Informal economy

From Wikipedia, the free encyclopedia

The informal sector of the economy, informal economy, or grey economy is the part of an economy that is neither taxed nor monitored by any form of government. Unlike the formal economy, activities of the informal economy are not included in a country's gross national product (GNP) or gross domestic product (GDP). The informal sector can be described as a grey market in labour.

 

Other concepts that can be characterized as informal sector can include the black market (shadow economy, underground economy), agorism, and System D. Associated idioms include "under the table", "off the books", and "working for cash".

Although the informal sector makes up a significant portion of the economies in developing countries, it is often stigmatized as troublesome and unmanageable. However, the informal sector provides critical economic opportunities for the poor and has been expanding rapidly since the 1960s. Integrating the informal economy into the formal sector is an important policy challenge.

Definition

Black market peddler on graffiti, Kharkiv

 

The original use of the term 'informal sector' is attributed to the economic development model put forward by W. Arthur Lewis, used to describe employment or livelihood generation primarily within the developing world. It was used to describe a type of employment that was viewed as falling outside of the modern industrial sector. An alternative definition uses job security as the measure of formality, defining participants in the informal economy as those "who do not have employment security, work security and social security". While both of these definitions imply a lack of choice or agency in involvement with the informal economy, participation may also be driven by a wish to avoid regulation or taxation. This may manifest as unreported employment, hidden from the state for tax, social security or labour law purposes, but legal in all other aspects. Edgar L. Feige has proposed a taxonomy for describing unobserved economies including the informal economy as being characterized by some form of non-compliant behavior with an institutional set of rules. Feige argues that circumvention of labor market regulations specifying minimum wages, working conditions, social security, unemployment and disability benefits gives rise to an informal economy that deprives some workers of deserved benefits while conveying undeserved benefits to others. 

The term is also useful in describing and accounting for forms of shelter or living arrangements that are similarly unlawful, unregulated, or not afforded protection of the state. 'Informal economy' is increasingly replacing 'informal sector' as the preferred descriptor for this activity.

Informality, both in housing and livelihood generation has often been seen as a social ill, and described either in terms of what participant's lack, or wish to avoid. A countervailing view, put forward by prominent Dutch sociologist Saskia Sassen is that the modern or new 'informal' sector is the product and driver of advanced capitalism and the site of the most entrepreneurial aspects of the urban economy, led by creative professionals such as artists, architects, designers and software developers. While this manifestation of the informal sector remains largely a feature of developed countries, increasingly systems are emerging to facilitate similarly qualified people in developing countries to participate.

Characteristics

Street vendor in Colombia

 

Waste picker in Indonesia

 

Street vendor in India

 

The informal sector is largely characterized by several qualities: easy entry, meaning anyone who wishes to join the sector can find some sort of work which will result in cash earnings, a lack of stable employer-employee relationships, a small scale of operations, and skills gained outside of a formal education. Workers who participate in the informal economy are typically classified as employed. The type of work that makes up the informal economy is diverse, particularly in terms of capital invested, technology used, and income generated. The spectrum ranges from self-employment or unpaid family labor to street vendors, shoe shiners, and junk collectors. On the higher end of the spectrum are upper-tier informal activities such as small-scale service or manufacturing businesses, which have more limited entry. The upper-tier informal activities have higher set-up costs, which might include complicated licensing regulations, and irregular hours of operation. However, most workers in the informal sector, even those are self-employed or wage workers, do not have access to secure work, benefits, welfare protection, or representation. These features differ from businesses and employees in the formal sector which have regular hours of operation, a regular location and other structured benefits.

