Carbon Neutrality
by 2050

November 2022

Executive Summary
On November 12, 2021, the COP26 Joint Declaration (or Glasgow Climate Pact) established the goalof achieving carbon neutrality by 2050. OICA and its member associations – representing the global
automotive industry – appreciate the importance of this goal and are working diligently to contribute to
the decarbonization of road transport in support of this broader objective. We also recognize no single
government policy or industry commitment alone will achieve this ambitious goal. We must work
collaboratively – at all levels of government and across all economic sectors – to identify the range ofapproaches necessary to establish sustainable pathways to carbon neutrality across sectors and theunique circumstances of individual nations around the world.
The auto industry understands the important role it plays in decarbonizing road transport as a way tohelp achieve this broader goal. According to the International Energy Agency 1, transport as a wholecontributed in 2020 to 37 percent of the global CO2 emissions from end-use sectors. It is also
generally recognized that road transport (cars, trucks and buses) accounts for about 75 percent of thetotal transport sector.
To that end, the automotive industry is planning to invest more than $1 trillion globally by 2030 2 tohelp facilitate the transition to an electrified future (including battery, plug-in hybrid and fuel cellelectric vehicles), while simultaneously continuing to innovate on the broad array of powertraintechnologies necessary to meet the broad and diverse needs of a global market. This includes, forexample, internal combustion engines (ICE) with low carbon or carbon neutral fuels, such ashydrogen, bioethanol, biomethane, biodiesel, HVO (Hydrotreated Vegetable Oil), and synthetic fuels.
This is valid for all vehicle segments.
While the long-term trajectory certainly embraces a shift toward electrification, the industry
recognizes, at present, no single technology is capable of achieving carbon neutrality across theglobal automotive industry. Individual nations need the flexibility to adopt multiple technologies andpolicies best suited to their unique realities, including geography, socioeconomic, and geopoliticalconsiderations. Technology neutral and multiple approaches provide more practical and sustainable
pathways to carbon neutrality for all nations.

1 International Energy Agency - https://www.iea.org/topics/transport

2 https://www.reuters.com/technology/exclusive-automakers-double-spending-evs-batteries-12-trillion-by-2030-2022-10-21/

The auto industry as represented by OICA, therefore, encourages a collective embrace of thefollowing principles: As we work toward carbon neutrality and rapid reduction of carbon emissions, electrification
will play a leading role especially for the developed countries. This transition to electrification,
however, will require a comprehensive plan that takes the present market realities, the carbon
neutrality of electricity generation, consumers’ optimal choices into consideration, as well as
the on-going investment and innovation in ICE technologies and low carbon fuels including forthe existing vehicles in the field.
 Individual countries should proceed toward the achievement of carbon neutrality byimplementing practical and sustainable technological and policy measures tailored to their
specific circumstances.
 Essential to achieving automotive carbon neutrality are comprehensive national industrial andenergy policies with multiple pathways for energy security that effectively promote thecompetitiveness of the automobile industry.

The Path to Electrification
In many of the largest automotive markets, widespread consumer and commercial adoption of EVs 3
is important for achieving goals of long-term carbon neutrality from the transportation sector. To that
end, motor vehicle manufacturers are working toward greenhouse gas (GHG) reductions byincreasing the number of EVs and alternative fuel vehicles on the road, and with ongoing efficiency
improvements for ICE vehicles.
As a result, the world is on the cusp of achieving a remarkable milestone of 20 million EVs on theroad, up from just one million in 2016. To further illustrate the pace of this transition, sales of electriccars (including fully electric and plug-in hybrids) doubled in 2021 to a new record of 6.6 million.
Despite global supply chain challenges, “sales kept rising into 2022, with 2 million electric cars soldworldwide in the first quarter, up by three-quarters from the same period a year earlier. The numberof electric cars on the world’s roads by the end of 2021 was about 16.5 million, triple the amount in2018.”4
3 For the purposes of this document, all references to EVs include battery, plug-in hybrid, and fuel cell electric vehicles unless otherwise

specified

4 International Energy Agency, Press Release, “Global electric car sales have continued their strong growth in 2022 after breaking records

last year,” 2022-05-23

Despite this tremendous progress and building momentum, EVs still represent only a fraction of themore than 1.4 billion vehicles on the road worldwide. 5 Likewise, the increasing pace of EV sales are
not the same in every country around the world.

EV SALES BY COUNTRY, 2021
China

Germany

U.S.

