Panama
Panama
March 15, 2024

Panama's Strategic Shift: Embracing Electrification for Sustainable Fleet Management

Navigating Challenges and Seizing Opportunities in Panama's Fleet Electrification Journey

Panama's Strategic Shift: Embracing Electrification for Sustainable Fleet Management
Panama
March 15, 2024
Panama's Strategic Shift: Embracing Electrification for Sustainable Fleet Management
Navigating Challenges and Seizing Opportunities in Panama's Fleet Electrification Journey
Summary

Panama's path to sustainable fleet management and vehicle electrification, while in its early stages, reflects a growing commitment to environmental sustainability and CO2 emission reduction. Faced with challenges such as underdeveloped infrastructure and low environmental awareness, Panama is taking strategic steps towards electrification, emphasizing the role of Hybrid Electric Vehicles (HEVs) as a transitional solution. This approach, aligned with the country's moderate electricity emission factor, offers a pragmatic pathway to reducing emissions and preparing for a future that includes a broader adoption of Battery Electric Vehicles (BEVs). As Panama continues to navigate these challenges, its efforts towards sustainable transportation and electrification highlight the potential for significant environmental benefits, setting an example for other countries facing similar challenges in their journey towards a greener future.

Country General Overview

Introduction

Panama has leveraged its geographical advantage to become a crucial global logistics and trade hub. The country's economic activities are significantly influenced by the services sector, including the Panama Canal, logistics, banking, and tourism. Corporate fleet management in Panama is essential for maintaining the efficiency of these services, requiring sophisticated strategies to navigate the economic and environmental landscape.

Geographic and Infrastructure

Panama's geography, marked by its famous canal, plays a pivotal role in its economic activities, especially in transportation and logistics. The well-developed services sector, which accounts for more than three-quarters of the GDP, underscores the importance of efficient fleet management. The Panama Canal's expansion, completed in 2016, has more than doubled its capacity, further emphasizing the need for effective fleet operations to handle the increased logistics and transport activities​​.

Economic

Panama's economy is notable for its rapid growth and significant contribution from the services sector. In 2022, Panama exhibited a strong economic rebound with a GDP growth of 10.8 percent, supported by construction, transport and logistics, tourism, and mining​​. With a GDP of $76.52 billion in 2022 and a population of approximately 4.4 million people, Panama's economic landscape provides a fertile ground for corporate fleet management solutions​​​​.

Environmental Considerations

Panama stands out as one of only three carbon negative countries globally, thanks to its commitment to protecting land and ocean conservation efforts​​. This environmental stewardship presents both a challenge and an opportunity for corporate fleet management, highlighting the importance of adopting sustainable practices, such as using fuel-efficient vehicles and optimizing routes, to align with the country's environmental achievements.

Sustainable Fleet Management

Scopes Data - Electrification Recommendation Rank Icon

Electrification Recommendation Rank

Panama
's Category

Rank G : Difficult Environment for EVs

These countries are challenging environments for EV adoption due to economic difficulties and underdeveloped infrastructure. Here, transitioning to HEVs is the first choice for reducing CO2 emissions.

Same Category Countries

Argentina, Egypt, India, Kazakhstan, Philippines, Russia, Saudi Arabia, South Africa

Info:

The Electrification Recommendation is derived from two aspects: each country's EV Readiness assessment (based on factors such as Electric Vehicle market share, environmental consciousness, GDP, etc.), and the Electricity Emission Factor (EF). Even if a country has a low Electricity EF, enabling CO2e emissions reduction through transitioning to BEVs, the adoption of BEVs could be challenging if the country lacks adequate infrastructure or faces financial constraints.

Since every company operates in a unique environment, this recommendation might not apply in all cases. However, it can be useful for setting a general direction.

