Course:EOSC311/2023/Neev's Project

Introduction

Electronic Vehicles are gradually becoming talking points in households. This fast-emerging industry has been trending as people are motivated to cut down on their usage of Fossil Fuels. This has been mostly because of the fact that climate change is becoming a massive threat to our existence as we continue to increase our carbon footprint. On the other side of this coin is the substantial extractive industry that contributes to global warming through its perpetual supply of petroleum products such as crude oil, gasoline, heating oil, diesel, propane, and other liquids including biofuels and natural gas liquids. Through this project, I aim to understand the survivability and future of the Canadian Extractive Industry amidst the measures taken by society and the governments of the world to minimize the use of fossil fuels in order to combat climate change.

Statement of Connection

Through this project, I plan to explore this topic to understand and explain the impacts of upcoming developments in the automobile industry with respect to EVs. Governments of the world are planning to phase out the use of Petroleum and its alternative fuels in order to increase the use of greener alternatives of fuel such as electricity. My goal is to understand the potential impacts of phasing out of these fuels on the finances and survival of the Petroleum Industry. Another perspective to explore would be the capacity of renewable sources of energy and if that industry would have a prospering future. Exhaustive research is required to determine if this topic would be viable for this course.

Net Zero Coalition of Governments by 2050

What is net zero?

Net zero refers to cutting greenhouse gas emissions from the atmosphere to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere, by oceans and forests etc.

Why is net zero important?

Scientifically, to avert the worst impacts of climate change and maintain life on our planet, global temperature increase needs to be limited to 1.5°C above pre-industrial levels. To keep global warming less than 1.5°C  – as called for in the Paris Agreement – emissions need to be reduced by 45% by 2030 and achieve net zero by the year 2050.

How can net zero be achieved?

One of the toughest tasks humanity has ever had to face is the transition to a net-zero world. It demands nothing less than a radical change in the ways that we produce, consume, and travel. Approximately three-quarters of today's greenhouse gas emissions come from the energy sector, which also holds the key to preventing the worst effects of climate change. Carbon emissions would be significantly reduced if electricity from renewable sources, such as wind or solar, were to replace dirty coal, gas and oil-fired power.

What is the world trying to do to reach net zero?

More than 70 countries, including the biggest polluters – China, the United States, and the European Union – have set a net-zero target, covering about 76% of global emissions. The following statistics display the contributions that are being made in today's date. Below are the participating organizations that have joined the Race to Zero, pledging to take rigorous, immediate action to halve global emissions by 2030.

• Over 3,000 businesses and financial institutions are working with the Science-Based Targets Initiative to reduce their emissions in line with climate science.
• More than 1000 cities have decided to take a number of measures to reduce carbon emissions. This can be done through urban planning keeping in mind the renewable energy sources and monitoring the GHG emission levels by creating specific targets.
• Over 1000 educational institutions which are massive energy consumers due to their state-of-the-art infrastructures have pledged to take several measures to use renewable energy sources and reduce their carbon emission levels.
• Over 400 financial institutions have also pledged to make their contributions to reduce carbon emissions with the use of renewable sources of energy to power their infrastructure.

Policies Proposed by United Nations

Net-Zero Emissions

Kyoto Protocol

Countries began negotiating in 1995 to improve the global response to climate change, and the Kyoto Protocol was adopted two years later. The protocol imposes strict legal obligations on developed nations to reduce their emissions. The Kyoto Protocol's initial commitment period was from 2008 to 2012. From 2013 until 2020, the second commitment period was in effect. There are currently 192 Parties to the Protocol and 198 Parties to the Convention.

Paris Agreement

The main objective of the Paris Agreement is to strengthen the international response to the threat posed by climate change by limiting the rise in global temperature this century to well below 2 degrees Celsius and pursuing efforts to further limit the temperature increase to 1.5 degrees Celsius. 175 international leaders signed the Paris Agreement on April 22, 2016, on the occasion of Earth Day, at the UN headquarters in New York. This was by far the greatest number of nations to ever sign a treaty on a single day. The Paris Agreement has been ratified by 194 nations as of today.

Secretary Kerry Delivers Remarks at the Event on the UN Paris Agreement Entry Into Force

Glasgow Climate Pact

Over 40,000 people registered to attend the UN Climate Change Conference in Glasgow (COP26), including 120 world leaders, 22,274 party delegates, 14,124 observers, and 3,886 media representatives. The science, the solutions, the political will to act, and the obvious signs of action were all the topics of the world for two weeks.

The outcome of COP26, the Glasgow Climate Pact, is the result of two weeks of intense discussions involving almost 200 countries, months of laborious formal and informal work, and nearly two years of ongoing participation both physically and online.

