Part 1 – An introduction to our special series on the broader impacts of EV production
Western economies are attempting to decarbonise to address climate change. Key strategies include shifting electricity generation from thermal to renewable sources and, similarly, replacing internal combustion engine (ICE) vehicles with electric vehicles (EVs).
The rationale behind the shift towards EVs is largely based on their lower carbon emissions. However, the focus on these emissions benefits overlooks the negative environmental impact of EV production.
Frontier Economics is producing a series of articles exploring the broader environmental impacts of producing EVs, that is, beyond just the life cycle carbon emissions associated with EVs. This first article introduces our series.
EVs and lifecycle carbon emissions
The environmental benefit of EVs is typically framed around their lower life cycle carbon emissions, compared to alternative vehicle types:
Battery EVs have zero exhaust emissions, so that alone makes them better for our environment than a petrol, diesel or hybrid vehicles – particularly in terms of improving air quality and reducing the health impacts of car pollution.
As a result, and to support efforts toward decarbonisation, all Australian governments have been encouraging the switch from ICE vehicles to EVs through a combination of subsidies, grants, rebates and incentives to increase the accessibility of EVs to Australian consumers.
EVs are many times more minerals-intensive than conventional vehicles
The production of EVs is significantly more minerals intensive than ICE vehicles, particularly for minerals such as lithium, cobalt, copper and nickel. The International Energy Agency (IEA) reports that EVs require six times as much minerals as a conventional car:
According to the World Health Organization, there were about two billion registered vehicles on earth in 2015-16. This number would have grown substantially over the ensuing nine years. Almost all these vehicles would be ICE vehicles.
Decarbonising transport would therefore require replacing at least two billion existing vehicles with EVs, meeting the ongoing demand for new vehicles, and eventually, replacing aging EVs with newer ones. This shift will drive a massive increase in mining activity for EV production, along with other significant environmental impacts associated with mining.
In reality, mineral-rich locations often coincide with areas of relatively unspoiled nature.
As a result, the environmental impact of mining is shaped by the fixed locations of mineral deposits.:
Mineral deposits have fixed locations, so mining activities, unlike renewable resource activities (such as fishing, agriculture, and forestry), are not subject to rational selection or advanced planning.
While the mineral intensity of EVs has been improving over time, it is doubtful that this will improve to the extent that the additional mining required to meet the demand for EVs is no longer a material and growing environmental problem.
According to the IEA, by 2040 the demand for copper is expected to grow by 40%, lithium by nearly 90% and nickel by 60-70% from current levels. The IEA expects that much of this growth will be driven by the deployment of EVs alongside other clean energy technologies.
Meeting this demand will require significantly more mining activity and place greater environmental pressure on mineral-rich locations – oftentimes in locations far away and out of sight of EV consumers.
Frontier Economics series on EVs' environmental, social & governance impacts
Frontier Economics is undertaking a multi-staged economic analysis of the environmental, social and governance costs of producing EVs. To help inform policy makers and consumers of the impacts of their choices.
The analysis will examine the trade-off between the decarbonisation potential of EV technology and the environmental harm of meeting the growing demand for minerals.
Ultimately, this work will examine whether Australian consumers should be protected from unknowingly supporting environmental damage through their purchase of EVs, especially from manufacturers who source raw minerals from suppliers who have poor environmental practices.
Currently, Australia does not manufacture EVs domestically and probably never will. The Australian government already protects consumers from unknowingly supporting environmentally damaging practices in other countries for other products. For example, the government prohibits the importation of illegal, unsustainable logged timber to prevent Australian consumers from unintentionally contributing to environmental harm. We’ll explore whether the government should do the same in the fast-growing EV sector to protect consumers from supporting poor environmental practices of EV manufacturers.
Economic framework
Natural resources and market failure
Many natural resources have public good characteristics, and if left solely to private markets, they risk overuse, leading to environmental and social degradation, as well as governance challenges requiring regulatory intervention.
