greenhouse gases and pollutants generated in the vehicle’s creation, processing, distribution, and eventual disposal.
Factoring in these elements creates a more nuanced view of the environmental benefits of BEVs and PHEVs. For example, the Wall Street Journal reported that manufacturing an all-electric Tesla Model 3 generated 65% more emissions than building a gasoline-powered Toyota RAV4. The difference is largely due to the Tesla’s lithium-ion battery, which uses scarce minerals such as lithium, natural graphite, and manganese, the mining of which generates its own environmental and governance concerns.
Improving Impact throughout the Life Cycle
To achieve maximum green goals, a PHEV or BEV owner must remain with the same vehicle for many years. For example, over the course of a 200,000-mile lifespan, a Tesla Model 3 will generate about 46% of the emissions produced by a gas-fueled Toyota RAV4, the Wall Street Journal reported. However, the Tesla does not gain an emissions advantage until after 20,600 miles. Therefore, the longer an electric or hybrid car is owned and operated, the greater the environmental benefits.
Another key variable in the environmental benefit of a PHEV or BEV is the source energy behind the electric charge. A BEV generates 50% of the emissions of the average gas-powered vehicle if it is in Ohio, which uses coal for 37% of its electricity generation. Yet in gusty Iowa, where wind provides 58% of electric generation, a BEV emits 25% of the greenhouse gases compared with fossil fuel alternatives.
Usage habits influence the benefits, too. The BBC meanwhile found that PHEV owners can improve their environmental impact by keeping their vehicles charged, maximizing electric motor usage on short trips, and altering driving habits to reduce reliance on the gas-powered engine.
With manufacturers including Toyota to BMW pledging that at least 50% of their vehicles sold in 2030 will be electronic, sustainable cars represent the future. Yet vehicle production and electric generation processes must steadily improve as well to maximize progress on their environmental impact—an area where impact investors can play a key role.