Foreign Direct Investment in Latin America and the Caribbean 2017

132 Chapter II Economic Commission for Latin America and the Caribbean (ECLAC)
Laws, regulations and policies tend to lag behind technological progress, at least at
the start of a new phase. In the automotive industry, for example, seatbelts started to
appear in vehicles in the late 1940s, but they first became mandatory only 20 years later,
under a law passed in Australia in 1970. At the present time, regulations are starting to
change in several areas, and standards are being introduced that reflect technological
changes, increased awareness and concern for the environment, and the need to
advance energy efficiency. Many countries have also implemented emission-limiting
standards and have started to deploy various zero-emission mobility models. At the
same time, the rapid emergence and consolidation of new technological paradigms
makes various instruments available to tackle these challenges (ECLAC, 2016). 27
In the last few years, manufacturers and suppliers have been adapting to new
standards and have made progress on various aspects of conventional vehicles. Firstly,
there have been major improvements in energy efficiency and in cutting emissions
from internal combustion engines. Secondly, new materials have been incorporated that
reduce vehicle weight and hence the consumption of fossil fuels. If manufacturers fail to
comply with the regulations, they may face harsh penalties and a serious deterioration
of their image and prestige with consumers. This happened with Volkswagen when,
in September 2015, it was found to have installed software to change the results of
pollutant emission controls on more than 10 million diesel-powered cars sold between
2009 and 2015 (The Guardian, 2015).
In this context, electric vehicles are starting to be seen as one of the most
attractive alternatives. Electric propulsion is probably the fastest growing segment in
production, despite uncertainty regarding the acceptance of this technology on the
world market. Electric vehicles have benefits associated with pollution reduction, energy
diversification and climate change mitigation, as well as lower operating costs than
their internal-combustion counterpart. 28 The most serious obstacles to wider adoption
of electric vehicles are the limitations and high cost of autonomy (attributed to energy
storage technologies), poor accessibility to recharging infrastructure and its high cost,
and lack of awareness of the technology, or confidence in it (IEA, 2016).
Technological progress and cost reduction coupled with generous purchase
subsidies have boosted electric vehicle sales (see figure II.23). For example, Norway
and Germany propose banning the sale of vehicles that use gasoline and diesel engines
from 2025 and 2030, respectively. As a result of a massive support and promotion plan
that reduces the cost of an electric car by up to 50%, Norway has the world’s largest
number of fully electric cars per capita. By 2016, electric vehicles represented nearly
40% of all new passenger vehicles registered in the country (The Guardian, 2017).
27
The search for a new development paradigm through the 2030 Agenda for Sustainable Development and the Sustainable Development
Goals, together with the need to address the effects of climate change through the Paris Agreement under the United Nations
Framework Convention on Climate Change (UNFCCC), are evidence of the growing awareness of these global problems.
28
Assuming current electricity and fuel taxation, a 100-km trip would cost about one fourth to one-fifth of the cost of using a car
powered by a conventional internal combustion engine in Europe, and roughly half in the United States. Over five years, this
would generate fuel savings of over US$ 3,000 in Europe, and about US$ 2,000 in the United States (IEA, 2016).