Speaker 1: Hi, Mark, We are here today discussing lithium ion battery
Speaker 1: manufacturing emissions, which is a note that can be found
Speaker 1: on the Bloomberg terminal at benof Go or at benf
Speaker 1: dot com. This particular research note is something I have
Speaker 1: been waiting for some time now. Several months back, I
Speaker 1: was test driving electric vehicles as I was thinking about
Speaker 1: buying one, and I at the same time as being
Speaker 1: teased pretty relentlessly, i might add, by a friend of mine,
Speaker 1: and he kept telling me that I was looking to
Speaker 1: buy a coal car, so like one of those cars
Speaker 1: that's converted from a gasoline to a coal fired car. No,
Speaker 1: not at all, This at a thing. Yeah, yeah, look
Speaker 1: it up on YouTube. Well no, actually he meant that
Speaker 1: because an electric vehicle is actually plugged into the grid,
Speaker 1: and oftentimes you find coal in the grid, that that
Speaker 1: is ultimately what was powering it. There is really a
Speaker 1: lack of information out there regarding electric vehicles and their
Speaker 1: emissions when you're taking the battery manufacturing part into consideration.
Speaker 1: So this is B and F chance to clear everything up.
Speaker 1: And of course all of this is taking place with
Speaker 1: air pollution in cities as a part of the backdrop.
Speaker 1: So what if electric vehicles are actually just moving the
Speaker 1: emissions elsewhere and they're not coming out of your tail pipe,
Speaker 1: but they're still polluting and have the greenhouse gases with
Speaker 1: them as well. Well. Fortunately we have James Frith energy
Speaker 1: storage analysts and Logan Goldie Scott, who is the head
Speaker 1: of the NEF Energy Storage team. They're going to tell
Speaker 1: us more about what is actually happening with battery emissions
Speaker 1: and hopefully demystify a bunch of this for us. Please
Speaker 1: note that benef does not provide investment strategy advice, and
Speaker 1: we can hear a full disclaimer at the end of
Speaker 1: the show. James Logan, thank you for joining us today.
Speaker 1: Thanks for having us. Dana, Thanks Dana. So people that
Speaker 1: own electric vehicles, are they really doing right by the environment? Yeah, definitely.
Speaker 1: We found in this work that electric vehicle produces about
Speaker 1: half the CEO two emissions over its lifetime compared to
Speaker 1: an internal combustion engine VIC when you're looking at the
Speaker 1: same vehicle segments, and that's for vehicles produced and used
Speaker 1: in Germany. If you look at vehicles that are used
Speaker 1: on other grids in the world, actually those emissions dropped massively.
Speaker 1: In Sweden, for example, where the electricity grid there produces
Speaker 1: about sixteen grams of c O two per killor hour
Speaker 1: of energy produced. The lifetime emissions of an electric vehicle
Speaker 1: about fifty three times lower than that of a standard
Speaker 1: small internal combustion engine vehicle in Europe. Okay, let's unpack
Speaker 1: that just a bit. So you're saying that location matters
Speaker 1: for the lifetime emissions of these cars. Yeah, certainly for
Speaker 1: electric vehicles, it's so important you have the emissions associated
Speaker 1: with vehicle manufacturing, with the battery manufacturing, and then crucially
Speaker 1: for electric vehicles, with their use over the lifetime. So
Speaker 1: if you think about an electric vehicle, it charges from
Speaker 1: the grid, so those grid emissions have a big impact.
Speaker 1: Whereas for an internal combustion engine vehicle, you're using petrol
Speaker 1: or diesel, So it doesn't matter where in the world
Speaker 1: you are, those emissions are going to be the same.
Speaker 1: It's just going to change by whatever engine you're using.
Speaker 1: And so just just thinking about about use case and
Speaker 1: just to put some put some numbers on it. If
Speaker 1: you're like, on average, emissions from an electric vehicle will
Speaker 1: be around lower than emissions from an internal combustion engine.