In Ulyssea (2018) we learn that there are three views that try to explain the causes of informality. The first view argues that the informal sector is a reservoir of potentially productive entrepreneurs who are kept out of formality by high regulatory costs, most notably entry regulation. The second sees informal forms as “parasite forms” that are productive enough to survive in the formal sector but choose to remain informal to earn higher profits from the cost advantages of not complying with taxes and regulations.6 The third argues that informality is a survival strategy for low-skill individuals, who are too unproductive to ever become formal. A study on informality in Brazil shows that the first view corresponds to 9.3 percent of all informal forms, while the second (the “parasite view”) corresponds to 41.9 percent. The remaining forms correspond to low-skill entrepreneurs who are too unproductive to ever become formal and use informality as a survival strategy. These results therefore suggest that informal forms are to a large extent “parasite forms” and therefore eradicating them (e.g., through tighter enforcement)could in principle produce positive effects on the economy.

The most prevalent types of work in the informal economy are home-based workers and street vendors. Home-based workers are more numerous while street vendors are more visible. Combined, the two fields make up about 10–15% of the non-agricultural workforce in developing countries and over 5% of the workforce in developed countries.

While participation in the informal sector can be stigmatized, many workers engage in informal ventures by choice, for either economic or non-economic reasons. Economic motivations include the ability to evade taxes, the freedom to circumvent regulations and licensing requirements, and the capacity to maintain certain government benefits. A study of informal workers in Costa Rica illustrated other economic reasons for staying in the informal sector, as well as non-economic factors. First, they felt they would earn more money through their informal sector work than at a job in the formal economy. Second, even if workers made less money, working in the informal sector offered them more independence, the chance to select their own hours, the opportunity to work outside and near friends, etc. While jobs in the formal economy might bring more security and regularity, or even pay better, the combination of monetary and psychological rewards from working in the informal sector proves appealing for many workers.

The informal sector was historically recognized as an opposition to formal economy, meaning it included all income earning activities beyond legally regulated enterprises. However, this understanding is too inclusive and vague, and certain activities that could be included by that definition are not considered part of the informal economy. As the International Labour Organization defined the informal sector in 2002, the informal sector does not include the criminal economy. While production or employment arrangements in the informal economy may not be strictly legal, the sector produces and distributes legal goods and services. The criminal economy produces illegal goods and services. The informal economy also does not include the reproductive or care economy, which is made up of unpaid domestic work and care activities. The informal economy is part of the market economy, meaning it produces goods and services for sale and profit. Unpaid domestic work and care activities do not contribute to that, and as a result, are not a part of the informal economy.

History

Black market in Shinbashi, Japan, 1946

 

Governments have tried to regulate aspects of their economies for as long as surplus wealth has existed which is at least as early as Sumer. Yet no such regulation has ever been wholly enforceable. Archaeological and anthropological evidence strongly suggests that people of all societies regularly adjust their activity within economic systems in attempt to evade regulations. Therefore, if informal economic activity is that which goes unregulated in an otherwise regulated system then informal economies are as old as their formal counterparts, if not older. The term itself, however, is much more recent. The optimism of the modernization theory school of development had led most people in the 1950s and 1960s to believe that traditional forms of work and production would disappear as a result of economic progress in developing countries. As this optimism proved to be unfounded, scholars turned to study more closely what was then called the traditional sector. They found that the sector had not only persisted, but in fact expanded to encompass new developments. In accepting that these forms of productions were there to stay, scholars and some international organizations quickly took up the term informal sector (later known as the informal economy or just informality), which is credited to the British anthropologist Keith Hart in a 1971 study on Ghana published in 1973, and was coined by the International Labour Organization in a widely read study on Kenya in 1972.

In "The Underground Economies: Tax Evasion and Information Distortion" Edgar L. Feige examined the economic implications of a shift of economic activity from the observed to the non-observed sector of the economy. Such a shift not only reduces the government's ability to collect revenues, it can also bias the nation's information systems and therefore lead to misguided policy decisions. The book examines alternative means of estimating the size of various unobserved economies and examines their consequences in both socialist and market oriented economies. Feige goes on to develop a taxonomic framework that clarifies the distinctions between informal, illegal, unreported and unrecorded economies, and identifies their conceptual and empirical linkages and the alternative means of measuring their size and trends. Since then the informal sector has become an increasingly popular subject of investigation, not just in economics, but also in sociology, anthropology and urban planning. With the turn towards so called post-fordist modes of production in the advanced developing countries, many workers were forced out of their formal sector work and into informal employment. In a seminal collection of articles, The Informal Economy. Studies in Advanced and Less Developed Countries, Alejandro Portes and collaborators emphasized the existence of an informal economy in all countries by including case studies ranging from New York City and Madrid to Uruguay and Colombia.

