Remarks by CARICOM Assistant Secretary-General, Joseph Cox, at CSEF VIII opening

“Diversifying energy portfolios with indigenous renewable energy reduces geopolitical security risks, import dependency and the variability of electricity generation costs. Access to clean, reliable, and affordable energy services, with a higher level of predictability in pricing and supply, is therefore indispensable to economic transformation in CARICOM countries.” – Mr. Joseph Cox

CARICOM Assistant Secretary-General, Economic Integration, Innovation and Development, Mr. Joseph Cox, on Tuesday delivered remarks at the opening of the eighth Caribbean Sustainable Energy Forum (CSEF VIII) in Kingston, Jamaica. Powering Transport is the theme of the Forum, which is hosted by the CARICOM Secretariat and the Caribbean Centre for Renewable Energy and Energy Efficiency (CCREEE), with financial support from the Caribbean Development Bank (CDB), the Jamaica Electric Vehicle Association, and the Inter-American Development Bank (IDB). The Forum, from 7-9 November, is a flagship event of the CARICOM Energy Month.

Please read his remarks below:

Mr. Andrew Jackson – President, Jamaica Electric Vehicles Association

Dr. Stacy Richards-Kennedy – Regional Manager for the Caribbean, CAF, Development Bank of Latin America and the Caribbean

Mr. Anton Edmunds – General Manager, Country Dept, Caribbean Group and Country Rep in Jamaica, IDB

Mrs. Therese Turner –Jones – Director, Projects, CDB

Mr. Nigel Davy – M D, Innovative Energy Company Ltd

Dr. James Fletcher – Executive Chairman, CCREEE

Members of the Media,

Distinguished Ladies and Gentlemen all

It is my pleasure to add my words of welcome in this Opening Session of the Caribbean Sustainable Energy Forum 2023 (CSEF VIII) under the theme “Powering Transport!” The importance and timeliness of this Forum needs no articulation and represents yet another invaluable contribution to CARICOM Energy Month 2023 as it provides a platform for knowledge exchange, and shared learning from implementation experiences within CARICOM. In contemplating the current dynamic within the regional energy space, the focus on Powering Transport is not a road paved with good intentions but gives voice to an unvarnished truth.

Indeed, the Region is confronted with a paradox of development as it finds itself at yet another inflexion point, where on the one hand we are confronted by the prediction by the World Bank of oil prices reaching US$150 per barrel by 2024 and therefore even higher electricity rates, if the Israeli – Hamas war morphs into a regional conflict. On the other hand, electrification and the adoption of renewable energy solutions within CARICOM are being hindered by supply chain challenges, archaic legislation, outdated power grids, and high interest rates. Indeed, we must remain mindful of the mounting concerns that some Caribbean countries may not be ready to transition to electric vehicles (EVs), in so far as in some jurisdictions if even one percent of total vehicle imports are EVs, this would “bring a significant strain on the electricity grid”.

However, as we transition on this new path we must remain cognizant that the cost of electricity within the Region has been persistently high over the past two decades and, even during periods of relatively “low oil pricing”, regional prices are (on average) around four times higher than in North America with the obviously adverse impact on our Region’s competitiveness. Similarly, globally, mobility represents roughly between twenty and twenty- five percent of final energy consumption. The vast majority of CARICOM Member States exceed this global average, and in one instance, the transport sector records over sixty percent of total energy consumption, also far exceeding the consumption by the electricity sector. Therefore, diversifying energy portfolios with indigenous renewable energy reduces geopolitical security risks, import dependency and the variability of electricity generation costs. Access to clean, reliable, and affordable energy services, with a higher level of predictability in pricing and supply, is therefore indispensable to economic transformation in CARICOM countries.

Frankly, to effect the kind of transformation demanded by Powering Transport, the Region requires the qualities of youth, not as a time of life, but as a state of mind. However, sadly, many persons within the Region who find themselves sometimes at the apex of leadership of various sectors and institutions still have a reflexive attitude of rejection to new technology, new ideas and new strategies in an evolving global space. The net effect is a Region seemingly mired in antiquated approaches and buffeted by perennial challenges.  However, time waits on no one.

