ISSN 2330-717X

Electric Mobility For Jobs, Growth And Sustainability – Analysis

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By Himani Jain and Aravind Harikumar

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Millions of human lives were lost to the COVID-19 pandemic. Worse, it has laid a devastating blow to trade and economic growth, pushing millions into unemployment and poverty. Economic disruption caused by the pandemic and increasing extreme climatic events urgently demand decoupling economic growth from resource use and carbon emissions. Such inclusive green growth policies can bring millions out of poverty while achieving climate targets.

Electric vehicle (EV) transition in the transport sector is often cited as a green growth policy.  The transport sector is responsible for about 24 percent of global CO2 emissions from fuel combustion. EVs certainly have a role to play in mitigating these emissions. For many countries, EVs also address the twin issues of air pollution and energy security. The EV transition has tremendous potential to contribute to economic growth as well. The Council on Energy, Environment and Water’s (CEEW) 2020 report has quantified that 30 percent share of EVs in new sales by 2030 in India can increase job creation, improve energy security, reduce greenhouse gas (GHG) and pollutant emissions and increase domestic value addition while reducing travel costs for users. However, to ensure it is on the path of green growth, a sustainable e-mobility policy must be effective, efficient, just and inclusive.

Effective targets

The CEEW study on the transition to electric mobility also shows that the purported benefits of electrifying passenger transport are overturned in the case of high private vehicle ownership, leading to even higher energy demand than usual. The best case for energy security, GHG savings and air pollution is when EV penetration is combined with increased adoption of public transport and shared mobility. Another study for India has estimated that EV supply push policies deliver moderate co-benefits vis-a-vis air pollution and energy security indicators but have an insignificant effect on GHG savings. Regardless of vehicle technology, it is beyond doubt that high private vehicle ownership will lead to costly congestion in cities. Policymakers and general civil society must understand that the transition is necessary. Still, it is not sufficient to usher in an era of sustainable mobility. Side-tracking public transport and non-motorised transport-related policies will be disastrous for these policy goals at the cost of EVs.

Cost Efficiency

Cost efficiencies of e-mobility policies around the world are questionable. Global evidence indicates that for improving cost efficiencies, e-mobility policies should focus their efforts on making EVs accessible to specific consumer segments rather than spending resources to alter the technology prematurely to earn acceptance by mainstream consumers. Consider India’s e-mobility incentive scheme, Faster Adoption and Manufacturing of Electric Vehicles Phase-II (FAME-II). Each rupee spent on incentivising electric three-wheelers is eleven times more cost-effective than electric buses in reducing CO2 emissions. Buses are the most efficient modes of transport in terms of emissions per passenger per kilometre. However, about 40 percent of the EV incentive scheme is aimed towards making this most efficient mode even more efficient. India needs a lot more buses rather than a handful of expensive e-buses. The incentive for one e-bus can be used to incentivise 100 e-autos. Reallocation of resources to incentivise niche segments like auto-rickshaws can substantially increase overall cost efficiencies of purchase incentive schemes like FAME-II.  Similarly, e-mobility policies in India must target other niche segments like commercial applications of two-wheelersintermediate paratransit (IPT) segments, and urban freight for developing sustainable e-mobility ecosystems.

Just and equitable transition

CEEW analysis shows that EV transition can lead to job loss in the oil production sector, value add loss and job loss in the internal combustion engine (ICE) manufacturing sector. Also, it will cause a considerable loss for the state and central governments in terms of revenue earned from fuel taxes. In a post-pandemic developing country like India, a just and equitable transition is of utmost priority. These trade-offs from EV transition can be balanced through careful and pre-emptive planning. Other than EV manufacturing itself, value addition and jobs can be created through new economic activities like battery recycling, giga factories, and EV charging infrastructure. Similarly, early planning for alternative revenue streams for the centre and states can manage the revenue trade-offs.

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Inclusive growth

The pandemic and associated mobility restrictions have dealt a heavy blow on the earnings of cab/auto-rickshaw drivers, delivery agents and other transport workers. The transport sector employs approximately 10 million people in India, in private bus and tourist taxi operations, and 4 million workers in intermediate paratransit services (like autos, tempos, e-rickshaws, maxi-cabs etc.), which faced 30 percent job loss due to COVID. The Indian Federation of App-based Transport Workers (IFAT) found that even after easing of lockdown restrictions in June 2020, 70 percent of the app-based delivery workers claimed to have zero net earnings at the end of their shift. Rising petrol and diesel prices in India have further pinched the pockets of all transport workers.