Arguably one of the more influential books on the informal economy is Hernando de Soto's El otro sendero (1986), which was published in English in 1989 as The Other Path with a preface by Peruvian writer Mario Vargas Llosa. De Soto and his team argue that excessive regulation in the Peruvian (and other Latin American) economies force a large part of the economy into informality and thus prevent economic development. While accusing the ruling class of 20th century mercantilism, de Soto admires the entrepreneurial spirit of the informal economy. In a widely cited experiment, his team tried to legally register a small garment factory in Lima. This took more than 100 administrative steps and almost a year of full-time work. Feige's review of the Other Path places the work in the context of the informal economy literature. Whereas de Soto's work is popular with policymakers and champions of free market policies like The Economist, some scholars of the informal economy have criticized it both for methodological flaws and normative bias.

In the second half of the 1990s many scholars have started to consciously use the term "informal economy" instead of "informal sector" to refer to a broader concept that includes enterprises as well as employment in developing, transition, and advanced industrialized economies.

Among the surveys about the size and development of the shadow economy (mostly expressed in percent of official GDP) are those by Feige (1989), and Schneider and Enste (2000). In these surveys an intensive discussion about the various estimation procedures of the size of the shadow economy as well as a critical evaluation of the size of the shadow economy and the consequences of the shadow economy on the official one can be found. The most recent survey paper on the subject reviews the meaning and measurement of unobserved economies and is particularly critical of estimates of the size of the so-called "shadow economy" that employ Multiple Indicator multiple cause methods which treat the shadow economy as a latent variable.

Statistics

The Narantuul Market in Ulaanbaatar, Mongolia, colloquially also called Khar Zakh (Black Market)

 

The informal economy under any governing system is diverse and includes small-scaled, occasional members (often street vendors and garbage recyclers) as well as larger, regular enterprises (including transit systems such as that of Lima, Peru). Informal economies include garment workers working from their homes, as well as informally employed personnel of formal enterprises. Employees working in the informal sector can be classified as wage workers, non-wage workers, or a combination of both.

Statistics on the informal economy are unreliable by virtue of the subject, yet they can provide a tentative picture of its relevance. For example, informal employment makes up 58.7% of non-agricultural employment in Middle East - North Africa, 64.6% in Latin America, 79.4% in Asia, and 80.4% in sub-Saharan Africa. If agricultural employment is included, the percentages rise, in some countries like India and many sub-Saharan African countries beyond 90%. Estimates for developed countries are around 15%. In recent surveys, the informal economy in many regions has declined over the past 20 years to 2014. In Africa, the share of the informal economy has decreased to an estimate of around 40% of the economy.

In developing countries, the largest part of informal work, around 70%, is self-employed. Wage employment predominates. The majority of informal economy workers are women. Policies and developments affecting the informal economy have thus a distinctly gendered effect.

Estimated size of countries' informal economy

To estimate the size and development of any underground or shadow economy is quite a challenging task since participants in such economies attempt to hide their behaviors. One must also be very careful to distinguish whether one is attempting to measure the unreported economy, normally associated with tax evasion, or the unrecorded or non observed economy, associated with the amount of income that is readily excluded from national income and produce accounts due to the difficulty of measurement. There are numerous estimates of tax noncompliance as measured by tax gaps produced by audit methods or by "top down" methods Friedrich Schneider and several co-authors claim to have estimated the size and trend of what they call the "shadow economy" worldwide by a currency demand /MIMIC model approach that treats the "shadow economy" as a latent variable.Trevor S. Breusch has critiqued this work warning the profession that" The literature applying this model to the underground economy abounds with alarming Procrustean tendencies. Various kinds of sliding and scaling of the results are carried out in the name of "benchmarking", although these operations are not always clearly documented. The data are typically transformed in ways that are not only undeclared but have the unfortunate effect of making the results of the study sensitive to the units in which the variables are measured. The complexity of the estimation procedure, together with its deficient documentation, leave the reader unaware of how these results have been shorted to fit the bed of prior belief. There are many other results in circulation for various countries, for which the data cannot be identified and which are given no more documentation than "own calculations by the MIMIC method". Readers are advised to adjust their valuation of these estimates accordingly. Edgar L. Feige finds that Schneider's shadow economy "estimates suffer from conceptual flaws, apparent manipulation of results and insufficient documentation for replication, questioning their place in the academic, policy and popular literature".