Speaker 1: But if you go to a country. If you're driving
Speaker 1: your car in China, for instance, which is a much
Speaker 1: more coal on the grid that is only around so
Speaker 1: location can be incredibly impactful here. Now, is that just
Speaker 1: taking into consideration when you're actually using the vehicle and
Speaker 1: tailpipe emissions? Because in this note you're really getting into
Speaker 1: a lot of parts of the supply chain in the
Speaker 1: manufacturing process. What does it include there? That's that's only
Speaker 1: when we're using the vehicle. That what stood out with
Speaker 1: this note was really how we could track from extraction
Speaker 1: of the raw materials all the way through to manufacturing,
Speaker 1: manufacturing the components, the logistics associated with that, and then
Speaker 1: manufacturing the batteries themselves. And what we found overall is
Speaker 1: that even once you account for that, battery electric vehicles
Speaker 1: are better from an emission standpoint then are equivalent internal
Speaker 1: combustion engine Let's isolate the manufacturing part, since we've already
Speaker 1: talked about tail pipe emissions in the manufacturing process of
Speaker 1: the battery. How big a part of the overall vehicles
Speaker 1: life cycle emissions is this? It's actually a lot smaller
Speaker 1: than people think. So some people quote it being about
Speaker 1: of the vehicle's lifetime emissions, but actually we found that
Speaker 1: it's closer to ten percent. Ten percent's not a ton,
Speaker 1: but definitely moves the needle. So what's the biggest input
Speaker 1: that's going to make the battery high or low? From
Speaker 1: an emission standpoint, there's a couple of things to look at.
Speaker 1: So the chemistry that's being used has an impact, but
Speaker 1: also the conditions you use during that manufacturing process. They
Speaker 1: can range hugely depending on what outcome you're trying to produce.
Speaker 1: If you want a high power cell, for example, is
Speaker 1: used in hybrid electric vehicles, the emissions associated with that
Speaker 1: are larger than if you're using an energy cell as
Speaker 1: used in a battery electric vehicle. Oh, so the hybrid
Speaker 1: vehicles are actually those batteries themselves are worse because you
Speaker 1: would think they're smaller. So therefore, from an emission standpoint,
Speaker 1: it's a win. You can kind of touched on it there.
Speaker 1: They are smaller, so the total emissions from that is
Speaker 1: going to be less than for a battery electric vehicle.
Speaker 1: But if you look on a on a killer what
Speaker 1: our basis, so a killer what hour of hybrid electric
Speaker 1: vehicle pack is more polluting than a kilo what hour
Speaker 1: of battery electric vehicle pack. There are a lot of
Speaker 1: different battery pack types and compositions, so who's the biggest
Speaker 1: and who's the smallest in terms of emission size. So
Speaker 1: definitely the lowest polluting ones that we came across were
Speaker 1: lithium and phosphate based batteries, and these are the type
Speaker 1: that are commonly used in electric buses, whereas the types
Speaker 1: that used in electric vehicles are increasingly using more nickel
Speaker 1: in those batteries, and some of the emissions associated with
Speaker 1: extracting and processing nickel is quite high, so that increases
Speaker 1: the emissions of those trees. So nickel's the worst offender
Speaker 1: and all of this it's not great for it. There
Speaker 1: are some other considerations around aluminium and copper, but let's
Speaker 1: say nickel for the moment, it isn't nickel demand for
Speaker 1: the battery growing. What's replacing cobalt, right, Yeah, precisely. So
Speaker 1: there is more and more nickel going into these chemistries.