With low operating costs, EVs have the potential to improve the net earnings of these groups. According to Ministry of Road Transport and Highways (MoRTH) data (as of 16th Nov), 1.6 percent and 5.8 percent of total passenger and goods three-wheelers registered in 2021 are EVs. Of the total three-wheelers registered (including e-rickshaws) during the same period, 40 percent are electric. This is happening because niche groups value specific characteristics (like low operational costs) of EVs. Other such groups like cab drivers, small goods vehicle drivers, last-mile delivery drivers etc., can improve their net earnings with the proper support for transitioning to electric. Designing e-mobility policies to include these transport workers in the transition would ensure that it is on a green growth pathway.

Capacity conundrum

So long as resources and time are finite, decision-makers must decide how best to use them.  Local governments need to enable strategic interventions at the earliest. Fast-tracking a weak project will waste resources and time, so local leaders must prioritise well. Capacity management will remain a cornerstone of organisational efficiency and planning. There are 0.23 planners per lakh population in India in contrast to 38 per lakh population in the UK. The lack of multidisciplinary teams and urban planners in the state planning machinery remains a severe gap in India. Systemic capacity gaps, as discussed below, are over and above the government institutional capacity.

A) Improve Human Resource

A recent NITI Aayog (2021) report highlights that 65 percent of the 7,933 urban settlements in India do not have any master plan. Half of the sanctioned posts for town planners in state planning departments are vacant. There are just 49 educational institutions in India that provide courses in urban planning or allied specialisations but will likely fall short in delivering 0.3 million new urban and transport planners needed by 2030. Addressing this gap is essential for the effective design and implementation of sustainable mobility, compact cities, and climate-proof critical transport infrastructure. Improved human resource capacity can enable regional and urban local bodies (ULBs) in transport infrastructure planning, establishing cooperatives, providing a guarantee, technical support, soft skills training, EV procurement and maintenance.

B) Improve coordination between agencies

There is an assortment of stakeholders involved at all levels of e-mobility related policies. Coordination between them is of vital importance for achieving policy goals. Legislation and strengthening of Metropolitan Transport Authorities (MTA) in Kerala are trying to address this at the regional level. MTAs are also pivotal in facilitating integrated transport systems at the city level. With the rapid growth in medium and small cities, there is an increasing need for regional planning to incorporate these towns and surrounding rural areas with the economic hub-city. This will ensure the uptake of EVs, charging infrastructure and related technical capacity infusion at scale.

C) Strengthen Policy finance – Urban Transport Fund

Even after enactment, MTAs still face limitations regarding regulatory powers, finances and human resources. Establishing Urban Transport Funds (UTF) can broadly empower MTAs. The revenue collection at the local level can leverage tools like congestion, carbon and parking pricing, land value capture etc. Such devices can help implement disincentives for old and dirty vehicle segments while nudging the transition to cleaner modes of transport (bus, cycle, EVs, etc.).

D) Facilitate Consumer Finance

A recent NITI Aayog report (2021) shows that high financing costs and uncertainty over long-term economics, including EVs’ resale value, remain a concern for Financial Institutions (FIs). This translates to increased interest and insurance rates for EV consumers. The interest rates can be as high as 20 percent for electric two-wheelers. Targeted policy steps like the inclusion of EVs in priority sector lending guidelines and interest subvention for EVs can address this to some extent. Robust and open EV performance data repositories can facilitate FIs to evaluate their risks better and lower interest rates on EVs. Civil society organisations and think tanks have a crucial role in bringing out neutral and transparent EV performance data through scientific research studies.

E) Provide the right charging solution

Private or home focussed charging solutions are best suited for sparsely populated countries with private parking spaces. Public charging solutions are crucial for the adoption of EVs by the niche segments discussed above. For these transport workers, charging time during operational hours has an opportunity cost of rides lost. Fast charging and battery swapping solutions are lucrative options for mitigating this drawback. Battery swapping solutions also have the potential to reduce purchase costs by delinking the battery from the vehicle. Electricity distributors, regulators and local governments have an indispensable role in facilitating such solutions. State and local policies can support solutions for the niche segments through real estate provision and subsidised electricity.

F) Facilitate innovative business models

Innovative business models like cooperative society/company paratransit drivers can help boost EV adoption through collective bargains on vehicle purchase, loans interests and guarantees, setting charging infra, and managing to park. This also improves coordination and negotiation, lobbying or advocacy with government agencies. Other business models like subscription and renting/leasing of EVs can be promoted through policy incentives at state and local levels.

Conclusion

In a post-pandemic world, this technology transition in mobility also can generate jobs on green growth pathways. However, to ensure that e-mobility policies are effectively on a ‘green’ and ‘growth’ trajectory, it is essential to ensure that they are efficient, just and inclusive. A sustainable e-mobility policy must pre-emptively plan for trade-offs while making sure that the most vulnerable benefit the most from it. A successful transition from such policies requires bridging gaps associated with human resource, financing, infrastructure, and ease of business.

The views expressed above belong to the author(s).

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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