Analysis: What will the impact of the Paris Agreement on Climate Change be for the motor industry?

Photo credit: Michael Loke via Flickr.

By Anders Lorenzen

Last year, world leaders representing all 195 UN member countries agreed upon a world first global deal to combat our climate crisis; the Paris Agreement on Climate Change.

The deal has been widely welcomed across a variety of sectors; NGOs, business, governments, academics and the media all agree it is an important first step in tackling our climate crisis and sends a strong signal that fossil fuels belong to the past and a clean energy future lies ahead.

But what impact will this have on the motor industry?

While we’re racing ahead in our goals to replace the fossil fuels used to generate electricity with energy from renewables and nuclear, we have yet to make a dent in our dependency on fossil fuels in the transport sector. Progress has been made in making trucks, buses, vans and cars more efficient, but the uptake of electric and hydrogen fuel cells powered vehicles is painstakingly slow.

The Organization of the Petroleum Exporting Countries (OPEC) does not appear concerned that the Agreement will have an impact the motor or oil industry; in fact, they expect oil usage and the sale of petrol cars to increase. In their 2015 World Oil Outlook report, they predict that the fossil fuel share of the global energy market will remain dominant at 78% until at least 2040. They also believe that oil will be central to the global energy demand over the next 25 years, that global demand for crude oil will rise, not decline, and that oil output by 2040 will be a staggering 110 million barrels a day, up from today’s 80 million barrels.

Another factor to consider is the lack of meaningful policies around for consumers to acquire electric / hybrid cars and cleaner petrol cars. In the UK, just last year the government removed electric cars incentives. Across the Atlantic, however, things are different, and US President Barack Obama recently unveiled new, ambitious efficiency standards for the motor industry, which mean consumers will pay less at the pump as cars and trucks will be required to be able to drive further on the litre.

Another key factor is that public’s view and trust in the petrol car industry is starting to deteriorate. This trend partly centers on concerns about climate change but also air pollution; the recent Volkswagen emission cheating scandal did nothing to remedy this and other big car makers have recently become embroiled in similar upsets.

As technologies for cleaner vehicles improve and consumer concerns about climate change and air pollution increase, a gradual shift towards low carbon vehicles will likely follow. And if, in the wake of the Paris Agreement, national governments were to enact policies accelerating a shift to cleaner vehicles, such as electric car incentives or a tax on carbon / petrol, the Paris Agreement may well play a part in shifting the motor industry towards an electric, hybrid and hydrogen fuel cells engine future.

However, Ambrose Evans-Pritchard, International Business Editor of The Daily Telegraph, recently produced an analysis of the electric car industry, in which he indicated that OPEC has underestimated the consumer interest in electric cars and, in fact, faces an enormous threat from them. He referenced recent impressive electric car stats in Norway, where electric vehicles now account for 16% of cars on the road. And also pointed out that the world’s largest carmaker, Toyota, is focusing hugely on developing hydrogen fuel cell, alongside the world’s two largest technology companies, Apple and Google.

But are these clean vehicle technologies developing fast enough? How do we ensure that the millions of new cars which enter the roads of the developing world in countries like China and India become increasingly clean? And is the trend moving too fast for some and might we see a backlash from existing petrol car owners refusing to obey car restrictions in city centers and pay petrol taxes? Answers to these questions will become evident over time.

For now, the industry is watching and consumers are in a jubilant mood as the low oil price has meant cheap petrol. How long this will last is anyone’s guess.

Related news:

World leaders agree on historic deal to combat dangerous climate change

Opinion: The Paris Agreement: Let’s get to work

Opinion: Three ways Paris climate agreement will expand global investment in clean energy

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