Comparison of shadow economies in EU countries according to estimates by Friedrich Schneider

German shadow economy 1975–2015, Friedrich Schneider University Linz

 

Since the establishment of the Single Market (Maastricht 1993) the total EU shadow economy has been growing systematically to approx. 1.9 trillions € in preparation of the EURO driven by the motor of the European shadow economy, Germany, which has been generating approx. 350 bn € per annum since then (see also diagram on the right). Hence, the EU financial economy has developed parallel an efficient tax haven bank system to protect and manage its growing shadow economy. As per the Financial Secrecy Index (FSI 2013) currently Germany and some neighbouring countries, range among the world's top tax haven countries. 

The diagram below clearly shows that national informal economies per capita vary only moderately in most EU countries. It is because market sectors with high informal part (above 45%) like "building and construction" or "agriculture" are rather homogeneously distributed over the countries, whereas sectors with low informal part (below 30%) like "financial and business" (in Switzerland, Luxembourg), "public and personal services" (in Scandinavian countries) as well as "retail, wholesale and repair" are dominant in countries with extremely high GDP per capita i.e. industrially highly developed countries. The diagram also shows that in absolute numbers the shadow economy per capita is related to the wealth of a society (GDP). Generally spoken, the higher GDP the higher shadow economy, albeit non-proportional.

There is a direct relation between high self-employment of a country to its above average shadow economy. In highly industrialized countries where shadow economy (per capita) is high and the huge private sector is shared by an extremely small elite of entrepreneurs a considerable part of tax evasion is practised by a much smaller number of (elite) people. As an example German shadow economy in 2013 was 4.400 € per capita, which was the 9th highest place in EU, whereas according to OECD only 11.2% of employed people were self-employed (place 18). On the other hand, Greece's shadow economy was only 3.900 € p.c (place 13) but self-employment was 36.9% (place 1).

An extreme example of shadow economy camouflaged by the financial market is Luxembourg where the relative annual shadow economy is only 8% of the GDP which is the second lowest percentage (2013) of all EU countries whereas its absolute size (6.800 € per capita) is the highest.

Map of the national shadow economies per capita in EU countries. The red scale represents the numbers displayed by the red bars of the diagram on the left.

 

Social and political implications and issues

According to development and transition theories, workers in the informal sector typically earn less income, have unstable income, and do not have access to basic protections and services. The informal economy is also much larger than most people realize, with women playing a huge role. The working poor, particularly women, are concentrated in the informal economy, and most low-income households rely on the sector to provide for them. However, informal businesses can also lack the potential for growth, trapping employees in menial jobs indefinitely. On the other hand, the informal sector can allow a large proportion of the population to escape extreme poverty and earn an income that is satisfactory for survival. Also, in developed countries, some people who are formally employed may choose to perform part of their work outside of the formal economy, exactly because it delivers them more advantages. This is called 'moonlighting'. They derive social protection, pension and child benefits and the like, from their formal employment, and at the same time have tax and other advantages from working on the side.

From the viewpoint of governments, the informal sector can create a vicious cycle. Being unable to collect taxes from the informal sector, the government may be hindered in financing public services, which in turn makes the sector more attractive. Conversely, some governments view informality as a benefit, enabling excess labor to be absorbed, and mitigating unemployment issues. Recognizing that the informal economy can produce significant goods and services, create necessary jobs, and contribute to imports and exports is critical for governments.