UK

FranceNorwayItaly

SwedenSouth Korea

Netherlands

Rest of Europe

6

Rest of the World

6

3,519,054

695,657

326,990

631,152

322,043

153,699

141,615

138,771

119,402

97,282469,930

313,129

EV MARKET SHARE BY COUNTRY, 2021

Market Share (percent)

100

90

Market Share

World Average

80
70
60
50
40
30
20
10
0

5 Colin McKerracher, “The World's Electric Vehicle Fleet Will Soon Surpass 20 Million,” Bloomberg, 2022-04-08
6 Govind Bhutada, “Visualizing 10 Years of Global EV Sales by Country,” 2022-08-08

In order to maximize EV acceptance and adoption, policymakers and industry investments must focus
on improving vehicle affordability, increasing consumer awareness and confidence, developing vital
charging and refueling infrastructure, accelerate decarbonization of the electric grid, and building
reliable and resilient supply chains to support the manufacture of EVs.
Electrical charging and hydrogen fueling infrastructure: All stakeholders must work together on
public policy efforts, such as incentives, grants, rebates and other mechanisms, along with private
investment, to spur significant electric charging and hydrogen refueling infrastructure development tosupport three key areas: homes (especially multi-unit dwellings and areas with higher residential
densities), workplaces and highway and other public locations, with an emphasis on those lacking
public transport.
Existing research shows charging needs will vary substantially by country and region, housing stock,average distance travelled, population density and EV mix. 7 For example, home charging is currently
the most important charging option in most countries for the current type of EV customers and willremain a critical option where conditions support home charging. Other countries, regions, andcustomer segments are seeing an increasing importance of public and workplace charging. Further,individual countries will have different demands for DC fast charging depending on geography,
demographics and other factors. In short, there is no set playbook for optimizing charging
infrastructure and individual nations must make decisions based on their national interests andneeds.” 8Regardless, achieving the right charging infrastructure mix will require a massive and coordinatedinvestment between the public and private sectors. For example, according to Alix Partners, it isestimated that around a $300 billion infrastructure investment would be required by 2030 to support
automaker-projected growth in EV parc globally. 9 According to IEA, globally there were nearly 1.8
million publicly accessible charging points in 2021, a third of which were fast chargers. In addition, thenumber of fast chargers installed in 2021 (500,000) was greater than the total number of global
chargers available in 2017. 10 In other words, while progress has been made over the last five years,
there is still significant investment necessary to meet the needs of a diverse set of EV drivers.

7 International Energy Agency, Global EV Outlook 2022, 2022

8 Simon Árpád Funkea, Frances Spreib, Till Gnanna, Patrick Plötza, “How much charging infrastructure do electric vehicles need?,”Transportation
Research
Part D: Transport and Environment, 20199 Michael Wayland, “Biden wants to build a national EV charging system under $2 trillion infrastructure plan, but it won’t be easy,” CNBC,
2021-03-31
10 International Energy Agency, Global EV Outlook 2022, 2022

Consumer Acceptance and Adoption: In regions where electrification will play a dominant role inachieving carbon neutrality, sustained government incentives will be essential to encourage
consumers to replace their vehicles with EV models. Traditionally, the complete replacement of theexisting fleets of vehicles takes decades, if not longer (a minimum of 15 to 20 years if not more). In
order to accelerate this process – especially as new, more expensive technologies scale and mature– incentives will be necessary in order to at least partly offset the additional cost to the consumer.
Otherwise, if consumers are forced to keep their older vehicles longer than they should, the net effectof electrification will be negative.

NUMBER OF PUBLICLY AVAILABLE ELECTRIC VEHICLE CHARGERS(EVSE) IN 2021, BY MAJOR COUNTRY AND TYPE
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000

0

Slow Charging (<22 Kilowatts of Power)

Fast Charging (>22 Kilowatts of Power)

While the auto sector has made significant progress driving down battery and fuel cell costs, further
research and development (R&D) investments will be needed to realize “cost, utility, and convenience
parity” between EVs and their internal combustion counterparts. EVs currently cost significantly more
to produce than equivalent gasoline cars or trucks. This divide grows when considering “convenienceand utility parity,” which requires larger batteries to support longer EV ranges commensurate with
consumer expectations and needs in certain nations.

