On June 14th the International Transport Forum of the Organization for Economic Co-operation and Development released a Policy Brief that asks the rhetorical question “Electric Cars: Ready for prime time?” I was very surprised that the OECD, an organization of 34 democratic, industrialized and overwhelmingly western nations, would even ask the question. I was even more surprised by their conclusions that most claimed benefits of electric passenger cars are illusory while the societal costs are $9,000 to $15,000 more per vehicle than conventional automobiles. In other words, every EV produced and sold makes society poorer. No matter how you “feel” about electric cars, the OECD Policy Brief and the related discussion paper, “Electric Vehicles Revisited – Costs, Subsidies and Prospects” suggest that global thought leaders are rapidly distancing themselves from the idea that electric drive is a sensible solution.
The discussion paper begins with an introduction that explains, “The International Transport Forum at the OECD is an intergovernmental organisation with 53 member countries. It acts as a strategic think tank with the objective of helping shape the transport policy agenda on a global level and ensuring that it contributes to economic growth, environmental protection, social inclusion and the preservation of human life and well-being.”
These guys aren’t oil industry puppets and they don’t evaluate macroeconomic issues from the perspective of an individual consumer who’s trying to make a car buying decision. Instead they focus on the broader questions of whether individual consumption decisions are productive or counterproductive for society and humanity as a whole. When the OECD starts openly questioning the fundamental economic and environmental value of electric drive, you know the geopolitical winds are shifting rapidly. When the first graph in an OECD discussion paper is a simplified version of the Gartner Group’s Hype Cycle, it’s a clear indication that evolving attitudes of policymakers are bad news for investors in companies like Tesla Motors (TSLA) that want to drive the auto industry in directions that don’t serve the best interests of society or humanity.
As a staunch critic of electric drive, I was particularly pleased with the OECD’s admission that electric cars are “displaced emission” rather than zero emission vehicles, that the environmental benefits of electric drive are wholly contingent on the marginal electricity production used to charge the vehicles, and that where electricity generation is relatively polluting, the air quality-related health impacts of electric vehicles are worse than gasoline ICEs but better than diesel ICEs. It’s nice to finally see an honest acknowledgement that moving pollution from a tail pipe to a power plant doesn’t solve the problem. It merely shifts the suffering from the polluter to somebody else.
Since I’m weary of juvenile arguments with EVangelicals who cleave to eco-religious dogma without exercising their power of independent thought, I’ll refrain from providing a detailed analysis of the OECD policy brief and discussion paper. I will, however, suggest that both documents are Must Reads for prudent investors who want to understand the likely future of government support for the fatally flawed proposition that battery-powered electric vehicles can overcome the laws of thermodynamics, chemistry, physics and economic gravity.
Disclosure: Author is a former director of Axion Power International (AXPW.OB) and holds a substantial long position in its common stock.