Current Market for Electric Vehicles

According to market researchers, the overall share of Electric Cars has gone through an explosive growth spell in recent years. The market share has increased tremendously from 4% in 2020 to 14% in 2022 and is expected to grow further to 18% in the following year. “Electric vehicles are one of the driving forces in the new global energy economy that is rapidly emerging – and they are bringing about a historic transformation of the car manufacturing industry worldwide,” said IEA Executive Director Fatih Birol, about the future of EVs. It is safe to say that these trends could have significant implications for global oil demand. The following image shows the projected market for electric cars compared to their combustion engine counterparts.

Electric Vehicles in Canada

According to government reports, there has been a record sale of more than 86,000 EVs registered in the year 2021. This makes up about 5.3% of registrations of all vehicles in the automobile industry. In comparison to this, the numbers from previous years were significantly lower. There were about 56,000 EVs registered in the year 2019 (about 2.9% of all registrations) and around 19,000 registrations in 2017 (1% of total registrations). Keeping this growth trajectory intact, the market showed a record registration of 26,000+ EVs for the first quarter of 2022 (7.7% of total registrations). Battery electric vehicles (BEVs) make up roughly 75% of new electric vehicle registrations, with the rest going to plug-in hybrid electric vehicles (PHEVs). The Canadian government considers both Battery electric vehicles and Plug-in hybrid electric vehicles under one category called ZEVs or Zero-emission vehicles. All non-combustion engine vehicles fall under this category.

Let us look at the leading companies in the automobile industry concerning Electric Vehicles. The top 10 brands of automobiles in terms of preferences and demand are:

1. Tesla
2. Ford
3. General Motors
4. Hyundai/Kia
5. Volkswagen/Audi/Porsche
6. Nissan
7. BMW
8. Mercedes-Benz
9. Rivian
10. Lucid

Tesla is currently the leading company for electric vehicles in Canada and worldwide. Tesla was able to buck the trend and increase sales to almost 1 million units in 2021 during a year in which the majority of automakers had double-digit sales decreases. The two most popular electric vehicles (EVs) in Canada last year were the Model 3 and Model Y. Motor Illustrated data shows that sales of the Model 3 climbed by 14.3% year over year (YoY) to over 12,800. Even when gas-powered automobiles are taken into consideration, that was enough to place it as the fifth best-selling vehicle in Canada. The only cheap vehicles to outsell the high-end electric sedan were the Kia Forte, Hyundai Elantra, Toyota Corolla, and Honda Civic. Although it didn't sell as many, the Model Y has gained appeal in Canada. In 2021, there will be about 6,400 Model Ys. The table below shows the annual sales revenue numbers for Tesla Inc. There has been a massive spike in the last 5 years in terms of both, sales amount as well as percentage increase (YoY). This growth can be correlated with the emerging strategies of institutions around the globe to minimize their carbon footprints.

Tesla Logo

Tesla Annual Sales Revenue

Year	Revenue	Change
2023 (TTM)	$86.03 B	5.61%
2022	$81.46 B	51.35%
2021	$53.82 B	70.67%
2020	$31.53 B	28.31%
2019	$24.57 B	14.52%
2018	$21.46 B	82.51%
2017	$11.75 B	67.98%
2016	$7.00 B	73.01%
2015	$4.04 B	26.5%
2014	$3.19 B	58.85%
2013	$2.01 B	387.23%
2012	$0.41 B	102.34%
2011	$0.20 B	74.95%
2010	$0.11 B	4.29%
2009	$0.11 B

Electric vehicle sales target

Canadian Government Policies

Government policies that provide subsidies on purchases of EVs contribute immensely to these increasing sales numbers. The Canadian Federal government as well as the Provincial government in several states have such policies on purchases of ZEVs. All Canadians qualify for up to $5,000 toward the purchase of a fully electric or plug-in hybrid electric vehicle as a part of the iZEV Incentive Program. Several States such as British Columbia, Quebec and Nova Scotia have similar provincial subsidies as well which are applicable. Policies and subsidies such as these drive citizens to purchase emission-free vehicles which would further contribute towards achieving net-zero.

Extractive Industry - Canada

Canada's oil and mining companies are the key driver of the Canadian economy. Canadian mining and mineral exploration corporations alone are responsible for about half of the world's activity in this industry, with stakes in more than 8,000 sites both domestically and abroad in more than 100 nations. These businesses—many of which are small and medium-sized —have developed a well-known name throughout the world thanks to Canadian expertise in exploration, engineering, extraction, development, and financial management. The extractive sector, which includes oil and gas and mining companies, generated $174 billion in exports for Canada in 2013, accounting for over 39 percent of total domestic exports. In the mining sector alone, nearly 3,200 suppliers of equipment and services support the industry. The financial sector is also affected economically by the mining industry. In particular, the Toronto Stock Exchange and the TSX Venture Exchange handled more global mining equity financings than any other stock exchange in the world between 2008 and 2012, accounting for nearly 70% of all worldwide mining equity financings and 39% of all global mining equity financings. The financial stability of the mining industry supports both private pension plans and the Canada Pension Plan.

