Holding off on buying an EV? Beware the sunk cost carbon fallacy

There is a financial concept known as the sunk cost fallacy. It’s where people continue spending on a project for fear of wasting the money already spent. It could also be known as the good money after bad principle. All it does is put off the evil day when someone has to accept responsibility for the waste of money.

A similar proposition has been put forward in relation to the environmental effectiveness of switching to an electric vehicle (EV) from a petrol or diesel car with years of useful life left in it. The logic is that the environmental cost of manufacturing and maintaining the fossil fuel car would go to waste if the switch was made. That waste would be compounded by the environmental cost of manufacturing the EV. And then you add the fact that much of the electricity used to charge the EV battery comes from fossil-fuel-powered generating plant.

The argument has a certain allure, particularly if you are one of those people driving a five-year-old diesel car and are mulling over the motoring equivalent of stick or twist in the environmental card game.

Unfortunately, it makes no sense. The first thing to look at is the environmental cost of an EV. While they are certainly not impact free, they are undoubtedly a lot better than the alternative. European clean transport NGO Transport & Environment has compiled the most up-to-date data on CO2 emissions linked to the use of an electric, diesel or petrol car. It takes account of all possible criteria, such as the amount of CO2 emitted when electricity is produced or fuel is burnt, as well as the carbon impact of resource extraction for batteries or of building a power plant.

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The worst performer is an electric car with a battery produced in China and driven in Poland which emits in its life cycle 37 per cent less CO2 than petrol. At the other end of the spectrum, an electric car with a battery produced in Sweden and driven in Sweden can emit 83 per cent less than petrol. Looking ahead, it claims that electric cars bought in 2030 will reduce CO2 emissions fourfold thanks to a European power grid dominated by renewables.

In many cases, the almost Jesuitical environmental calculus masks a financial motivation. Let’s face it, new EVs are expensive and a lot of people simply can’t see the sense of switching when their existing car is running well.

“We need to focus on people who buy new cars and encourage them to buy EVs,” says Hannah Daly, professor in sustainable energy and energy systems modelling at UCC. “Many people don’t have the financial capacity to be so choosy and we will still have lots of gas-guzzling cars on the market for decades. But we need to get to 100 per cent EVs as quickly as possible.”

However, the cost equation is improving. “An average new car now costs something like €48,000,” Daly notes. “Lots of EVs will come in under that, especially those from Chinese manufacturers. Some of them are coming in at under €30,000.”

She says there is no environmental case to be made for continuing to drive a petrol or diesel car. “If you are in a position to buy a new or second-hand EV, the initial carbon footprint is offset very quickly. Just one year of driving is enough.”

Prof Brian Caulfield of Trinity College Dublin’s department of civil, structural and environmental engineering concurs. “If you have an old diesel car belching out gases causing cancer and asthma, it’s always going to be better to be driving around an electric car,” he says. “There is a lot of research to show that an EV breaks even in the first year.”

While promoting EV usage, Caulfield also accepts that it is a costly way to reduce emissions. “Cars are only being used between 5 and 10 per cent of the time. It’s a very expensive way to decarbonise. It is a quite inefficient way of doing it. If we built wind turbines which were only going to be in operation 5 to 10 per cent of the time, we would stop doing it.”

But Ireland’s geography and other factors mean that many people will continue to rely on cars for essential transport.

“Data produced by the National Transport Authority in August showed that almost everywhere in Ireland 74 per cent of people are within a 15-minute walk of the nearest shop. But only 38 per cent of the 1.2 million people in rural Ireland are within that distance. They need a car solution and we need that to be electric,” says Caulfield.

I hope that by 2035 buying a petrol or diesel car will be like buying a house with subsidence – we just wouldn’t do it

—  Prof Brian Caulfield, TCD

“We will be selling petrol and diesel cars until 2035 but I hope that petrol and diesel costs will have got to a level by then where it won’t make sense to buy one. I hope that by 2035 buying a petrol or diesel car will be like buying a house with subsidence – we just wouldn’t do it.”

In the meantime, he suggests some form of scrappage scheme to get older internal combustion cars off the roads and a subsidy scheme to favour people living in rural Ireland.

“We should pump as many EVs into rural Ireland as possible. The grants are the same in Dublin as they are there – we need to think about that. Of course, parts of Dublin have poor public transport connectivity as well and that should be addressed too.”