Scopes Data - CO2e From Electricity Icon

Electricity EF Category

Panama
's Electricity EF

0.477

CO2e kg/kWh

Ref:

The IFI Dataset of Default Grid Factors v.3.0 in 2021

Panama
's Category

Rank 2 : Moderate Emission Countries (0.25 - 0.50 kg/kWh)

Info:

Countries with high Electricity EF have less benefit for electrification

  • Rank 1: 0.00 – 0.25 kg/kWh (About 0 – 38 CO2e g/km)
  • Rank 2: 0.25 – 0.50 kg/kWh (About 38 – 76 CO2e g/km)
  • Rank 3: 0.50 – 0.75 kg/kWh (About 76 – 113 CO2e g/km)
  • Rank 4: 0.75 – 1.00 kg/kWh (About 113 – 151 CO2e g/km)
  • Rank 5: More than1.00 kg/kWh (About more than 151 CO2e g/km)
Scopes Data - EV Readiness Icon

EV Readiness Category

Panama
's Category

Rank 5 : Very Challenging Environment for EV Adoption

Market Share information
Scopes Data - BEV Icon
2022 BEV

0.4

%

2023 BEV

0.3

%

Scopes Data - HEV Icon
2022 HEV

1.3

%

2023 HEV

0.9

%

Scopes Data - Non-ICE Icon
2022 Non-ICE

1.8

%

2023 Non-ICE

1.3

%

HEV: Only Full Hybrid Vehicles (Does not include
Mild Hybrid Vehicles)

Non-ICE: Total of BEV (Battery Electric Vehicles), PHEV (Plug-in Hybrid Electric Vehicles), HEV (Hybrid Electric Vehicles), and MHEV (Mild Hybrid Electric Vehicles)

2022 EPI Results
Rank

47

/180

Score

50.5

2022 EPI Results : Environmental Performance Index(EPI) provides a quantitative basis for comparing, analyzing, and understanding environmental performance for 180 countries.

Ref:Wolf, M. J., Emerson, J. W., Esty, D. C., de Sherbinin, A., Wendling, Z. A., et al. (2022). 2022 Environmental Performance Index. New Haven, CT: Yale Center for Environmental Law & Policy. epi.yale.edu

Introduction to Sustainable Fleet Management and Electrification Efforts

Panama is at the nascent stages of embracing sustainable fleet management and the electrification of vehicles, reflecting a growing awareness of environmental sustainability and CO2 emission reduction. Despite being categorized as facing a very challenging environment for EV adoption, Panama's efforts towards incorporating electric buses and taxis signal the beginning of a significant shift. The country's moderate electricity emission factor provides a conducive backdrop for this transition, offering a potential reduction in CO2e emissions by shifting from internal combustion engine vehicles to battery electric vehicles (BEVs). This initial step towards electrification illustrates Panama's commitment to exploring sustainable transportation solutions, despite the infrastructural and economic challenges ahead.

Current Vehicle Landscape: Preferences and Powertrain Segments

The vehicle landscape in Panama is predominantly dominated by internal combustion engine (ICE) vehicles, with models like the Toyota Corolla, Nissan Sentra, and Toyota Hilux leading in popularity. These preferences indicate a strong inclination towards reliability and brand reputation. However, the landscape is beginning to show signs of diversification with the introduction of Hybrid Electric Vehicles (HEVs) and a modest presence of Battery Electric Vehicles (BEVs), such as the BMW iX and BYD Auto Yuan PLUS. Despite the slow growth, these segments represent a pivotal step towards diversification and sustainability in Panama's vehicle market. The current mix showcases a traditional preference for ICE vehicles across various segments, from compact sedans to SUVs and pickups, but also hints at the emerging interest in more sustainable powertrains. This evolution in vehicle preferences and powertrain segments sets the stage for a broader acceptance and adoption of electric and hybrid vehicles, marking the early stages of a shift towards a more sustainable transportation ecosystem in Panama.

Panama

Grid.js Table

HEV: Only Full Hybrid Vehicles (Does not include
Mild Hybrid Vehicles)

Non-ICE: Total of BEV (Battery Electric Vehicles), PHEV (Plug-in Hybrid Electric Vehicles), HEV (Hybrid Electric Vehicles), and MHEV (Mild Hybrid Electric Vehicles)

Electric Vehicle Market Overview and Trends

Panama's electric vehicle (EV) market is in its early stages but shows promising signs of growth. The market share for Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) remains low, yet there's an observable increase in interest and adoption, particularly in the context of a 0.8% plug-in market share in the first half of 2023. This burgeoning interest is underscored by the introduction of electric buses and taxis, reflecting a governmental push towards electric mobility. However, the EV market faces significant challenges, including a very challenging environment for EV adoption, characterized by underdeveloped infrastructure and low environmental awareness. Despite these hurdles, the gradual increase in BEV and PHEV sales points to a growing recognition of the benefits of electric mobility. The market is at a crucial juncture, with the potential for rapid growth if supported by targeted policies, infrastructure development, and increased consumer awareness.