The transition to electric vehicles (EVs) is not just a trend but a crucial step toward a more sustainable, clean, and prosperous future for our Region. However, expectation that this transition would occur seamlessly along a simple adoption curve was always unrealistic. The higher capital cost of electric vehicles is often offset by a combination of lower lifecycle costs and externality benefits. Capital cost premiums associated with electric vehicles are substantial, but declining. Nonetheless, the Region is projected to move from 19% electrification currently to 51% electrification by 2050, but history thus far has illustrated that RE progress in the Region has been organic and not accelerated. This therefore demands new approaches.

Sales of electric cars are soaring in Europe and China, with the US further behind, but the rush of new launches is putting pressure on European manufacturers in particular, who are struggling to compete with cheap models coming from China. In fact, according to Harald Wilhelm, the Chief Financial Officer of Mercedes-Benz, some manufacturers are pricing battery electric vehicles (BEVs) similarly to petrol variants despite higher costs of production, amid “intense price competition”. In other words, economic dumping of vehicles has already crept into the EV market. Indeed, though EV sales in the US are still growing, the pace has slowed. In the first half of 2023, EV sales rose 49% from one year before, a slower rate than the 63% increase last year. Manufacturers who have adopted a strategy of hedging their bets on EVs by continuing to invest in hybrids, hydrogen-powered cars, and other alternative eco-friendly vehicles are also influencing market outcomes.

In fact, much of the pressure on European carmakers to switch to electric is coming from China, whose government has heavily subsidised the industry. Chinese manufacturers had never managed to export large numbers of petrol and diesel cars to Europe or the US, but now brands such as BYD, Nio, Xpeng and the Chinese-owned MG are gaining market share rapidly, to the alarm of traditional carmakers in Europe and the US. The pressure on the European industry led to the EU recently launching an investigation into Chinese electric vehicle subsidies, a move that could eventually lead to tariffs on imports in an effort to protect its home industry.

Nonetheless, EV sales are on pace to reach 46.98 million in 2033, or 20% more than gasoline cars. This translates to a tenfold expansion in the EV market over 12 years. This is of particular relevance as the EU is slated to ban the production of the internal combustion engine by 2035 with Nissan in Japan also following suit. The move comes as policymakers worldwide tighten restrictions on vehicle emissions to promote a shift to EVs. In Europe, new Euro 7 emissions standards are on track to go into effect as early as July 2025 with some manufacturers determining that these rules will raise the cost of developing internal combustion engines to unsustainable levels.

On our part, this will require a strategic shift in our development model to be even more inclusive. In fact, it is time that as a Region, motor vehicles are recognised as tools of trade rather than merely for pleasure, and in so doing reassess the applicable import duty framework. This would actively discourage the dumping of Internal Combustion Engine (ICE) vehicles in our markets when the transition to EV’s becomes more pronounced and emission standards in Europe render the ICE vehicles uncompetitive in that market, but continues to be viable in the Caribbean. This requires urgent legislative intervention.

Similarly, while we are cognisant that several CARICOM Member States offer several incentives to encourage the procurement of hybrid and electric vehicles including the removal of or significant reductions in import duty, there is potential abuse of the process looming. Indeed, some EV manufacturers offer subscription-based upgrades to unlock additional features or capabilities in the vehicle, such as increased range, improved performance, or advanced driver-assistance systems. It might seem counterintuitive, but automakers have been increasingly pay-walling features and services for their vehicles, including some features that are physically built into the car. These features are being charged for on a monthly basis. This, therefore is likely to constitute significant revenue leakage to our already fiscally strapped Member States, as the applicable motor vehicle import duties or revenue foregone by the countries are founded on the CIF value of the vehicles. If features that would normally enhance the value of the vehicles are being implemented on a subscription basis (usually monthly), then the revenue foregone or collected, as the case may be, becomes compromised.

For automakers, the advantage of this model is clear. Not only do they get a stream of recurring revenue for years after an initial purchase, they can hope to maintain a longer-term relationship with the customer and build brand loyalty. Indeed, amid supply chain disruption, geopolitical tension and the transition towards green mobility, manufacturers are trying to work out how to preserve their profit margins.