Governments attempt to remedy this problem through a range of mechanisms, including:
- Restricting the use of natural resources through environmental regulations and planning laws,
- Placing a price on the use of natural resources. This approach aims to ensure users include the costs of using environmental inputs into their costs of producing goods and services so they don’t overuse these resources, or
- Natural resources can be characterised as an economic asset, or ‘natural capital’. Assigning a value to natural capital involves valuing the ‘ecosystem services’ it provides to society. When viewed as an asset, economic tools can be used to measure the contribution of nature to the economy. A high-level summary of a standard framework is summarised below.
Natural capital and the value of ecosystem services
Natural resources can be characterised as an economic asset, or ‘natural capital’. Assigning a value to natural capital involves valuing the ‘ecosystem services’ it provides to society. When viewed as an asset, economic tools can be used to measure the contribution of nature to the economy. A high-level summary of a standard framework is summarised below:
This framework will support our long-term study by helping us quantify the environmental impacts of nature loss caused by mining for minerals used in EV production. Importantly, this study goes beyond life cycle carbon emissions to examine broader environmental harms, including biodiversity loss, damage to river and coastal systems, deforestation, and the loss of flora and fauna.
We aim to attach dollar values to these harms to determine the embodied environmental costs of EVs.
We will also consider, qualitatively:
- Social impacts of EV-related mining, including its effects on Indigenous communities and the social challenges that can arise in mining regions.
- Governance considerations, such as the role of regulatory frameworks, the risks of economic dependence on EV-manufacturing nations, and the importance of environmental safeguards in mining operations in mineral-rich locations.
Examples of environmental, social and governance harms
This section outlines the types of impacts we will identify, describe, and ultimately value as part of this series. As an introduction, we focus on two specific locations and minerals:
- Nickel in Indonesia, and
- Copper in Chile.
Nickel in Indonesia
Nickel is a critical component in the production of EVs. The Nickel Institute report that 55% of the world’s nickel production comes from Indonesia, noting that:
In 2023, Indonesia’s primary nickel production rose by a staggering 53% y-o-y as greenfield and brownfield capacity expanded. The strong rise in nickel output during this period occurred even though between 2017 and 2019, exports of ore grading up to 1.7% were allowed (from 2020 onwards that part-relaxation of the ore export ban was ended). Most of the primary nickel production, in form of Nickel Pig Iron (NPI), is intended for the burgeoning stainless steel sector in Indonesia which is supported by Chinese investment. However, Indonesia is also developing battery-grade nickel capacity with the aim of developing an integrated battery supply chain over the next few years.
This video from The University of Queensland, Centre for Social Responsibility in Mining provides a map of nickel and coal mining leases and related infrastructure development, and forest cover from 2008 and 2023 across Kalimantan, Sulawesi, and Maluku islands. It shows the substantial growth in both the coal and nickel sectors during this period.
Indonesia’s nickel deposits are largely underneath its rainforests, requiring significant rainforest clearing to access and process the resource. The University of Queensland finds that Nickel mining in Indonesia is expanding rapidly in Sulawesi and North Maluku.
In January 2024 Climate Rights International reported:
A massive, multi-billion-dollar nickel industrial complex in North Maluku and nearby nickel mining is violating the rights of local communities, including Indigenous Peoples, causing significant deforestation, air and water pollution, and emitting massive amounts of greenhouse gases from captive coal plants.
Indonesia’s Weda Bay Industria Park (IWIP) in North Maluku is one of the largest nickel mines located in North Maluku and incorporates smelters and coal fire power stations to refine and process nickel. The scale and speed of impact be seen starkly in these satellite images:
In 2024, Mighty Earth, a global environmental advocacy organisation, investigated the environmental impact of nickel mining in Indonesia that is supporting the manufacture of EVs. Their research found:
- Conservatively, Indonesia’s nickel mines have cleared nearly 80,000 hectares of forest to extract nickel. With more than half a million additional hectares of Indonesian forest within nickel concessions [permit areas], putting them at risk for deforestation.
- The rate of deforestation is likely accelerating. With Radar for Detecting Deforestation (RADD) alerts showing more than twice as much forest clearance in 2023 than alerts showed in 2020.
- The Mighty Earth investigation also uncovered potential illegality in some nickel concessions:
- At least three of these concessions have cleared Protection Forests without the prior exemptions that would have allowed them to do so legally,
- Six have strip-mined within 100 meters of the ocean, which is a legally contested practice,
- Five of the top 25 deforesting nickel mines have cleared 2,654 ha of Production Forest without the legally required Borrow and Use Permit.
