EU Court of Auditors: Europe in the Electric Car Dilemma - Can We Turn the Corner?

The European Court of Auditors has once again raised the alarm and is urging governments to revise their currently inadequate strategy to meet CO2 targets in the automotive sector. The aim is to raise awareness that the CO2 reduction targets, the current industry policy that still strongly protects combustion engines, and the goal of affordable mobility for all are neither compatible nor realistic. Reducing or completely eliminating car emissions is a central element of the European climate strategy, which aims to reduce net emissions to zero by 2050, according to the report.

To achieve this, CO2 emissions from combustion engine cars must be reduced. Furthermore, options for alternative fuels must be explored. Finally, battery-powered electric vehicles must reach the mass market. In recent years, the European Court of Auditors has published a series of reports indicating that the first goal has so far been missed, the second – as seen with biofuels – does not appear viable on a large scale, and the third could become costly for both the industry and consumers in the EU.

Reducing car emissions: easier said than done

While the EU has made progress in reducing greenhouse gas emissions – it has not done so in the transport sector, which accounts for about a quarter of all greenhouse gas emissions in Europe, half of which comes from cars alone.

"The Green Deal can only be successful if car emissions are reduced. However, it is with regret that we note that most conventional cars still emit as much CO2 as they did 12 years ago, despite ambitious goals and stringent requirements," says Nikolaos Milionis, Member of the European Court of Auditors.

As long as the combustion engine dominates, and that is clearly the case at present, the ramp-up of e-mobility cannot properly unfold, Milionis stated. Although testing standards have been tightened since the 2010s, EU auditors found that actual emissions from conventional combustion engines – which still account for almost three-quarters of new registrations – have not significantly decreased in 12 years. While engines have become more efficient, this has been offset by cars being on average (around 10%) heavier and (around 25%) more powerful engines required to move this weight. Additionally, the auditors found that plug-in hybrid vehicles – once thought to gently replace pure combustion engines – are still classified as "low-emission" even though emissions measured under laboratory conditions and on-road emissions differ by an average of 250%.

Alternative Fuels: Uncertain Future

Alternative fuels such as biofuels, e-fuels, or hydrogen are often mentioned as potential successors to gasoline and diesel. However, in their report on biofuels, EU auditors emphasize that a clear and stable roadmap to address the long-term issues of the industry—available fuel quantity, costs, and environmental friendliness— is lacking.

"Since they are not available nationwide, biofuels do not represent a reliable and credible alternative for cars," says Nikolaos Milionis.

Firstly, domestically produced biomass is not sufficient to be a serious alternative to conventional fossil fuels. If the biomass is predominantly imported from third countries, this runs counter to the goal of strategic autonomy in the energy sector. Biofuels also compete with other industries (e.g., food, pharmaceuticals, and cosmetics) for raw materials. Secondly, due to these demand issues, EU auditors concluded that biofuels are still not competitive. Biofuels are simply more expensive than carbon-based fuels, and currently, it is cheaper to purchase emission certificates than to reduce CO2 emissions through biofuels, which are not always favored by the tax policies of EU countries.

Biofuels: Overestimated Impact - Underestimated Consequences

The crucial indication from the auditors finally is that the environmental friendliness of biofuels is overestimated. Biofuels require raw materials. Their production can unbalance ecosystems and can adversely affect biodiversity, soil, and water quality. Inevitably, the ethical question arises as to whether fuel production should take precedence over food production.

Combustion Engine Emissions Stagnate - E-Mobility the Only Way Out

Since CO2 emissions from combustion engines have not been effectively reduced or cannot be reduced, battery-powered electric vehicles seem to be the only viable alternative. However, the auditors see problems on both the demand and supply sides, making it unlikely that the EU will easily reconcile its Green Deal and industrial sovereignty.

Electric Vehicles: A Dilemma for the EU

The auditors found that the European battery industry has lagged in global competition. This could nip a complete establishment of capacities in the EU in the bud. Less than 10% of the world's battery production takes place in Europe, and most of the manufacturers are non-European companies. Globally, China produces the lion's share with 76%.

"Electric cars can indeed become a double dilemma for the EU: between environmental priorities and industrial policy and between environmental goals and costs for consumers," says Annemie Turtelboom, a member of the European Court of Auditors.

Batteries: High Dependence on Raw Material Imports

A major obstacle for the EU battery industry is its strong dependence on raw material imports from third countries with which it has not concluded suitable trade agreements. For example, 87% of raw lithium imports into the EU come from Australia, 80% of manganese imports from South Africa and Gabon, 68% of raw cobalt from the Democratic Republic of Congo, and 40% of graphite from China. The dependence on imports of highly demanded raw materials not only leads to cost constraints. Moreover, many of the countries of origin are politically unstable or even pose geopolitical risks to Europe's strategic autonomy – not to mention the social and environmental conditions under which these raw materials are extracted. The establishment of its own raw material value chain is theoretically possible due to the presence of mineral deposits. However, the establishment would take twelve to sixteen years, time that Europe does not have, Turtelboom outlined.

A Battery "made in Europe" alone costs 15,000 euros

The auditors further stressed that the costs of batteries manufactured in the EU remain much higher than planned despite extensive public support. This inevitably affects their competitiveness compared to other global players and could also result in European electric vehicles being unaffordable for the majority of the population. Since the EU auditors' report on batteries was published, the sale of new electric cars in Europe appears to have increased significantly (1.5 million registrations last year, or one-seventh of all new registrations). However, recent studies have shown that these sales were publicly subsidized and mostly in the price range of more than 30,000 euros. A significant portion of these costs are due to the batteries: in Europe, an average of up to 15,000 euros.

"In short, if no clear improvement is achieved in the EU's capacities and competitiveness, there is a risk that the 'electric car revolution' in Europe will depend on imports and ultimately negatively affect the European automotive industry with its more than three million manufacturing jobs," warn the auditors.