Securing the Green Transition

Securing the Green Transition

Subject: Environment

Context-

• Electric vehicles (EVs) are key in the global quest to decarbonise.
• In India, which also faces serious air pollution issues, the transition to EVs is critical.
• However, there is a China-size risk in the supply chain for electric vehicles.

EV supply chain globally-

• According to a recent report by the International Energy Association, every part of the EV supply chain is highly concentrated in China.
  • The first stage of the supply chain is the key minerals required for batteries, namely lithium, nickel, cobalt and graphite.
    • In graphite, China has an 80 per cent share of global mining output.
    • In cobalt, the Democratic Republic of Congo mines two-thirds of the global supply and Chinese companies control a big share of that country’s mining.
    • Lithium and nickel are not concentrated in China, Australia mines over 50 per cent of the world’s lithium and Indonesia mines 35 per cent of global nickel.
    • Overall, this is a far greater concentration than in oil and gas.
• The next stage of the supply chain is the processing of ore/mineral concentrate into metal. China dominates across the board.
  • Globally, over 60 per cent of lithium processing, over 70 per cent of cobalt processing, 80 per cent of graphite processing and about 40 percent of nickel processing takes place in China.
• The next stage is cell components-
  • China produces two-thirds of global anodes and three-fourths of cathodes.
  • The only other producing countries of note are South Korea and
  • In the Battery cells, China has a 70 per cent share.
  • In EVs themselves, China has a share of around 50 per cent in global production.
  • Europe is a distant second with 25 per cent.
  • The US is a small player in the EV supply chain, producing only 10 per cent of vehicles and containing just 7 per cent of battery production capacity.

China is now the biggest spender on climate/energy transition.

• According to a report by Bloomberg’s New Energy Fund (NEF), in 2021, out of a total global spend of $750 billion in climate-related investments (90 per cent of which went into renewable energy and electric transport), China alone spent $266 billion.
• The US was a distant second with $114 billion.
• The major countries of Europe combined would equal the US.
• India was in 7th place with $14 billion invested.
• However, while almost 40 per cent of Chinese and US spending was on EVs, more than 95 per cent of India’s spending is on renewable energy.
• In Europe, about 75- 80 per cent of the spending is on EVs, which is why it leads the US in this sector.
• In India, EVs have not received sufficient investment.

A two-pronged strategy is needed for India-

• First, on the minerals and materials.
  • India has been slow at acquiring overseas mines of these critical minerals.
  • A recently formed government venture, KABIL, which is a JV between three minerals and metals PSUs, is tasked with the job of identifying and acquiring overseas mines.
  • A public-private partnership is vital.
• Second, the vibrant start-up ecosystem must be leveraged because it is more likely to be innovative than legacy firms.

Electric Vehicles and India

• About two in every hundred cars sold today are powered by electricity with EV sales for the year 2020 reaching 2.1 million.
• The global EV fleet totalled 8.0 million in 2020 with EVs accounting for 1% of the global vehicle stock and 2.6% of global car sales.
• Falling battery costs and rising performance efficiencies are also fueling the demand for EVs globally.

Need for Electric Vehicles:

• India is in need of a transportation revolution.
• The current trajectory of adding ever more cars running on expensive imported fuel and cluttering up already overcrowded cities suffering from infrastructure bottlenecks and intense air pollution is unfeasible.
• The transition to electric mobility is a promising global strategy for decarbonising the transport sector.

India’s Support of EVs:

• India is among a handful of countries that support the global EV30@30 campaign, which aims for at least 30% new vehicle sales to be electric by 2030.
• India’s advocacy of five elements for climate change — “Panchamrit” — at the COP26 in Glasgow is a commitment to the same.
• Various ideas were espoused by India at the Glasgow summit, such as renewable energy catering to 50% of India’s energy needs, reducing carbon emission by 1 billion tonnes by 2030 and achieving net zero by 2070.
• The government of India has taken various measures to develop and promote the EV ecosystem in the country such as:
• The remodelled Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme
• Production-Linked Incentive (PLI) scheme for Advanced Chemistry Cell (ACC) for the supplier side
• The recently launched PLI scheme for Auto and Automotive Components for manufacturers of electric vehicles.