Growth of electric vehicles will significantly reduce oil demand by 2030: IEA

Wider adoption of electric vehicles (EVs) will result in a reduction in oil demand of about 2.5 million barrels per day by 2030, predicts IEA in their publication Global EV Outlook 2019. This is based on projections from the impact of announced policy ambitions worldwide.

Global EV sales are also expected to reach 23 million by 2030. Of this, EVs would likely make up 57 per cent of all vehicle sales in China, with Europe and Japan’s market share of EVs at 26 per cent and 21 per cent respectively. The total number of EVs globally will exceed 130 million vehicles, stock projections that are in line with targets already announced by automobile manufacturers.

Electricity demand is thus expected to experience significant growth, in response to the rise of EVs. Demand will reach almost 640 TWh in 2030, where the electrification of cars will be a crucial driver for further innovation and investment in battery manufacturing. This will lead to lower unit costs of automotive battery packs.

The rise in demand will also have a positive impact on carbon emissions, especially if the electricity mix is not carbon-intensive. Based on the global average carbon intensity of power generation today, greenhouse gas emissions by the EV fleet in 2030 will be approximately half that of an equivalent fleet of internal combustion engine vehicles.

To better prepare for this scenario, here are several recommendations from IEA to policy makers:

1. Anticipate long-term impacts of the EV transition. Tax revenues, especially from vehicle and fuel taxes, will be reduced by the growth of EVs. Decision-makers should consider gradually raising taxes on carbon-intensive fuels.

2. Maximise the benefits of reduced emissions by EVs. Governments should take the opportunity to decarbonise the electricity generation mix and encourage the integration of renewables. Power markets should also evolve to incorporate services that are suitable for a larger EV fleet.

3. Develop a battery industry value chain. Governments should mitigate investment risks for key industry players and stakeholders. For example, they can allocate funds to research and innovation in advanced lithium-ion and solid-state battery technologies.

4. Increase the attention on raw material supply for battery manufacturing. Anticipating and managing potential challenges and ensuring the sustainability of cobalt, lithium and manganese is crucial to limit the risk of shortages.

For more insight into the growth of electric vehicles in 2030, please read Global EV Outlook 2019.