Energy Context: Electricity Emission Factors and Implications for Electrification

Panama's moderate electricity emission factor of 0.477 kg CO2e/kWh provides a relatively favorable backdrop for the electrification of transportation. This factor reflects a mixed energy production landscape, incorporating renewable energy sources alongside traditional fossil fuels. The implications for vehicle electrification are significant, offering the potential to reduce CO2e emissions by about 50% to 75% when switching from traditional ICE vehicles to BEVs. This transition is particularly impactful for compact vehicles, highlighting the environmental benefits of electrification within Panama's specific energy context. However, the full potential of these reductions depends on further diversification of the energy mix towards renewable sources, emphasizing the interconnectedness of transportation electrification and energy policy.

Challenges and Opportunities in EV Adoption

Panama's journey towards electric vehicle (EV) adoption is marked by a spectrum of challenges and opportunities. The primary obstacles include a very challenging environment characterized by low to moderate environmental awareness, limited infrastructure development, and economic barriers that hinder the widespread adoption of EVs. The modest market share of BEVs and PHEVs, alongside the slow pace of infrastructure development, underscores the need for targeted initiatives to accelerate the transition to electric mobility. Despite these challenges, Panama possesses significant opportunities to become a leader in the electrification of transportation in Latin America. The country's strategic investments in electric buses and taxis, coupled with its moderate electricity emission factor, lay the groundwork for a more sustainable transportation future. Furthermore, Panama's geographical position and economic dynamics present unique opportunities to leverage renewable energy sources, enhancing the environmental benefits of EVs. Addressing the infrastructural and economic challenges through comprehensive policies, incentives, and public-private partnerships could catalyze a significant shift towards electric mobility, paving the way for reduced CO2 emissions and a greener transportation ecosystem.

Additional Insights: Shaping the Future of Transportation

Panama's efforts towards sustainable fleet management and vehicle electrification are shaping the future of transportation in the country. Despite facing significant challenges, including a very challenging environment for EV adoption and underdeveloped infrastructure, Panama's early steps towards electric mobility demonstrate a commitment to environmental sustainability. The gradual increase in electric vehicle sales and initiatives to introduce electric buses and taxis highlight the potential for growth and innovation in Panama's transportation sector. As Panama continues to explore and implement strategies for electrification, the country's journey offers valuable insights into the complexities of transitioning to a more sustainable transportation system, emphasizing the need for integrated approaches that address both infrastructural and economic barriers.

Country Case Study

The "Base Fleet" percentage is set according to the sales ratio of each powertrain in Panama for the year 2023. (For countries where sales ratios cannot be obtained, it is assumed all are ICE vehicles.) The "Recommended Fleet" is designed to be realistic (based on a rank determined by the Electricity Emission Factor Category and EV Readiness Category, deciding a practical range) and efficient in reducing CO2e emissions. It is not expected that the entire fleet will switch to this mix at once but rather after one or two renewal cycles over about 4 to 8 years, considering the usual fleet renewal period is around 4 years. This is viewed as a recommendation for the fleet composition in 4 to 8 years.

The calculation of CO2e emissions is based on a fleet of 100 vehicles traveling an average of 30,000 km per year. Therefore, if your company's fleet size in Panama is 1,000 vehicles, multiplying the results by 10 will give you an approximate value. For fuel, it is assumed all vehicles use petrol (2345.02 CO2e g/L), and for electricity, the average emission factor of Panama is used. For PHEVs, it is calculated assuming 50% electricity usage and 50% fuel usage.

Analysis of Fleet Transition from Current State to Sustainable Future

This refers to the average CO2e emissions per kilometer calculated based on the actual energy (Fuel and Electricity) used. It also takes into account the size of the vehicles used in Panama's fleet.

Scopes Data - ICE Icon

ICE

(CO2e g/km)

Scopes Data - HEV Icon

HEV

(CO2e g/km)

Scopes Data - PHEV Icon

PHEV

(CO2e g/km)

Scopes Data - BEV Icon

BEV

(CO2e g/km)

ICE

HEV

PHEV

BEV

Panama stands on the cusp of a significant transformation in corporate fleet management, steering towards a sustainable and environmentally friendly future. Currently, the fleet is predominantly comprised of Internal Combustion Engine (ICE) vehicles, totaling 99 units. This scenario mirrors the traditional reliance on fossil fuels, presenting a substantial environmental footprint. The proposed transition envisions a drastic reduction of ICE vehicles to just 12, indicating a pivotal shift towards minimizing carbon emissions and promoting sustainability.