As the work in informal sector is not monitored or registered with the state, its workers are not entitled to social security, nor can they form trade unions.

Gender

A group of Indian women making bamboo products they intend to sell in Dumka, Jharkhand

 

A girl selling plastic containers for carrying Ganges water, Haridwar, India

 

Women tend to make up the greatest portion of the informal sector, often ending up in the most erratic and corrupt segments of the sector. In developing countries, most of the female non-agricultural labor force is in the informal sector. Major occupations in the informal sector include home-based workers (such as dependent subcontract workers, independent own account producers, and unpaid workers in family businesses) and street vendors, which both are classified in the informal sector. In India, women working in the informal sector often work as ragpickers, domestic workers, coolies, vendors, beauticians, construction laborers, and garment workers.

Female representation in the informal sector is attributed to a variety of factors. One such factor is that employment in the informal sector is the source of employment that is most readily available to women. A 2011 study of poverty in Bangladesh noted that cultural norms, religious seclusion, and illiteracy among women in many developing countries, along with a greater commitment to family responsibilities, prevent women from entering the formal sector.

According to a 2002 study commissioned by the ILO, the connection between employment in the informal economy and being poor is stronger for women than men. While men tend to be over-represented in the top segment of the informal sector, women overpopulate the bottom segment. Men are more likely to have larger-scale operations and deal in non-perishable items while few women are employers who hire others. Instead, women are more likely to be involved in smaller-scale operations and trade food items. Women are under-represented in higher-income employment positions in the informal economy and over-represented in lower-income statuses. As a result, the gender gap in terms of wage is higher in the informal sector than the formal sector. Labor markets, household decisions, and states all propagate this gender inequality.

Political power of agents

Workers in the informal economy lack a significant voice in government policy. Not only is the political power of informal workers limited, but the existence of the informal economy creates challenges for other politically influential actors. For example, the informal workforce is not a part of any trade union, nor does there seem a push or inclination to change that status. Yet the informal economy negatively affects membership and investment in the trade unions. Laborers who might be formally employed and join a union for protection may choose to branch out on their own instead. As a result, trade unions are inclined to oppose the informal sector, highlighting the costs and disadvantages of the system. Producers in the formal sector can similarly feel threatened by the informal economy. The flexibility of production, low labor and production costs, and bureaucratic freedom of the informal economy can be seen as consequential competition for formal producers, leading them to challenge and object to that sector. Last, the nature of the informal economy is largely anti-regulation and free of standard taxes, which diminishes the material and political power of government agents. Whatever the significance of these concerns are, the informal sector can shift political power and energies.

Poverty

Informal vendors in Uttar Pradesh

 

The relationship between the informal sectors and poverty certainly is not simple nor does a clear, causal relationship exist. An inverse relationship between an increased informal sector and slower economic growth has been observed though. Average incomes are substantially lower in the informal economy and there is a higher preponderance of impoverished employees working in the informal sector. In addition, workers in the informal economy are less likely to benefit from employment benefits and social protection programs. For instance, a survey in Europe shows that the respondents who have difficulties to pay their household bills have worked informally more often in the past year than those that do not (10% versus 3% of the respondents).

Children and child labour

A girl weaving a rug in Egypt

 

Children work in the informal economy in many parts of the world. They often work as scavengers (collecting recyclables from the streets and dump sites), day laborers, cleaners, construction workers, vendors, in seasonal activities, domestic workers, and in small workshops; and often work under hazardous and exploitative conditions. It is common for children to work as domestic servants across Latin America and parts of Asia. Such children are very vulnerable to exploitation: often they are not allowed to take breaks or are required to work long hours; many suffer from a lack of access to education, which can contribute to social isolation and a lack of future opportunity. UNICEF considers domestic work to be among the lowest status, and reports that most child domestic workers are live-in workers and are under the round-the-clock control of their employers. Some estimates suggest that among girls, domestic work is the most common form of employment.