In sum, both industry and government have a role to play in increasing the availability andaffordability of new vehicle technologies.
R&D: To increase EV market share, the focus should not be simply on strengthening fuel-efficiency
and other regulations. These must be complemented by additional government policies that facilitate
the transition to an electric future, including support for critical R&D. Automakers have committed$255 billion to EV R&D activities in 2023. 11
In order to increase EV penetration and provide EV owners the same cost benefits as those provided
by internal combustion engines, governments must continue to work proactively with industry to
identify and support critical R&D opportunities, programs and initiatives. Despite tremendous
progress in advancing EV technologies, R&D remains essential to addressing challenges from EV
battery-pack prices to secure stable access to critical components and supply chains.
Fuel Cell: In addition to battery and plug-in EVs, hydrogen fuel cell EVs represent an important
technology on the path to decarbonizing road transportation. This is particularly important for heavy
duty vehicles, where battery technology may present challenges related to weight, cost and charging.
Hydrogen should be priced at affordable levels, and hydrogen fuels made more conveniently
available to users. Accordingly, government support measures are needed in the areas of fuel celland hydrogen storage R&D, and hydrogen production and station infrastructure development. For
example, in South Korea the government has committed substantial resources to both hydrogenenergy projects, as well as the establishment of a public-private hydrogen-powered FCEV market. 12
This type of public and private sector collaboration and investment reflects the type of national
strategy and technology flexibility necessary to achieve broader decarbonization goals.
Mineral Extraction and Supply Chain: Realizing widescale adoption of EVs will require asubstantial increase in the identification and responsible extraction of resources critical to the battery
supply chain, as well as battery end-of-life policies that minimize environmental harm and support
robust and resilient supply chains for battery materials.
According to the IEA, “demand for EV batteries will increase from around 340 GWh today, to over3500 GWh by 2030.”13 Others place this estimate higher – up to 9,300 GWh by 2030, a more than1600 percent increase from 2020 levels. 14 This will apply tremendous pressure on existing supply
11 Alix Partners, “Betting Big in Electrification and Autonomous,” AlixPartners Global Automotive Outlook 201812 https://www.macquarie.com/au/en/perspectives/a-clean-start-south-korea-embraces-its-hydrogen-future.htm
13 International Energy Agency, “Global Supply Chains of EV Batteries,” 7/22

14 Govind Bhutada, “Mapped: EV Battery Manufacturing Capacity, by Region,” Visual Capitalist, 2022-02-28

chains for critical minerals, components and materials. For example, some estimates suggest that
global demand for lithium from battery factories “could hit 3 million tonnes by 2030, requiring a
massive increase over the 82,000 tonnes produced in 2020. 15 Benchmark Minerals Intelligenceestimates that over 300 new mines for graphite, lithium, nickel and cobalt will need to be built over the
next decade to meet EV and energy storage battery demands. 16
As a result of surging demand and tight supply chains, “[p]rices of raw materials such as cobalt,
lithium and nickel have surged. In May 2022, lithium prices were over seven times higher than at thestart of 2021.”17
18

18

Grid Reliability/Decarbonizing: Decarbonization of road transport is firmly linked to decarbonizationof the electric grid (both for BEVs as well as FCEVs). Thus, realizing the full potential of EVs and theircharging infrastructure will require careful but urgent consideration and evaluation of upgrades toelectric grid infrastructure, as well as the accelerated transition to clean and renewable sources ofenergy. A critical factor in the widescale adoption of EVs is ensuring the grid infrastructure is clean,reliable, resilient, affordable and able to accommodate various charging needs (not limited only tolight-duty vehicles). We must work collaboratively to understand how widespread adoption of EVs will
15 Govind Bhutada, “Mapped: EV Battery Manufacturing Capacity, by Region,” Visual Capitalist, 2022-02-28

16 Benchmark Mineral Intelligence, “More Than 300 New Mines Required To Meet Battery Demand by 2035,” 9/22

17 International Energy Agency, Press Release, “Global Electric Car Sales Have Continued Their Strong Growth In 2022 After Breaking

Records Last Year,” 2022-05-23
18 International Energy Agency, “Global Supply Chains of EV Batteries,” 7/22

increase demand on existing infrastructure and plan for the necessary investments required tomaintain grid reliability.
Further, realizing the benefits of electric and fuel cell vehicles makes decarbonizing the electric gridincreasingly important. In order to truly achieve the bold ambition of COP26, especiallydecarbonization of road transport, the power used to charge EVs will need to come from clean andrenewable sources – while also maintaining the reliability necessary to meet demand.