Speaker 1: So the emissions are increasing, but there's also work that's
Speaker 1: being done by the battery manufacturers to reduce those emissions,
Speaker 1: particularly in the manufacturing process. We're seeing companies like north Vault,
Speaker 1: who are based in Sweden. They're trying to become a
Speaker 1: net zero emission manufacturer. Should I know. North Vault there
Speaker 1: are a startup at the moment, but they've been making
Speaker 1: big waves recently in the battery world. So they've signed
Speaker 1: a joint venture with with VW and they recently secured
Speaker 1: a billion in funding from the European Investment Bank amongst
Speaker 1: other people. And they're going to be Europe's first gigga
Speaker 1: scale homegrown battery manufacturer and based in Sweden because of
Speaker 1: the emissions, so their flagship plant will be based in
Speaker 1: Sweden and it's those lower emissions is one of the
Speaker 1: reasons why they chose to base the factory there. They've
Speaker 1: also going to have at least one more plant in
Speaker 1: Germany at the moment and that will be paired up
Speaker 1: with VW. Just on the previous point around looking at
Speaker 1: technologies and how they compare from an emission standpoint, it's
Speaker 1: just so important to look at company strategies as well.
Speaker 1: So automakers, battery manufacturers, they are all investing heavily in
Speaker 1: their supply chain sustainability and so regardless of the technology
Speaker 1: of choice. Actually we're seeing a huge amount of progress
Speaker 1: on this front, but it depends by company. Almost more
Speaker 1: than anything else. Why are they incentive to care about sustainability?
Speaker 1: Is it from a pr and attracting consumer standpoint or
Speaker 1: more attracting investor standpoint? I think probably more more of
Speaker 1: the latter. They're they're looking at sustainability in order to
Speaker 1: improve efficiency UM and mitigate climate and transition risk. And
Speaker 1: this is something that was seeing increasingly at the forefront
Speaker 1: of investor as minds um and coming up on stead
Speaker 1: of on shareholders calls fairly frequently within the automotive and
Speaker 1: battery space, and and and much broader as well. I
Speaker 1: think i'd add to that as well. When we're thinking
Speaker 1: about this from the public perception point of view as well,
Speaker 1: the question that we had at the start, are internal
Speaker 1: combustion engine vehicles more or less polluting than electric vehicles?
Speaker 1: I don't want to buy an electric vehicle if I
Speaker 1: think it's it's not as it's not better for the
Speaker 1: environment than in the internal combustion engine vehicle. And so
Speaker 1: manufacturers are also listening to what the public says, especially
Speaker 1: when at this point in time they are more expensive.
Speaker 1: The cheapest electric vehicle you can get is still way
Speaker 1: more expensive than the cheapest internal combustion engine you can get.
Speaker 1: So if you're paying a premium, you want to pay
Speaker 1: a premium for something that's going to hopefully achieve what
Speaker 1: you think in your mind you're trying to achieve, which
Speaker 1: is lower emissions. Just on that front, though, where at
Speaker 1: the moment that is that is true for most for
Speaker 1: most vehicle segments. The recent success of models such as
Speaker 1: Tesla's Model three, which came out in this sort of
Speaker 1: a second half of eighteen, have demonstrated that appetite for
Speaker 1: for a more competitive, for a more sort of a
Speaker 1: for a more competitive sort of vehicle in consumers minds
Speaker 1: um and when when we look at battery technologies and
Speaker 1: battery prices going forward, actually on an upfront basis, we
Speaker 1: believe that you start seeing electric vehicles actually become more
Speaker 1: attractive and a lower cost option than internal combustion engine
Speaker 1: vehicles depending on country, depending on segment. But by by
Speaker 1: the mid early to mid twenties, and so we're only
Speaker 1: a few years away from that description of yours just
Speaker 1: just no longer no longer being correct. So these batteries
Speaker 1: are getting cheaper and they're getting more range as well,
Speaker 1: which assumes then that the battery packs are getting a
Speaker 1: bit larger. Does that have a big impact on the
Speaker 1: emissions profile. So we'll have an impact on the emissions profile.
Speaker 1: But I think if we're looking for the future. The
Speaker 1: other thing that we've got to bring up here, of course,
Speaker 1: is that actually grids around the world are getting greener.
Speaker 1: There's CEO two emissions pecular hour of energy produced are falling.
