Policies to promote electric vehicle deployment – Global EV Outlook 2021 – Analysis

European Union

As part of its pandemic-related response, the European Union accelerated the roll-out of electric mobility through its commitment to decarbonisation in the EU Green Deal8 and the subsequent Next Generation EU and Recovery Plan. In December 2020, the EU Sustainable and Smart Mobility Strategy and Action Plan bolstered these plans for the transport sector with ambitious ZEV deployment goals.

A number of EU directives and regulations are under review to adapt them to achieve stated ambitions. These include: CO2 emissions performance standards for cars and vans; Alternative Fuels Infrastructure Directive; European Energy Performance of Buildings Directive (which supports the deployment of charging infrastructure); Batteries Directive of 2006 which is being complemented by a proposed Batteries Regulation announced in December 2020 and the EURO pollutants emissions standard.

Corporate fleet average tailpipe emissions are targeted to go below 95 grammes of carbon dioxide per kilometre (g CO2/km)9 in 2021 under the CO2 emissions standards. EVs are increasingly important to meet the targets and a driving factor explaining why EV sales rose in 2020 despite Covid-19 and the automotive sector’s overall downturn. The next targets push emissions to fall 15% in 2025 and 37.5% by 2030 from 2021 levels.These targets are being revised with a view to better support the EU Green Deal ambitions. Revisions are likely to include lower emissions targets, modifications in the role of zero and low emission vehicles (ZLEVs) (emissions under 50 g CO2) and possibly a well-to-wheel approach rather than the current tailpipe (tank-to-wheel) approach.

In early 2021, nine EU countries urged the European Commission to accelerate an EU-wide phase out of petrol and diesel cars. This could create legislation allowing member states to enforce national ICE bans. 

In addition to EU policies and directives, many countries in Europe are continuing EV subsidy and incentive measures. In some, pandemic relief stimulus measures have favoured alternative powertrains with supplemental purchase subsidies and cash-for-clunker schemes. 

United States

At the federal level, the United States took a less supportive approach to EVs than China and Europe in 2020. The Corporate Average Fuel Economy (CAFE) standard was revised and rebranded as the Safer, Affordable Fuel-Efficient (SAFE) vehicle standard with significantly weaker energy efficiency targets for model years 2021-2026 than those established under the CAFE standards.10 In 2020, a federal tax credit of up to USD 7 500 for the purchase of an electric car was still available, with the exception of General Motors and Tesla which had reached the 200 000 sales limit per automaker in 2018, but this credit was not renewed.

It was at the state level where policies pushed for stronger EV deployment. The number of states following the California Low Emissions Vehicles pollutant and GHG emissions regulations now represent about a third of US car sales. The governor of California issued an Executive Order requiring that by 2035 all new car and passenger light truck sales be zero-emission vehicles. New York, New Jersey, and Massachusetts are considering similar bans on internal combustion engines.

Other state level policies such as the Low Carbon Fuel Standard are supporting EV adoption, especially in the heavy-duty vehicle sector. In addition, the majority of US states have specific policies in place to offer tax credits or purchase incentives for EVs as well as financial and technical assistance for installing charging infrastructure.

Total car sales dropped 23% in the United States in 2020, but sales shares of electric cars held up. This may be reflective of state intiatives partly compensating for diluted federal incentives as well as the expanding menu of available EV models including very popular SUV models. Only 30% of electric cars sold in the United States in 2020 benefitted from federal tax credits. In early 2021, the new US administration announced intentions to encourage ZEVs. So changes to the SAFE and federal tax credit programmes may be forthcoming and may be likely to to be structured to benefit domestic manufacturers and middle-class consumers.

India

India’s efforts to control pollutant emissions from vehicles moved into high gear in April 2020 when it imposed Bharat Stage VI (BS-VI) standards, (which are largely aligned with Euro 6 standards), on new sales of motorcycles, light-duty and heavy-duty vehicles. The jump directly from BS-IV to BS-VI forces manufacturers to make significant changes to vehicle designs in a short period. Investment by some Indian OEMs focus on ICE models meeting BS-VI standards, thereby delaying investment in BEV deployment. These OEMs have indicated that they are facing losses due to slumps in auto sales from reduced demand during the pandemic.

Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme is India’s key national policy relevant for EVs. It allocates USD 1.4 billion over three years from 2019 for 1.6 million hybrid and electric vehicles (including two/three-wheelers, buses and cars)11 and includes measures to promote domestic manufacturing of EVs and their parts. However, more than halfway to the April 2022 end-date only 3% of the allocated funds have been used for a total of just 30 000 vehicles. Significant acceleration will be required to reach both the programme targets and national targets of 30% EV sales by 2030. Some critics blame the lack of supply-side policy instruments such as ZEV sales requirements or ICE phase-out targets to hasten EV adoption, while others have indicated the limited availability of EV models for average consumers.

State and urban governments have also started efforts to fast track road vehicle electrification. In February 2021, the chief minister of New Delhi announced the Switch Delhi awareness campaign to highlight its ambitious EV policy introduced in August 2020. The policy targets 25% electrification of vehicle sales in 2024 and 50% of all new buses to be battery electric. Other cities such as Kolkata, Pune, Nagpur and Bangalore continue to transform their fleets.

Japan

Japan declared an intention to be cabon neutral by 2050 in a statement from the prime minister in October 2020. In December the Ministry of Economy, Trade and Industry (METI) released the Green Growth Strategy with action plans for 14 sectors to achieve that goal. For transport, it will focus on increased electrification and fuel cell use, as well as next generation batteries, by using a mix of grants (for research, development and demonstration projects), regulatory reforms related to hydrogen refuelling and EV charging infrastructure and tax incentives for capital investment and R&D.

METI announced that by the mid-2030s Japan aims to have all new passenger cars electrified.12 To reach this goal, it proposed to revisit fuel efficiency regulations, public procurement of EVs, expansion of charging infrastructure and large-scale investment in EV supply chains. A decision on options is to be made in mid-2021. Speculation is that the fuel efficiency standards for LDVs may be strengthened to meet the more ambitious mid-2030 and carbon neutrality targets.

In 2020, Japan was one of the few markets where EV sales dropped more than overall car sales. Sales are expected to recover after Japan doubled its subsidies for passenger ZEVs registered from the end of 2020. Other measures such as tax exemptions on BEVs, PHEVs and FCEVs have been extended for two years. In January 2021, electric cars sales increased around 35% relative to January 2020.

Canada

Canada continued to support key infrastructure and ZEV incentives in 2020 in light of its recently increased climate ambitions to reach net-zero emissions by 2050. Canada has ZEV targets of 10% of LDV sales by 2025, 30% by 2030 and 100% by 2040. Québec supports even faster adoption and has aligned with mandates in California and 14 other US states. British Columbia also has a ZEV mandate and together with Québec is leading the country in ZEV uptake.

A federal invesment of CDN 1.5 billion (USD 1.2 billion) in the low carbon and zero emissions fuels fund was announced in 2020 to increase production and use of low-carbon fuels, while major infrastructure and ZEV deployment programmes and federal purchase incentives received additional funding.

Chile

Chile’s energy roadmap 2018-2022 targets a ten-fold increase in the number of electric cars in 2022 compared with 2017. The National Electromobility Strategy aims for a 40% penetration rate of electric cars in the private stock by 2050 (and 100% of public transport by 2040).

A new energy efficiency law aims to reduce energy intensity by at least 10% by 2030 (from 2019). It will establish energy efficiency standards for imported vehicles (with BEVs and PHEVs given supercredits) for LDVs and heavy-duty trucks. The government offers subsidies for electric taxis and home charging points.

New Zealand

New Zealand has a target of net‑zero emissions by 2050, which is an important accelerator for policy developments in a variety of sectors. In 2020, the government and the private sector co-financed 45 new low-emissions transport projects, including charging infrastructure and BEV trucks. Legislation is expected to be adopted in 2021 for a clean car import standard which would progressively phase in more stringent targets, setting limits of up to 105 g CO2/km average emissions in 2025. A February 2021 draft advice package from New Zealand’s Climate Change Commission recommended a number of policies to accelerate the uptake of electric LDVs, including banning the import, manufacturing or assembling of light-duty ICE vehicles from 2030. The government's response to the Climate Change Commission's advice is due by the end of 2021.