A Global Approach – A Path to Decarbonization for All Nations
In the near-to-medium-term, full-scale electrification may not offer a realistic or practical path for manynations around the world.
For example, Brazil is the world’s largest producer of sugarcane ethanol and second largest soybean
producer. Brazil has pioneered the use of energy crops as biofuel for the transport sector since the1970’s (Barros, 2019; CONAB, 2021). 19 Biofuels have been proven to emit significantly lower
greenhouse gas (GHG) emissions than petroleum-based fuels. 20 In 2021, 84 percent of new lightvehicles sold in Brazil contained flex fuel engines. 21 In contrast, EVs accounted for only 0.14 percent
of vehicles sold and remain limited due to concerns around affordability, infrastructure and otherfactors. 22 Due to the long distances to be travelled in Brazil and the limited size of its electrical
recharging grid, the electrification solution for the heavy-duty vehicles segment is a complex
endeavor, bringing the use of biofuels (biodiesel, biomethane and HVO) to the center of the country’s
decarbonization strategy.
For example, according to a scenario analysis contracted by the Japanese Automobile Manufacturers
Association 23, as shown in the graph below, it will be possible for CO2 emissions reduction in the
global road transport sector to be in line with the IPCC’s 1.5℃ climate scenarios for 2050, if
electrification of powertrains (including BEVs, PHEVs, HEVs and FCEVs), is combined with the
supply by 2050 of carbon-neutral automotive fuels (synthetic fuels and biofuels) at a level equivalent
to approximately 30 percent of global automotive fuel consumption in 2020. Also, at least some
supply of those fuels for in-use vehicles will be essential for advanced economies to achieve 2050
carbon neutrality in the road transport sector.

19 https://www.sciencedirect.com/science/article/pii/S266678942200006X

20 U.S. Department of Energy, “Ethanol vs. Petroleum-Based Fuel Carbon Emissions,” 6/23/22
21 Electric cars in Brazil - May 2022
22 Id.

23 Transitioning to Carbon Neutrality by 2050: A Scenario-Based Analysis

Even in economically advantaged nations, depending on geography or other factors, during atransition phase, more fuel-efficient ICE vehicles, hybrid vehicles and plug-in hybrid vehicles may
offer a good alternative. In short, plug-in hybrid vehicles could offer the best of both worlds: a zeroemission driving mode for daily use in urban or semi-urban environments, as well as a good range forlonger distances. They also do not necessitate huge charging infrastructure investments.
Fuel carbon neutrality, including the use of low-carbon or even carbon-neutral fuels in ICE-powered
vehicles, contributes to reduce CO2 from in-use vehicles, and therefore is a key technology thatmerits R&D and government support. These clean[er] fuels must be user-friendly in terms of price,
quality, and ready availability and coupled with more efficient ICE technologies can provide significant
emissions benefits, particularly when an EV may not be an option for a customer.
Hydrogen in ICE vehicles may well offer a viable alternative in some markets, especially for heavy
vehicles and other specific use cases. Several manufacturers are actively considering this technology
in heavy vehicles and, in some cases, for light vehicles. Whether hydrogen is issued in a fuel cell or inan ICE, the carbon emissions at the tailpipe are zero.

Additional Considerations
Two key issues for achieving automotive carbon neutrality: Although EVs do not emit CO2 while in use, CO2 is emitted during the manufacture,
distribution, recycling and disposal process. Carbon neutrality for motor vehicles cannot be
achieved without CO2 emissions reductions throughout their life cycle.
 A critical and related issue is that notwithstanding the widely varied energy policies and powergeneration mixes existing among countries, a fair and internationally harmonized method of
evaluating CO2 emissions based on LCA will need to be adopted.
It should also be noted that carbon neutrality of electricity generation must be achieved by thesubstitution of thermoelectric plants fueled with coal, oil, and fossil fuels by hydro, solar, wind andother carbon zero plants. No solution will really be effective from the point of view of global warming,
if the whole energy chain, from well to wheel is disregarded.

Conclusion
No single government policy or industry commitment will achieve the ambitious goal of carbon
neutrality by 2050. We must work collaboratively – at all levels of government and across allindustries – to identify the suite of approaches necessary to establish sustainable pathways
to carbon neutrality across sectors that recognize and take into account the economic,
geographic and cultural realities of individual nations around the world. OICA and its members
are committed to supporting this goal. We believe electrification will play a leading role in thistransition, however it is currently not the most appropriate technology for all nations.
Electrification requires a sustained commitment and collaboration to adopt supporting policies andinfrastructure. Where other technologies or fuels may be more suitable, individual countries should
proceed towards the achievement of carbon neutrality by implementing practical and sustainable
technological and policy measures tailored to their specific circumstances. Finally, essential toachieving automotive carbon neutrality are comprehensive national industrial and energy policies that
effectively promote the competitiveness of the automobile industry and accelerate decarbonization ofelectric grids as well as ensure reliable infrastructure.