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The ripple effects of the electric vehicle revolution

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Hello, and welcome back to Energy Source, coming to you from New York.

The Joe Biden administration finalised sweeping new rules this morning to crackdown on carbon pollution from the US power sector, the second-largest source of emissions. The rules, if they survive expected court challenges, will mark the first successful federal emissions standard for power plants. Still, they are a scaled-back version of the initial regulations proposed last year, as the White House vies to shield itself against mounting legal challenges from Republican states over its environmental authority. Dive deeper into the rules here.

Meanwhile, in Norway, Nicolai Tangen, chief executive of its $1.6tn oil fund, told the FT that Europeans were “less hard-working” and “ambitious” than Americans. More from my hard-working colleagues in Oslo on what this means for investments between the two places here.

Today’s newsletter looks at the ripple effects of the move to electrify transport. This week, the International Energy Agency released hundreds of pages of reports on the state of electric vehicles and batteries. We sum up our three biggest takeaways.

Thanks for reading,


What electric vehicle adoption means for trade, taxes and the power grid

Growing demand for electric vehicles is “extremely robust”, with EVs set to make up a fifth of cars sold worldwide this year, the International Energy Agency said on Tuesday. Their bullish outlook comes at a tough moment for the sector as carmakers report slimming profit margins and missed sales targets.

The IEA anticipates every other car sold globally to be electric by 2035, avoiding the consumption of more than 10mn barrels per day of oil worldwide, equivalent to the amount the US currently consumes for transport. Whether more affordable models and chargers can be made rapidly available will be key to such a swift deployment.

“This will change the energy markets. This will change the car manufacturing industry,” said Fatih Birol, executive director of the IEA, which expects oil demand for transport to peak as soon as next year.

Chinese players have edge in the global market

Much has been reported about China’s domestic dominance in EVs. Nearly 40 per cent of new cars sold in the country are electric, and about 60 per cent of its electric models are price competitive with internal combustion engines. That’s an anomaly compared to the US and Europe, where carmakers have focused on larger, more expensive models and are just building up production.

This puts Chinese carmakers in a prime position to export, particularly to developing countries which lack domestic players. It’s a huge untapped market opportunity — 95 per cent of EV car sales last year were concentrated in China, the US and Europe — and will determine the success of EVs.

China exported 1.2mn electric vehicles last year, an 80 per cent increase from 2022, according to the IEA. The entry of Chinese EVs into the global market has alarmed Western policymakers in recent months, prompting investigations into Chinese trade practices and calls for greater trade restrictions to protect domestic industry.

“The threat is definitely starting to show now,” said Abhishek Murali, an analyst at Rystad Energy. “[Chinese carmakers] are turning their attention to markets such as Australia, South America and south Asia.”

Bar chart of Share of electric vehicle sales from Chinese manufacturers (%) showing Chinese EV companies are looking abroad

Tax reforms are needed

The rapid shift to electric vehicles risks leaving a gaping hole in public coffers. Revenues from gasoline and diesel taxes, often used to fund road improvements, are at risk of becoming “significantly reduced” as consumers move to EVs, the IEA warned. The organisation estimates the shift to EVs has already displaced $12bn in taxes globally last year.

Europe, where countries tend to charge higher taxes on gasoline and diesel compared to the US and China, made up 60 per cent of global revenue losses last year. While countries will gain back some funding in electricity taxes, the revenue is marginal compared to the loss in fuel taxes.

The IEA suggested reforms such as charges for distance travelled and road tolls could help offset the loss in tax revenues, adding the move to EVs will also bring indirect cost savings including lower health expenditures because of reduced air pollution.

Column chart of Estimated loss in revenue from fuel tax rates ($bn) showing Gasoline and diesel tax revenues are falling

More EVs = More power demand

As more EVs hit the road, more electricity will be required for charging. The IEA expects electricity demand from EVs to grow from 130TWh last year to as much as 2,700TWh by 2035 based on current country ambitions. The energy watchdog estimates electric car charging could make up 9.8 per cent of global electricity demand by 2035, up from 0.5 per cent today.

The forecasts come as countries scramble to prepare their rickety power grids for electricity demand growth from electric cars, manufacturing and artificial intelligence.

“As the fleet grows, careful planning of electricity infrastructure, peak load management and smart charging should be priorities for near-term decision-making,” warned the authors of the outlook.

Job moves

  • InstaVolt, a UK charging network, has appointed Delvin Lane as chief executive, succeeding Adrian Keen. Lane joins from eEnergy Group.

  • Lawrence Summers, former Harvard president and ex-Treasury secretary, joined the advisory board of Palmetto, a clean energy technology company.

  • EPRI, an energy research organisation, appointed Vince Sorgi, chief executive of PPL Corporation, as chair of the board. Tom Kent, CEO of the Nebraska Public Power District, and Mike Innocenzo, chief operating officer of Exelon, have been appointed first and second chair, respectively.

  • Newmont appointed Francois Hardy as chief technology officer of the gold producer, succeeding interim CTO Dean Gehring.

  • Leigh-Ann Russell, chief technology and innovation officer of BP, will leave the oil major after 18 years to take an external job. Russell will be replaced by Emeka Emembolu. Anja-Isabel Dotzenrath, head of gas and low-carbon, is also retiring and will be succeeded by William Lin.

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.

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