It’s all made possible by the advent of over-the-air software updates, which were pioneered by Tesla around a decade ago and are now entering the mainstream. Today’s vehicles are more internet-connected and computerised than ever before, meaning car companies can reach deep inside a vehicle to add new capabilities and tweak things from a distance.

Brands including Lexus, Toyota, and Subaru invite owners to pay for the convenience of being able to lock or start their cars remotely through an app. In some BMWs, you can pay to unlock automatic high-beam headlights, which dim for oncoming traffic. In 2020, BMW floated the idea of pay-as-you-go heated seats and steering wheels. General Motors and Ford both offer subscription plans for their hands-free highway driving systems.

In fact, Stellantis (formerly Fiat Chrysler), Ford, and GM each aim to generate at least $20 billion in annual revenue from software services by 2030. In this regard, automakers argue that this approach can also allow them to streamline manufacturing by building cars to more uniform specifications with the proviso being that down the line, owners can add on the features they want à la carte.

All this points to the need for legislative reviews, grid modernisation interventions, joint procurement practices and the advent of nearshoring to treat with supply chain disruptions and renegotiations of electric distribution licences where appropriate. Specifically, the strategic interventions required should include but not be limited to the following:

1.    Incentives and Subsidies:

• Governments and regional organizations can implement financial incentives, such as tax credits, rebates, or grants, to reduce the upfront cost of EVs. These incentives make EVs more affordable for consumers, which is a critical factor in driving adoption.
  • Special incentives can also be extended to businesses and fleets to encourage the adoption of electric vehicles for commercial purposes.

2.    Charging Infrastructure Development:

• A robust charging infrastructure is essential for the widespread adoption of EVs. Governments and private entities should collaborate to establish a comprehensive network of charging stations. These stations should be strategically located in urban areas, along major highways, and at tourist destinations.
  • Promote the use of renewable energy sources, such as solar or wind power, for charging infrastructure to reduce the carbon footprint of EVs.

3.    Education and Awareness Campaigns:

• Public awareness and education are vital to dispel misconceptions about EVs and highlight their benefits.

Governments, non-profit organisations, and EV manufacturers can launch public information campaigns.

• Organise workshops, webinars, and events to educate consumers, businesses, and policymakers about EV technology, charging options, and the environmental advantages of EVs.

4.    Fleet Electrification Programs:

• Encourage government agencies, public transportation providers, and businesses with large vehicle fleets to electrify their operations. Transitioning to electric buses, delivery vehicles, and taxis can have a significant impact on reducing emissions and promoting EV technology.
  • Offering incentives for businesses to switch to electric fleet vehicles can accelerate the adoption process.

5.    Supportive Policies and Regulations:

• Implement regulations and policies that support EV adoption, such as setting emission standards and offering preferential treatment in terms of tolls or access to certain areas.
  • Establish local manufacturing and assembly incentives for EV components, such as batteries, to promote job creation and the growth of the EV industry within the region.
  • Develop clear guidelines and standards for EV charging infrastructure, including safety regulations and technical requirements.

These recommendations are not exhaustive and neither are they intended to be, but are merely indicative of what I would hope would be a precursor to clear-eyed and frank discourse over the next two days on the issues, which confront us, as we collectively interrogate the issues affecting the Region’s transition to Electric Vehicles.

CARICOM’s position is that renewable energy is key to the Region’s energy and economic security. In that vein, the Secretariat continues to engage its regional and international partners to address the risks associated with the sustainable energy transition and to promote and scale-up private sector investments in renewable energy. It is within this context that the CARICOM Secretariat is pleased to be a strategic partner for this Forum, alongside the Caribbean Centre for Renewable Energy and Energy Efficiency (CCREEE), the Caribbean Development Bank, and other partners. With ambition, innovation and partnership we can collectively reduce our carbon footprint by accelerating the deployment of renewable and low-carbon sources of energy and the electrification of end-use sectors, particularly transport.

Let us therefore seize this opportunity to take the Region further along the pathway to Powering Transport.

I thank you

Source: CARICOM TODAY