Hybrid Electric Vehicles (HEVs) are positioned as the cornerstone of this transformation, with their numbers surging from a single unit to 88. This strategic shift acknowledges Panama's current energy landscape, characterized by a moderate electricity emission factor, and positions HEVs as a practical intermediary step towards electrification. Despite facing a challenging environment for Electric Vehicle (EV) adoption, marked by low EV sales share and infrastructural hurdles, Panama's transition strategy leverages HEVs to navigate these challenges effectively.

The transition does not currently incorporate Battery Electric Vehicles (BEVs), reflecting the pragmatic assessment of Panama's readiness for full electrification. This cautious approach underscores the complexities of transitioning in a very challenging EV adoption environment, emphasizing the importance of gradual, strategic shifts towards greener alternatives. This planned transformation aligns with global sustainability goals and demonstrates Panama's commitment to reducing its transportation sector's environmental impact, even within its unique context.

Analysis of CO2 Emission Reductions Through Fleet Transition

CO2e From Fuel  (Scope 1)

CO2e From Electricity (Scope 2)

Base Fleet Mix Case
Reasonable Recommended Fleet Mix Case

The envisioned fleet transition in Panama heralds a substantial decrease in CO2 emissions, underscoring the environmental benefits of shifting towards more sustainable vehicle technologies. Initially, the fleet, dominated by ICE vehicles, is responsible for a significant CO2 emission footprint, totaling 350 tons from fuel combustion alone. The transition plan sets forth a significant reduction in ICE vehicles, leading to a marked decrease in fuel-based CO2 emissions to 42 tons.

Incorporating a significant number of Hybrid Electric Vehicles (HEVs) into the fleet, increasing their presence from 1 to 88 units, emerges as a key strategy in this transition. HEVs, which utilize both gasoline and electric power, offer a more efficient alternative to traditional ICE vehicles, resulting in a projected 233 tons of CO2 emissions. This shift reflects a nuanced approach to reducing the fleet's environmental impact, leveraging the current energy mix and infrastructural readiness of Panama.

This strategic realignment within the fleet leads to a total CO2 emission reduction to 275 tons for the recommended fleet mix, showcasing a notable improvement in environmental performance. This transition not only demonstrates Panama's commitment to reducing its carbon footprint but also sets a precedent for future enhancements. As Panama continues to develop its infrastructure for electric mobility and potentially increases the share of renewable energy in its electricity mix, the groundwork laid by this transition will enable further reductions in CO2 emissions, contributing to a more sustainable future.

Comparative Analysis of CO2e Emissions Across Fleet Scenarios

CO2e From Fuel  (Scope 1)

CO2e From Electricity (Scope 2)

The comparison of CO2e emissions across various fleet scenarios reveals the impact of different electrification strategies in Panama, set against its moderate electricity emission factor. The base fleet mix, heavily reliant on ICE vehicles, results in 353 tons of CO2e emissions, establishing a baseline for improvement.

The shift to a recommended fleet mix, emphasizing a substantial increase in HEVs and a reduction in ICE vehicles, lowers total emissions to 275 tons of CO2e. This scenario reflects the practical considerations of Panama's current stage of EV infrastructure development and energy mix, showcasing the effectiveness of HEVs in reducing emissions within the given constraints.

Exploring other scenarios, an all-ICE fleet scenario would maintain emissions at 353 tons of CO2e, highlighting the urgency of transitioning away from fossil fuels. An all-HEV fleet represents a significant improvement, reducing emissions to 265 tons of CO2e and underscoring the potential of hybrid technology as an interim solution in Panama's context.

The potential scenarios involving Plug-in Hybrid Electric Vehicles (PHEVs) and Battery Electric Vehicles (BEVs) with varying degrees of renewable energy integration illustrate a spectrum of emission outcomes. An all-PHEV fleet scenario shows a balanced approach, with emissions at 272 tons of CO2e. Meanwhile, transitioning to an all-BEV fleet, depending on the share of renewable energy, can dramatically reduce emissions, from 189 tons (current energy mix) to as low as 47 tons (75% renewable electricity).

https://scopesdata.com/sustainability-country-information/panama-2023

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