A Plan for Cleaner Air in China by Mathews Asia

Week of July 08, 2016

 

The problem of widespread air pollution in major Chinese cities is well-known both inside and outside of China. Lesser known are the government efforts to address the issue—one of which is the rapid adoption of electric vehicles (EV).

For years, the promise of EVs to contribute to a cleaner future for global transit has struggled to gain traction in developed countries. For example, in the U.S., we are far from the Obama administration’s goal of getting 1 million plug-in electric vehicles on the road by 2015, and last year, sales of electric vehicles, in fact, declined in the U.S. By contrast, EV sales in China quadrupled last year, leading the country to eclipse the U.S. as the global leader in such sales. The Chinese government hopes its EV sales will reach 3 million a year by 2025.

Vehicle emissions are already the single-largest contributor to poor air quality in China’s major cities, like Beijing, where 31% of a type of hazardous airborne particulates (known as PM 2.5) comes from cars. Today, only 25% of Beijing residents drive cars. The problem is destined to worsen as incomes rise and more households are able to afford cars. To combat this, major cities have restricted motorists from obtaining license plates in order to control the problem. For example, in Beijing there is an annual quota on the number of plates issued each year as well as a limit to the number of vehicles that can be on the road each day. For example, if your license plate ends with the number 3 or 8, the rules may prohibit you from driving on Mondays for three months. If your license plate ends in a 4 or a 9, you may be restricted from driving on Tuesdays, and so on, in a system designed to keep one-fifth of all cars off the road each week. While such measures benefit the environment, they are problematic for those who require their own car every day.

Electric vehicles are a means to get around these measures. The odds of winning a license plate for an electric vehicle are significantly higher than for fossil-fuel vehicles in Beijing. In some cities, electric vehicles are exempt from the lottery system entirely. EVs are also now issued a green license plate to free them from certain driving bans. In an effort to support this trend, the government also promises attractive subsidies for electric vehicles. For example, electric vehicles in China could be subsidized up to 54,000 renminbi (US$8,709) compared with federal income tax credits of US$7,500 for EVs in the U.S.

However, it is still early to declare electric vehicles a success story. Sales of electric vehicles remain small, last year marking only 1.3% of total car sales. Subsidies like the ones enacted in China are not sustainable. Already, the Chinese government has indicated it will gradually roll back subsidies that favor electric vehicles, and this seems likely to dampen the rapid growth of recent years. The lack of adequate charging facilities is another problem. Although the central government has pushed local governments to spend on electric vehicle infrastructure, it will be a long time before most high-rise apartment complexes are retrofitted with charging facilities in their parking areas. And ultimately, the widespread adoption of electric vehicles in China suffers from the same technological difficulties hindering its advance in the U.S.—namely it takes too much time to recharge a vehicle and the distance a car can travel on a single charge is less than a gasoline-powered vehicle. That being said, the continued adoption of EVs in China—the world’s largest automobile market—should help improve battery technology and lower the cost of electric vehicles. These developments would be a boon for the industry globally and help clean up China’s air along the way.

Ryan Rutkowski
Research Associate
Matthews Asia

China Air Pollution concerns