Can Autonomous Electric Vehicles accelerate the low carbon transition?

The potential impact of A-EVs on global decarbonisation and the implications for business

In some projections, A-EVs alone could bridge 1/3 of the gap needed to limit warming to 2 degrees, triggering major business disruption

Autonomous Electric Vehicles (A-EVs) use AI, next-generation batteries and other Fourth Industrial Revolution (4IR) technologies and could transport passengers more efficiently, without the need for drivers or fossil-fuel-driven internal combustion engines (ICEs). Given the advantages of cleaner and quicker transport, A-EVs could potentially accelerate much-needed greenhouse gas emissions reductions in the transport sector.

Our Low Carbon Economy Index 2017 highlights the considerable gap between current decarbonisation efforts and the Paris Agreement’s goal to limit warming to 2 degrees Celsius. This ‘transition gap’ emphasises the need for immediate action, and indicates a number of risks and opportunities for business. These include market, technology and policy disruptions that could bridge the gap to 2 degrees but present substantial risks to a number of sectors. A-EV technology is one example of such a disruption.

So just how great an impact could A-EVs have? And how certain can business feel about the future of this technology? We’ve analysed a range of  projections to model the impact of A-EVs and answer these questions.

The projections tell different stories, driven by the underlying assumptions behind these ‘scenarios’. We've focused on the following recently published scenarios:

We've isolated the reduction in oil demand triggered by A-EVs in each scenario to give an upper bound, 'best case' estimation of their potential impact on global carbon intensity. For comparison, we considered two additional scenarios. These project potential reductions in oil demand from road transport as a result of more stringent policy measures:

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Note: Solid lines show the decarbonisation impact assuming 100% renewable energy powers A-EVs. Dotted line alongside the RethinkX scenario shows same scenario if A-EVs are powered by electricity with 2016's grid intensity. For BP, BNEF and Wood Mackenzie, the difference between 100% renewable energy and 2016 grid mix powering the A-EVs is not material on the scale of this graph.  Historic carbon intensity calculated using data from BP, Energy Information Agency, World Bank, IMF and PwC.

How great an impact could A-EVs have?

A-EV projections vary significantly, with implications for their impact upon decarbonisation efforts.

Rethink X’s scenario implies that renewable energy-powered A-EVs alone could bridge around a third of the gap between the 2011-16 decarbonisation rate (2.7%) and the 6.3% annual reduction needed for 2 degrees, up to 2030. BP and Wood Mackenzie’s scenarios show a more modest impact, increasing reliance on other technologies and sectors to bridge the gap to 2 degrees.

Multiple factors besides A-EV penetration will impact whether net vehicle emissions rise or fall.

Our analysis isolates A-EV technology to show ‘best case’ decarbonisation impacts from each scenario. However in real terms a range of other factors are likely to influence emissions from vehicles, such as the number of Internal Combustion Engine (ICE) vehicles left on the road. RethinkX’s view that ICE vehicle ownership would actively fall while A-EV usage increases would represent a major deviation away from rising ICE vehicle ownership trends.

A-EVs will catalyse major disruptions if they deliver a step change in decarbonisation

The impact on oil demand and the wider economy in BP, BNEF and Wood Mackenzie’s scenarios is noticeable, but does not amount to a paradigm shift. In contrast, RethinkX envision a total reshaping of mobility as an on-demand service. This fundamental shift leads to oil prices dropping to $25/barrel by 2030. This leads to oil fields, pipelines and refineries all increasingly at risk of becoming uneconomic or “stranded assets”, with knock-on effects for investors.

What could lead A-EV deployment to cruise or accelerate?

 

Policy

Policy could drive or constrain the ICT, power and road infrastructure and regulations required for largescale A-EV deployment. Legislation and regulations for self-driving cars have to be put in place, while stringent safety standards could pose a hurdle for manufacturers. The RethinkX forecast points to the importance of approval of AVs for widespread use on public roads and a competitive policy environment.

We recently published a report that emphasises the importance of clear signals from government in laying out a roadmap for EV deployment. Policy can influence both end-use cost and ease of adoption. The IEA points to emission standards as a tool to drive increases in EV penetration.

Cost

Falling costs are a critical driver in all scenarios, and with a reasonable degree of certainty. BP focus on falling costs of travel due to technological advances, including in lithium-ion batteries. The BNEF and Wood Mackenzie scenarios both expect battery prices to fall to roughly a third of their current cost in the early 2030s. In the RethinkX scenario, it becomes 2-10x cheaper to use ‘transport as service’ than owning a vehicle, leading to mass adoption.

Market & behavioural shifts

Behavioural changes are key for rapid A-EV deployment, which depends on early adopters who are willing to accept lifestyle changes associated with autonomous technology. RethinkX suggest this behavioural shift could be faster than current industry expectations, following the same trajectory as mobile phones in the early 21st century.

The BP and WoodMackenzie scenarios highlight that growing emerging markets, such as China, India and the Middle East could double the global car fleet over the next 20 years. This means it could take decades for A-EVs to completely replace ICE vehicles in the vehicle fleet.

R&D

Research and development (R&D) into cheaper batteries, precise GPS and navigation mapping and affordable sensors is essential. Technological developments, such as making sure active data gathering works during driving and training A-EV systems to rapidly make ethical decisions are needed. National governments are aware of the potential benefits of investing in R&D now to generate jobs related to next-generation vehicles.

What are the implications for business?

This range of scenarios demonstrate the current uncertainty of how this technology could impact the economy. A-EVs are just one of a number of emerging technologies under the Fourth Industrial Revolution (4IR) that could disrupt current business models. A range of stakeholders are likely to be impacted by these disruptions, including vehicles manufacturers; oil producers; utilities companies; regulators and consumers.

Speak to our team to discuss how 4IR technologies and the low carbon transition could affect your business.

 

Can Automous Electric Vehicles accelerate the low carbon transition? Download the full report

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Sam Unsworth
Sustainability & Climate Change, PwC United Kingdom
Tel: +44 (0)7764 958772
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Corinna Hornwall
Sustainability & Climate Change, PwC United Kingdom
Tel: +44 (0) 7718 979 463
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