What Chile Can Learn From Clean Car Rules Elsewhere

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Electric vehicle sales are surging globally. The sales have overshot 5%, considered to be the start of the mass market, in over 20 countries across the world. In places like India they are fast approaching that benchmark. Electric car models can now be bought for as little as US$10,000 and drive at least 300km, and the ratio is only improving.

This has been the result of government policies put in place to cut car emissions, help drivers get affordable clean models, as well as to capture the lucrative battery supply chains domestically. After making headlines with the largest battery-electric bus fleet outside of China, Chile wants to electrify more road vehicles. The country is about to enact its first clean car rules early next year.

Transport accounts for a fifth of Chile’s carbon emissions, mostly cars and trucks. Home to the third largest vehicle market in Latin America, the country imports all its fuels and has some of the highest gasoline and diesel prices in the region. Given its large lithium and other metal reserves, going electric should be no brainer for Chile, but yes the sales are still less than 1%.

But as one of South America’s most successful economies is putting in place its first clean car rules, there is much it can learn from experience of regulating car emissions elsewhere. From pure efficiency rules to dedicated electric car mandates, at least three lessons can be drawn.

First, design of the regulation matters as much as the ambition of the targets themselves. Until this year the so-called ‘super credits’ counted each electric car sold double across the European Union. Meant to incentivize the production of electric cars over incremental efficiency improvements, these in reality fueled the growth in SUV models, doubling in sales in 5 years. In Chile, SUVs already make up 45% of sales — the current push to reward plug-in hybrids alongside battery models will only worsen that.

The second lesson is that of speed. It is tempting to start the first set of standards with low ambition, growing it in future iterations. But the Chinese experience shows that bold long-term vision coupled with strict annual targets pays off. Europe even saw its electric car sales overtake China’s as its ambitious 2020 standard came into effect. But with no stricter standards in sight until 2025 (as opposed to annual targets), that lead is long gone.

Forecasters predict up to 1 in 2 cars sold by 2030 globally to be electric. As a leading market in South America, there is no reason why Chile’s ambition should not match that. And with the country lagging behind on fuel efficiency of conventional models, the climate gap to fill is even larger this decade. This should be done with more ambition on electric cars as technology to do so already exists.

The final lesson is that electric cars are much more than a climate policy. They exemplify the new green industrial race to onshore batteries and critical minerals necessary to produce the technology. The time advantage that China had when it started decades ago is gone. Where does this leave Chile and its ambitions to develop a global battery industry?

The country already has some of the world’s largest reserves of lithium, a key ingredient in batteries, as well as copper found in everything from grids to charge points. So strong environmental stewardship and frameworks to ensure local communities and businesses benefit must be part of the answer.

But this won’t be enough to build an entire electric car supply chain. Strong local and regional markets are important to pull investments and see near-shoring that can add value to the country’s natural resources. After lagging behind China for years, investment into Europe’s electric car production surged a year before the 2020 car emissions standard.

Upcoming national car CO2 standards are Chile’s D-Day. Done right, they can supercharge the country’s climate and industrial ambitions while closing the efficiency gap between Chile and other vehicle markets. They will also benefit consumers through reduced operating costs and better air quality. But only if their design and ambition incorporate the lessons from regulations elsewhere.

By Julia Poliscanova, senior director of Transport & Environment, & Sebastian Galarza, executive director of Sustainable Mobility Centre for Latin America