A new lifecycle assessment by The Energy and Resources Institute (TERI) reveals that CNG vehicles currently carry a lower environmental burden than electric vehicles in India. The finding highlights the impact of the nation’s coal-heavy electricity grid on EV adoption. While EVs excel in two-wheeler and three-wheeler segments, the study suggests a technology-agnostic approach may be needed for cars and heavy-duty transport until the power grid becomes greener.
A recent lifecycle assessment by The Energy and Resources Institute (TERI) has brought a new perspective to India’s energy transition, indicating that Compressed Natural Gas (CNG) vehicles currently have a lower environmental impact than electric vehicles (EVs). This conclusion stems from India’s heavy reliance on coal for electricity generation. While EVs do not produce emissions while driving, the study notes that the manufacturing of batteries and the use of coal-generated power for charging create significant lifecycle emissions that currently exceed those of CNG vehicles.
Grid Dependency Affects EV Environmental Score
The study uses a lifecycle assessment approach, which counts the total environmental cost of a vehicle, starting from raw material mining and manufacturing to fuel production and final disposal. Because India’s current electricity grid relies heavily on coal, the process of charging an electric car carries a hidden carbon footprint. When this is added to the intensive mineral extraction needed for batteries, the overall environmental score for EVs currently trails that of CNG vehicles in India. This highlights a critical challenge for investors: the success of the EV transition is deeply linked to the speed of grid decarbonization.
Segment-Wise Strategy for Transport
The research suggests that a one-size-fits-all approach to vehicle electrification may not be ideal. The data indicates that EVs are the most efficient and beneficial choice for two-wheelers and three-wheelers, where the lower running costs and high usage rates provide clear economic and environmental advantages. However, for passenger cars, taxis, and buses, the study points to CNG as holding a superior environmental balance. For long-haul freight, the report proposes that Liquefied Natural Gas (LNG) could play a more critical role than electrification.
Strategic Shift from Oil to Minerals
Beyond environmental metrics, the report highlights a shift in geopolitical risk. By moving away from fossil fuels, India is trading its dependence on imported crude oil for a reliance on global supply chains for critical battery minerals like lithium, cobalt, nickel, and graphite. As the EV ecosystem scales, the stability of these supply chains becomes a key factor for national energy security. The researchers emphasize that India needs a flexible policy framework that allows for different technologies to coexist while the power grid and battery technology evolve toward 2050.
For investors, these findings underscore the importance of monitoring how government policies develop. If the policy framework remains technology-agnostic, companies involved in City Gas Distribution (CGD) may continue to see strategic value in their core business. Conversely, for automotive manufacturers, the findings highlight the dual pressure of managing high mineral costs while waiting for the broader power grid to become cleaner. The key monitorables for stakeholders will be the pace of grid decarbonization, progress in domestic battery mineral sourcing, and potential shifts in government incentives for various vehicle technologies.