Oil price volatility could push countries like the Philippines to accelerate the transition to electric vehicles and renewable energy, Asian Development Bank (ADB) economists said on Thursday.
“Higher oil prices always helps the transition to electric vehicles,” ADB chief economist Albert Park told reporters. “It makes, from the government standpoint, the return to shifting to renewable energy much higher.”
As oil prices rise and electricity becomes cheaper through increased renewable energy generation, Park said that EVs were likely to become more attractive to consumers.
“The relative price of gas and electricity matters,” he said, and reducing electricity costs through greater investments in renewable energy would help make EVs more competitive.
Governments will have a stronger incentive to invest in renewable energy as volatile global oil prices make fossil fuel dependence more costly and risky, he added.
“If oil prices are high and uncertain, it creates economic incentives to accelerate the green transition,” Park said.
Based on latest industry data, EVs accounted for less than 10 percent of total car sales in the country in January but were up 63.1 percent year on year to 2,610 units.
Hybrid vehicles made up the bulk of EV sales at 2,072 units, marking a 43.4-percent increase. Plug-in hybrid sales surged by 2,977.8 percent to 277 units, while battery electric vehicles rose 78.8 percent to 251 units.
ADB lead economist for Southeast Asia James Villafuerte, meanwhile, said the shift to EVs among Filipino consumers remains slower compared with some of the country’s regional neighbors.
He noted that countries such as Thailand, Singapore and Indonesia had moved earlier to support EV adoption and develop the necessary industry and infrastructure.
Thailand, in particular, has long served as a major automobile manufacturing hub in Southeast Asia, giving it an advantage in transitioning toward electric mobility.
Despite the slower adoption, he said rising fuel prices could prompt more Filipinos to consider alternatives to conventional gasoline-powered vehicles.
“With fuel prices, most people will probably begin to really think about either hybrid or EV,” Villafuerte said.
Aside from fuel costs, Park emphasized that the availability of supporting infrastructure would also be crucial in encouraging wider adoption.
“In other countries, even in places like the United States, building EV-supportive infrastructure like charging stations has really been important for increasing EV adoption,” he said.
Villafuerte, meanwhile, said governments should carefully design their policy responses to rising oil prices to ensure that assistance reaches the most vulnerable sectors of society.
Instead of implementing blanket fuel excise tax reductions, he said targeted assistance such as income or food subsidies would have a stronger social impact.
“I imagine that greater targeting of the assistance would be better than a blanket reduction in excise tax,” Villafuerte said.
Cutting fuel taxes tends to benefit higher-income households more, he said, since they generally consume more gasoline through car ownership and frequent travel.
“If you reduce the excise tax, rich people who consume lots of cars would benefit more.”
Targeted subsidies to lower-income households, meanwhile, will allow governments to support those most affected by rising fuel costs while maintaining incentives to reduce gasoline consumption.
He noted that lowering fuel taxes could weaken signals that encourage consumers to cut back on gasoline use, which remains important in efforts to reduce pollution and carbon emissions.