EVs in Extractive Industry

The extractive industry does not solely produce petroleum products such as diesel and natural gas but also produces metals and other valuable geologic materials that we use in everyday life. One such valuable material is the chemical element lithium, which is used in the production of batteries in electric devices. Taking this into account, we cannot conclude that the extractive industry will fail to prosper with the growing demand for electric vehicles. Several crucial raw materials needed to produce components of electric vehicles include nickel, lithium, cobalt, copper, titanium, zinc and other minerals. The extraction of these minerals can only be achieved by diligently investing in the mining industry.

It is said that the demand for miners to decrease emissions and address climate risk is increasing via a variety of stakeholders, which may have a detrimental effect on the company's bottom line. Extreme weather occurrences brought on by climate change and the dangers of switching to a low-carbon economy represent the financial risk. Experts identify that with the growing numbers in the manufacturing of electric vehicles, the extractive industry will face favourable consequences. The following section discusses this at length.

Future Prospects for Extraction Industry

Amidst the increasing motivation of populations across the world to reduce their carbon footprints by switching towards EVs, the future of extractive industries is looking bright. There have been numerous reports concerning investment strategies in the mining sector with the upcoming spike in EV production. Multiple analysts have encouraged investment in the mining sector which is edging towards a "once-in-a-generation opportunity", according to industry insiders. Justin Trudeau's government plans to invest $ 3.8 billion over the next decade in what is known as Canada's first critical mineral strategy. The recommended steps that can be taken by the extractive industry to utilize the incoming liquidity, involve the commitment of 300 mines to combat global EV demand. By 2035, according to Benchmark Mineral Intelligence's estimates, the demand for graphite, lithium, nickel, and cobalt would require the opening of at least 384 additional mines. The company estimates that approximately 336 additional mines would be required if battery materials can be recycled in sufficient numbers. Steve LeVine, the editor of The Electric, said "At the end of the decade, the desire is to make between 25 million and 40 million EVs, if you count the Chinese [industry] and Tesla".

Another government policy which could potentially prove favourable to the Canadian economy is the US electric vehicle tax credit. This mandates electric vehicles and their batteries be made in North America putting Canada's EV battery supply chain in the spotlight. According to research by Clean Energy Canada, a domestic EV battery supply chain could support up to 250,000 employees by 2030 and contribute C$48 billion annually to the Canadian economy.

Conclusion / Your Evaluation of the Connections

Electronic vehicles (EVs) are becoming increasingly popular due to the growing concern about climate change and the extraction industry's contribution to global warming. This project aimed to understand the survival and future of the Canadian Extractive Industry amidst measures taken by society and governments to minimize the use of fossil fuels. The Canadian Extractive Industry is also facing challenges in transitioning to a net-zero world. To achieve net zero, emissions need to be reduced by 45% by 2030 and achieve net zero by 2050. Governments of the world, along with the United Nations have implemented several protocols and strategies for its fulfilment. Electric vehicles are currently the driving force for the global energy economy and are transforming the car manufacturing industry worldwide. The explosive growth of EV sales of an automobile giant such as Tesla provides us with an insight into the projected growth in their demand in the next decade. Canadian government policies, including federal and provincial subsidies, are significantly fueling these electric vehicle sales in the country. To suffice this growing trend of EV sales, the production companies will be under immense pressure and in turn put more pressure on raw material suppliers, in this case, the extractive industry. The financial risks associated with transitioning to a low-carbon economy and extreme weather occurrences are significant, but experts predict that the extractive industry will face favourable consequences with the increasing manufacturing of electric vehicles. This is because the extraction of key minerals like lithium is crucial for producing components such as the batteries of electric vehicles. Government actions such as hefty investments in the mining sector can have massive positive implications for the Canadian economy in the future. It could also benefit from the US electric vehicle tax credit, which mandates the production of electric vehicles and batteries in North America. According to researchers, a domestic EV battery supply chain could support up to 250,000 employees by 2030 and contribute C$48 billion annually to the Canadian economy. In summary, the future of the Canadian extractive industry, despite growing efforts to reduce the use of petroleum products, seems bright enough due to the fulfilment of the electric vehicle market demand.

References

This Earth Science resource was created by Course:EOSC311.