Speaker 1: And so when you look at the use of an
Speaker 1: electric vehicle over say a ten year lifetime, actually every
Speaker 1: time you charge it, almost the energy going into charging
Speaker 1: that battery is cleaner. And it's similar for manufacturing. As
Speaker 1: the batteries get bigger again, the grids will have got greener,
Speaker 1: and therefore the emissions associated with the battery and the
Speaker 1: vehicle will have fallen. By we expect wind and solar
Speaker 1: to make up of total generation globally, and that's up
Speaker 1: for less than ten percent or so today, and that
Speaker 1: just speaks to that change. Change to James's outline, my
Speaker 1: question really revolves around recycling. Is it going to end
Speaker 1: up being cheaper or better or worse from an emission
Speaker 1: standpoint to actually look at these existing batteries and do
Speaker 1: something with them at the end of life, or are
Speaker 1: they going to become power walls in our houses. So
Speaker 1: I think that is a really interesting question and the
Speaker 1: answer isn't clear. So recycling battery is clearly going to
Speaker 1: be vital in the future because we don't want to
Speaker 1: put them into landfills. But they might have a second life.
Speaker 1: As you point out, they may be using your house beforehand,
Speaker 1: for example, and if you do that, if you use
Speaker 1: them in the second life application, you're spreading the emissions
Speaker 1: with manufacturing that battery over more years of use, so
Speaker 1: you're reducing the average per cycle energy use. I think
Speaker 1: the honest there is on companies that are developing second
Speaker 1: life second life projects to prove that this really works
Speaker 1: in practice. In theory, this is this is a really
Speaker 1: nice idea, but at the moment we've yet to yet
Speaker 1: to see this deployed commercially. I think the other thing
Speaker 1: to add on that as well, when we look at recycling,
Speaker 1: one of the tricky things there is that actually the
Speaker 1: economics are heavily tied to the price of commodities when
Speaker 1: you're doing that recycling. So if cobalt or lithium is
Speaker 1: very cheap, then actually maybe it doesn't make sense to
Speaker 1: recycle that battery at that time, and so a second
Speaker 1: life application might be more beneficial. My question when I
Speaker 1: looked there at a figure on your exact sum was, Okay,
Speaker 1: so Poland has high graded emissions intensity, but do they
Speaker 1: really manufactured batteries? There really full four electric vehicles for
Speaker 1: electric vehicles because I hear LG and I hear phones
Speaker 1: individual consumer electronics, and actually that's a it's such an
Speaker 1: interesting overlap because I think you guys pointed out at
Speaker 1: a previous summit that there is this intersection between consumer
Speaker 1: electronics and our phones and our computers, and then energy
Speaker 1: storage on the grid and then vehicles. You have all
Speaker 1: of these really big companies who've got skin in the
Speaker 1: game on making this work. So they are really caring
Speaker 1: a about increasing the amount of supply and be on
Speaker 1: decreasing the cost of batteries. But are they playing a
Speaker 1: part in that though as well? Are they driving emissions
Speaker 1: down just by improving their manufacturing process. I think one
Speaker 1: of the things to point out is that they are
Speaker 1: driving emissions down by improving the manufacturing process. But there's
Speaker 1: also the option for manufacturers are perhaps located in areas
Speaker 1: with dirtier grids to use things like p p as
Speaker 1: or unsighte renewable generation to reduce their CEO two emissions.
Speaker 1: So let's say hypothetically you're sitting on a dirty grid
Speaker 1: and you're making this battery, but more of the supply
Speaker 1: is near you, so you don't have emissions as high
Speaker 1: associated from actually transporting things to you. Because I think
Speaker 1: you pointed out and here at one point that seven
Speaker 1: percent of the emissions for batteries manufactured in China can
Speaker 1: just come from physically getting the raw materials to them.
Speaker 1: Are we talking about a delta of enough that it
Speaker 1: would make sense to localize and manufacturing even on a
Speaker 1: dirty grid, or is it better to be on a
Speaker 1: clean grid and then have to transport things to you?
