Thread by @ChiefExecCCC

This is drivel from the Sunday Telegraph, who have spent the last two weeks trying to argue that we’d made a glaring mistake in our Net Zero report from 2019.

In reality we are meticulous. And the economy costs of electric vehicles have fallen since 2019.
telegraph.co.uk/politics/2021/…

The first question a reasonable person might ask is “why would @theCCCuk try to hide the cost?”. We’ve never done so before, and exposing the costs of decarbonisation in some areas is an important part of finding the right strategy to tackle those costs and bring them down.

This article concerns working level spreadsheets from 2019 that were released earlier this year, following a freedom of information request.

You can find them on our website: theccc.org.uk/about/transpar…

These internal spreadsheets are the numbers behind our analysis.
We go to great lengths to explain our analysis in our reports, so we had worries about releasing them because they weren’t prepared for publication.

Nevertheless, we released them “as is”. We have nothing to hide.

Now the amateur sleuths at the GWPF have been trawling them for errors. They have alighted on our analysis of the EV transition, and - surprise - they have not understood how the analysis was undertaken. And they don’t (or won’t) understand standard economic appraisal techniques.

They spotted that we have a £13k small electric vehicle in our 2019 modelling. ‘Aha! But a small EV on the market today is much more expensive. The CCC have misled you’, they say.

Let me explain why this is nonsense.

Our analysis is based on a detailed bottom-up model of the costs of each component of an EV and an ICE vehicle, produced for us by Ricardo-AEA. The model takes the different components that make up each vehicle type and forms estimates of the production cost of each vehicle.

The model shows that EVs are currently more expensive to produce than ICEs (consistent with the conclusions of other industry commentators), but that this difference will fall as battery prices drop, production increases and is streamlined, and demand grows.

Our analysis divides cars by their size, with car size categories based on the categories used by the Society for Motor Manufacturers and Traders (the industry body). Broadly we categorise them as ‘small’, ‘medium’ and ‘large’ cars.

Battery prices are a big part of the cost of an EV and they are falling fast – Bloomberg New Energy Finance estimates suggest they’ve come down by around 30% since 2018, the year from which our data was sourced.

We actually underestimated the potential for cost falls in 2019.

That rapid fall in battery prices has had an effect that we didn’t forecast in 2019. As batteries have become cheaper, the auto manufacturers have installed bigger batteries in EVs, extending their range.

So the ‘small’ category of car in our 2019 analysis doesn’t exist today.

We updated our thinking to match the current market conditions in our Sixth Carbon Budget analysis. You can see the difference here in these two tables.

In effect, a small EV today is in our medium category from 2019. Likewise, a medium EV today is in our large 2019 category.

Trying to compare the purchase price of a small EV today with our analysis from 2019 is comparing apples to oranges. There are no small EVs for sale today, that match the categorisation we used in 2019.

To be clear: this is a good thing. EVs are going further on a single charge.

And the second issue with this false comparison is with the comparison of purchase price to the numbers in this spreadsheet.

Remember, our analysis considers the components in the car. It’s trying to build a direct comparison between the costs of producing an ICE car and an EV.

This is known as the ‘social cost’, excluding taxes and profit margins. It is the standard ‘green book’ appraisal method. It allows us to look at the real differences in cost before cross-economy transfers like tax and shareholder returns.

So comparing our 2019 £13k social cost for a ‘small EV’ (a model which doesn’t exist for sale today thanks to technological progress) with the purchase price of a small EV on the forecourt today (which we would have categorised as a ‘medium’ in 2019) is just fatuous.

For our Sixth Carbon Budget analysis, this bottom-up model was updated based on the latest data available. It showed, once again, a short-term cost to the EV transition, as EVs today are more expensive than conventional vehicles and as charging infrastructure is installed.

Our latest assessment is that these in-year capital costs will be quickly offset by the savings afforded by these vehicles (due to fuel efficiency and reduced maintenance), leading to a net saving to society from 2028 onwards.

Over the whole period out to 2050, our latest assessment is that the EV transition will provide a cost *saving* to the UK economy of around £275bn, *up* from £170bn in our 2019 Net Zero analysis.

So the costs have *fallen* since we did our work on the Net Zero report.

And finally, for our Sixth Carbon Budget analysis, we also produced an estimate of vehicle costs to the private individual – i.e. the amount it would actually cost to purchase the vehicle.

These match pretty closely what’s for sale today.

This is the metric that you would need to use to do a true comparison of the CCC cost assumptions against what is happening in the market today.

But the Sunday Telegraph didn’t do that…