Abstract

     While electrification of road transport is a key component of decarbonisation, the implications for the broader economy and related jobs remain underexplored. We quantify these impacts in the EU in a global Computable General Equilibrium (CGE) model, combining techno-economic assumptions about electric vehicles with deployment scenarios derived by energy models. We augment input-output tables underlying the JRC-GEM-E3 model with an explicit representation of vehicle manufacturing and upgrade the modelling of vehicle purchase and operation. Our findings illustrate that greater road transport electrification reduces the overall costs of climate mitigation, primarily driven by lower fuel costs for electric vehicles and a faster decline of battery costs. Transport electrification alters supply-chains and leads to structural shifts in employment from traditional vehicle manufacturing towards battery production, electricity supply and related investments. Finally, we expand the set of labour market indicators to cover skills and occupations, to refine the socio-economic assessments of climate policy.

Introduction

     Global CO2 emissions from transport have continued to rise in recent years across all modes (IEA, 2020a). In the EU, transport greenhouse gas (GHG) emissions were 33 % higher in 2019 compared to 1990 levels, while other sectors achieved emissions reductions over the same period (e.g. energy supply −۳۹ %, industry −۳۵ %, EEA, 2020). This is in stark contrast with the EU’s objectives of 55 % emission reductions by 2030 compared to 1990 and to achieve net zero emissions by 2050.1

     Road transport, accounting for nearly one-fifth of total EU GHG emissions, has therefore become a priority sector for climate action and a key element of the European Green Deal (European Commission, 2019). To encourage rapid emissions reductions in road transport, Europe has recently proposed new initiatives for stronger emissions standards for cars and vans, the set-up of a new emission trading scheme for buildings and road transport, as well as new regulation for alternative fuel and charging infrastructure (European Commission, 2021, European Commission, 2021).

Conclusions and policy implications

     The electrification of road transport is accelerating across the globe, with significant increases in electric vehicle market shares in China, Europe and the United States in particular (IEA, 2020c). While long-term projections on the number of EVs in the car and truck fleets vary across models and methodologies, the technology is widely expected to make up the majority of the total vehicle stock by mid-century, as a result of increasingly stringent climate policies and technology advancements, notably in batteries. Such fleet transformation in the coming three decades will be associated with large shifts in the manufacturing of motor vehicles and their supply-chain in the near-term, as well as changes in the operation of vehicles (fuel shifting, energy efficiency, maintenance schedules, etc.).

     This paper explores the macroeconomic implications of road transport electrification as a contributing policy to reaching Europe’s climate targets. We combine techno-economic assumptions about the composition and operation of the fleet with fuel consumption projections from energy system models into a set of climate mitigation scenarios with varying degrees of road transport electrification. We run these scenarios in an augmented version of the JRC-GEM-E3 model, which explicitly represents the manufacturing of BEVs as a separate economic activity from the manufacturing of conventional ICE vehicles. This new methodology allows for a more detailed analysis of macroeconomic impacts in two major ways: first the supply chain implications of the deployment of EVs can be more clearly identified than if all vehicles were produced using a single input structure. This has large implications in terms of employment, and therefore on occupations and skills. Second, this also allows for a new decomposition analysis, where the various channels of impacts from EVs on macroeconomic results can be explored. Our modelling suggests that a higher degree of road transport electrification can contribute to reducing the costs of climate mitigation policies.