Speaker 1: So I think there's a couple of different questions and
Speaker 1: points to make. Certainly that transportation emissions can be quite high,
Speaker 1: but it really depends what you're transporting. So in that example,
Speaker 1: we were looking at when companies transport what's called concentrates,
Speaker 1: So this is material that's been mind but it hasn't
Speaker 1: been turned into a metal yet. And when you're transporting
Speaker 1: that material from say Australia to China or maybe somewhere
Speaker 1: in Africa to China, what you find is that concentrate
Speaker 1: only contains maybe six percent of the material you actually
Speaker 1: want and then material that you don't need, and so
Speaker 1: the emissions associated with transporting that can be quite high.
Speaker 1: But if you were to process that material on site,
Speaker 1: So using the example of Australia, if you were to
Speaker 1: mine or in the ground and convert it to the
Speaker 1: lithium form that you need, such as the lithium hydroxide
Speaker 1: and transport that lithium hydroxide to China, actually those transportation
Speaker 1: emissions are gonna be a lot lower than if you're
Speaker 1: transporting that concentrated material. Is pilots are going to play
Speaker 1: a factor in any of this. Policy has the potential
Speaker 1: to be incredibly important on this front, where at the moment,
Speaker 1: around three quarters of battery manufacturing capacity is located located
Speaker 1: in China, and what we expect to see in what
Speaker 1: we're beginning to see the early signs of his battery
Speaker 1: manufacturing moving much closer to demand centers such as here
Speaker 1: in Europe or in the United States. A big part
Speaker 1: of that is likely to be policy where the European
Speaker 1: Commission and policymakers across the world are increasingly aware and
Speaker 1: concerned around life cycle emissions, not just tail pipe permissions,
Speaker 1: and they would like manufacturers to prove that they have
Speaker 1: acceptable life cycle emissions to be able to participate in
Speaker 1: the market, because otherwise it would defeat the purpose. And
Speaker 1: so it's not unreasonable to expect that the European Commission
Speaker 1: or other policymakers will actually demand their manufacturers meet increasingly
Speaker 1: stringent life cycle emission standards in order to operate in
Speaker 1: a in a market, and that could incentivize manufacturers to
Speaker 1: set up plants in Europe rather than rather than incur
Speaker 1: these additional sort of carbon costs by having to import
Speaker 1: into that into the trade block. I think that could
Speaker 1: be interesting as well. When we're talking about manufacturing in Europe,
Speaker 1: then how the country or the region that you choose
Speaker 1: to manufacturing affects the price if you're having to buy
Speaker 1: carbon credits to offset some of the emissions that you're producing.
Speaker 1: On top of that as well, different countries within the
Speaker 1: region will have different electricity costs. So again using the
Speaker 1: example of Sweden, because they have a lot of hydro there,
Speaker 1: electricity is quite cheap in comparisons somewhere like Poland or
Speaker 1: Germany where the costs are higher. So doing this study
Speaker 1: put you into a debate. I mean, it puts you
Speaker 1: in a discussion with academic groups you know, and other
Speaker 1: organizations around the world. Usually when these groups do these studies,
Speaker 1: they'll do another one. So what's next for you guys
Speaker 1: in this line of research. I think the most important
Speaker 1: thing in terms of in terms of this publication and
Speaker 1: what we found when we reviewed all the other literature
Speaker 1: was actually the lack of transparency was really holding holding
Speaker 1: back the dialogue. Now, what we have done here um
Speaker 1: is we we will be releasing the model over over
Speaker 1: the next month or so, because, as we've talked about,
Speaker 1: there were so many different things that can change the
Speaker 1: ultimate emissions, whether it's the manufacturing process, or the country
Speaker 1: of location or the technology. So by releasing the model
Speaker 1: to our clients, we want to be able to let
Speaker 1: them make those decisions and understand the sensitivity. And I
Speaker 1: think that that's a big that that is a big
Speaker 1: shift to what we've seen so far in the literature.
Speaker 1: So the next step is to get the model out there.
Speaker 1: Huh exactly. So, James, we better wrap up the podcast
Speaker 1: and send you back to your task. James Logan, thanks
Speaker 1: for joining us, Thanks for having US, thanks very much.
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