Nations in the Global South risk becoming a dumping ground for used internal combustion engine (ICE) vehicles, unless governments adopt policies to seize the benefits of the electric vehicle revolution, warns a report from the financial think tank Carbon Tracker published on Friday, November 17, 2023.
If governments in the Global South lock themselves into using ICE vehicles, they will remain dependent on fossil fuel imports. Currently, nations in Africa spend $80 billion a year on transport fuels, 2.5% of the continent’s GDP.
But countries can break this dependency by setting policies that support a move to fully electric battery-powered vehicles (BEVs). This shift would save nations in Asia, Africa, and South America over $100 billion annually on fuel imports, cut their trade deficits, end their dependency on offshore refining, and create new jobs in industries of the future.
As the chart below shows, nations which lack refining capacity to meet domestic transport fuel demand experience significant capital and foreign exchange outflow. If countries pivot their fleet to electric, these vehicles could be powered inexpensively using domestically generated renewable power, assuming the correct policy environment and industrial strategy is in place.
Ben Scott, Senior Automotive Analyst at Carbon Tracker and author of the report, said: “The Global South’s reliance on internal combustion engine vehicles, and dependency on fossil fuels, holds back the region economically. They can boost their domestic economies by incentivising a shift to electric vehicles and kick start a positive cycle that brings faster electrification, a smart grid, and increased production and use of renewable energy. All these changes will reduce dependence on foreign nations.”
The new report, titled: “Driving Change: How Electric Vehicles can rise in the Global South”, recommends several policies governments can use to incentivise a shift to BEVs and creation of a domestic BEV sector – Used Car Import Bans, Age Restrictions, Emission Standards, Age Based Excise Duties, eliminating tariffs on electric cars, & supporting domestic production, sales and recycling of BEVs.
“Driving Change” highlights how a switch to BEVs can open new economic opportunities in the BEV value chain, including mineral mining, manufacturing, sales, logistics, servicing, infrastructure creation, and material recycling.
Scott said: “As the Global North phases out internal combustion engine vehicle sales, some automakers may turn to the Global South to sell these older models, locking the region into fossil fuel dependency. Now is not the time for countries in Africa, Asia, and South America to throw a lifeline to companies who want to maintain the status quo.”