Some of the social challenges associated with nickel mining can be seen in places like Wawonii Island, located in the Konawe Islands Regency off the coast of South-East Sulawesi. Mining activities have led to the displacement of local communities without sufficient consultation or compensation, while the arrival of large numbers of migrant workers has put pressure on local infrastructure and contributed to social tensions.
It is interesting to note that 90% of Indonesia’s nickel operations are owned by Chinese firms. These companies control almost all of Indonesia’s nickel processing industry, giving them greater sway over the local market. In addition to the control they have, there is also strong evidence that Chinese firms use nickel from mines that have serious negative environmental and social effects.
Copper in Chile
Copper is also a critical component to the production on EVs. Copper is an essential mineral to EVs because of its durability, malleability and reliability in conducting electricity. For the same reason, copper is used extensively in the renewables industry and electricity generation more generally.
According to the International Trade Administration, Chile is the world’s largest producer of copper. In 2023, Chile exported significant quantities (US$32.7 billion) of copper to Asia, US$24 billion of which to China. The IEA forecasts that almost all of the 10,000,000 tonne expected growth in demand for copper between now and 2040 will be driven by the demand for these technologies, including EVs.
The environmental and social impacts that arise from copper mining have become more acute in Chile, as mining activities have been expanded in increasingly fragile, arid regions. Copper mining in Chile primarily occurs in the Atacama Desert which is known for being one of the driest places in the world.
Increased water use for mining activities adds furthers stresses in an already strained water system, especially for Chile’s agricultural sector. Farmland in Chile is often located in valleys downstream of mines in the high Andes, giving mining operations priority access to water. This can result in conflicts over water usage between the mining industry and local agricultural communities, and problems with water contamination from chemicals leaching into the water supply from tailings dams.
There are even threats to Chile’s famed glaciers from copper mining, with some miners reportedly proposing the removal of glaciers in order to access the copper deposits underneath them. Even with the glaciers remaining in place, dust from nearby copper mines is likely causing glaciers to melt faster as the mining dust settles on glaciers which makes them darker and causes them to absorb more heat and melt faster (MIT News).
Chile’s heavy reliance on the Chinese market for its copper exports creates geopolitical risks, potentially leaving it vulnerable to unbalanced mining agreements which can result in threats to the environment. This economic dependence may pressure Chile to lower environmental standards to keep Chilean copper cost-competitive for Chinese buyers. However, Chile’s critical role as a major copper supplier gives it some leverage. Recent renegotiations of evergreen supply agreements with China suggest Chile may be able to push back against such pressures (Reuters).
Still, geopolitical dynamics complicate this balance. China has diversified its copper supply by expanding into Africa, reducing its reliance on Chilean exports and potentially strengthening its bargaining position (Reuters). Ultimately, Chile’s resource dependence and shifting global supply chains underscore the wider geopolitical stakes at play.
Lifting the hood on the broader impacts of EV production
This special report series will leverage our decades of experience in energy and natural resources economics.
In addition to exploring the nature and extent of environmental costs associated with mining for EV minerals we’ll also explore what Australia can do to protect the environment, when faced with other countries’ poor environmental standards in EV production.
While it would be preferable to ensure countries supplying minerals to be used in the manufacture of EVs applied best practice environmental standards, realistically, this is very unlikely to occur.
There are several levers that governments, corporate entities and end consumers can activate to make better choices. When it comes to environmental and manufacturing standards on any goods we purchase, including EVs, our options include:
- Domestic programs aimed at corporates to ensure responsibility for ethical supply chains in their operation, or consumer education and awareness.
- Or countries can act unilaterally to prevent their consumers from unknowingly supporting poor environmental practices by other countries. This includes restricting the importation of vehicles produced using environmentally and socially harmful practices, safeguarding both consumers and global sustainability efforts.
We’ll explore this and more in upcoming reports in this series.
What’s next for our report on EVs?
The next article in this special series on the environmental impacts of EVs is an examination of copper mining for EVs.
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