The great electrification crusade is getting complicated. The first emissions-free day has yet to dawn but the costs and contradictions of getting there are starting to accumulate.
The end result of electrification is that demand for electricity goes up. Like, d’uh. Growing competition for an essential product has a way of causing friction. In this case, big friction. As in pitting friends against friends. Causing rifts between allies. Even bringing down governments. Norway’s governing coalition collapsed in January on that very issue.
Norway is a rich country. Its sovereign wealth fund is valued at $2.5 trillion. It made $320 billion in profit last year alone. The fund grew fat thanks to the vast income it derives from North Sea oil production. Despite getting its money from fossil fuels, Norway positions itself as a progressive country dedicated to cleaning up the world’s emissions problem. Oslo has set a goal of ensuring 100 per cent of new vehicles sold this year are electric, and is almost there: 96 per cent of sales in January were for zero-emission vehicles. Norway’s population of 5.6 million is equivalent to British Columbia. Imagine B.C. with $2.5 trillion in the bank and an income of $320 billion. You’d buy an electric car too. Probably a big one.
Unfortunately, filling the roadways with electric vehicles means you need a lot of electricity to run them. In addition to being blessed with oil, Norway is in the happy position of getting almost all its electric power from nice, clean hydro resources. Problem is, the same climate issues that spur electrification make it sometimes difficult to deliver the juice. Norwegian utilities blamed climate change when a drought in 2022 reduced water reserves to a 20-year low; this month Parliament voted to open almost 400 previously protected rivers to development in a move that infuriated activists and environmentalists. Nonetheless, electricity bills have been going through the roof. Rates vary widely between northern and southern regions, with Norwegians in some parts of the country now figuring it costs more than C$6 to take a shower.
Upset over the crushing costs, voters have been putting immense pressure on the government. The problem isn’t all due to EV vehicles or even domestic demand: under complex agreements with the U.K. and European Union, Norway exports power to Denmark, Sweden, Germany and other European countries. In January one of the two parties in the coalition government, reacting to the public furor, announced it could no longer live with that deal.
“Enough is enough, this is the limit” declared Trygve Slagsvold Vedum, the finance minister and leader of one of the coalition partners. Norway needs to “take back control” of its resources, he said, restricting exports to its electricity-hungry EU allies. The tiff comes at a particularly poor moment as Europe struggles to cope with ramifications of the Ukraine war, the new U.S. administration and political uncertainty in Germany. It also leaves the remaining party of Prime Minister Jonas Gahr Støre to try and govern without a majority until elections in September.
While Norway argues, state governments in the U.S. are finding new ways to extract money from electric vehicle owners to make up for the decline in revenue from gasoline taxes. The New York Times reported that at least 39 states have introduced annual fees on EVs, in some cases making the cost of driving electric higher than the cost of driving gas guzzlers. Given that EVs still represent a tiny portion of U.S. vehicles, critics complain it’s a money grab based on politicians’ fear of jacking up pump prices. In Vermont, the Times reports, EV owners face registration charges double those of gas guzzlers.
China, meanwhile, is leading the world in EV production, but also leading in producing and consuming coal to a degree that nullifies gains made from renewables. According to the International Energy Agency, China consumes 30 per cent more coal than the rest of the world put together and is expected to continue boosting production to meet growing demand for power due, it says, to “the electrification of services previously provided by other fuels, such as mobility and industrial heat, and emerging industries” such as artificial intelligence with it’s massive energy demands.
Beijing is pouring money into nuclear plants, solar power and wind projects as well, but demand is so great that coal set another record in 2024. Similar situations in India, Vietnam and Indonesia reflect the determination to put priority on local economies, but China remains by far the planet’s king of coal.
It’s also fast establishing itself as the global leader in churning out low-cost EVs. An IEA report noted that while worldwide EV sales grew by 35 per cent in 2023, six in 10 of new registrations were in China. Beijing has been pushing hard to expand the market via exports to Europe, which — desperate to protect its own struggling auto industry — responded in October by imposing tariffs on Chinese car companies. European countries now find themselves trying to meet ambitious climate goals while blocking buyers from the cheaper emission-free vehicles needed to reach the target.
It’s unlikely the pressures are going to abate. A document published by the World Economic Forum notes that China accounted for almost 70 per cent of EV production in 2023, an increase of more than 13,000 per cent in just six years. Neither Canada nor the U.S. yet represents a large market for Chinese vehicles, both have imposed 100 per cent tariffs, while continuing to promote the climate benefits EVs might produce.
While governments remain steadfast in advocating the vast potential represented by the shift to alternatives, they’ve yet to sort out how to deal with the pressures entailed in pitting climate gains against economic pressures and international rivalries. It took just six years for Canada’s carbon tax, initially treated as a relatively affordable and generally accepted effort to do our bit, to become a project deemed unfair and over priced, disowned by all the leading candidates to replace Justin Trudeau as prime minister. Doing good is always popular until the bills pile up.
National Post