During times of economic crisis many families experience unemployment and job loss, thus compelling adolescents to supplement their parents’ income by selling goods or services to contribute to the family economy. At the core, youth must compromise their social activities with other youth, and instead prioritize their participation in the informal economy, thus manufacturing a labor class of adolescents who must take on an adult role within the family. Although it revolves around a negative stigma of deviance, for a majority of individuals, mostly people of color, the informal economy is not an ideal choice but a necessity for survival. Participating in the informal economy is becoming normalized due to the lack of resources available in low-income and marginalized communities, and no matter how hard they have to work, will not advance in the economic hierarchy. When a parent is either unemployed or their job is on low demand, they are compelled to find other methods to provide for themselves but most importantly their children. Yet, due to all the limitations and the lack of jobs, children eventually cooperate with their parent/s and also work for their family's economic well-being. By having to assist in providing for the family, children miss out on their childhood because instead of engaging in activities other youth their age participate in, they are obligated to take on an adult role, put the family first and contribute to the family's well-being.

The participation of adolescents in the informal economy, is a contentious issue due to the restrictions and laws in place for youth have to work. One of the main dilemmas that arise when children engage in this type of work, is that privileged adults, denounce children participation as forced labor. Due to the participant being young, the adults are viewed as “bad” parents because first they cannot provide for their children, second they are stripping the child from a “normal” childhood, and third, child labor is frowned upon. Furthermore, certain people believe that children should not be working because children do not know the risks and the pressure of working and having so much responsibility, but the reality is that for most families, the children are not being forced to work, rather they choose to help sustain their family’s income. The youth become forced by their circumstances, meaning that because of their conditions, they do not have much of a choice. Youth have the capability to acknowledge their family’s financial limitations and many feel that it is their moral obligation to contribute to the family income. Thus, they end up working without asking for an allowance or wage, because kids recognize that their parents cannot bring home enough income alone, thus their contribution is necessary and their involvement becomes instrumental for their family's economic survival.

Emir Estrada and Pierrette Hondagneu-Sotelo have gone to predominantly Latinx communities of Los Angeles, CA. to observe the daily actions of street vendors. They analyze why adults participate in the informal economy. Although it revolves around a negative stigma of deviance, for a majority of individuals, the informal economy is not an ideal choice but an action necessary for survival. While witnessing the constant struggle of Latinx individuals to make ends meet and trying to earn money to put food on the table, they witnessed how the participation of children either benefits the family or even hurt it. Through field notes derived from their participation, Estrada states, “children are not the ‘baggage’ that adult immigrants simply bring along. In the case of street vendors, we see that they are also contributors to family processes”. Estrada's findings demonstrate that children are working in order to help contribute to their household income, but most importantly, they play a vital role when it comes to language barriers. The kids are not simply workers, they achieve an understanding of how to manage a business and commerce.

Expansion and growth

The division of the economy into formal and informal sectors has a long heritage. Arthur Lewis in his seminal work Economic Development with Unlimited Supply of Labour, published in the 1950s, was the celebrated paradigm of development for the newly independent countries in the 1950s and 1960s. The model assumed that the unorganized sector with the surplus labour will gradually disappear as the surplus labour gets absorbed in the organised sector. The Lewis model is drawn from the experience of capitalist countries in which the share of agriculture and unorganized sector showed a spectacular decline, but it didn't prove to be true in many developing countries, including India. On the other hand, probabilistic migration models developed by Harris and Todaro in the 1970s envisaged the phenomenon of the informal sector as a transitional phase through which migrants move to the urban centers before shifting to formal sector employment. Hence it is not a surprise to see policy invisibility in the informal sector. Curiously, the informal sector does not find a permanent place in the Marxian theory since they anticipate the destruction of the pre-capitalist structure as a result of the aggressive growth of capitalism. To them, in the course of development, 'the small fish is being eaten by the big fish'. Therefore, neither in the Marxian theory nor in the classical economic theory, the unorganized sector holds a permanent place in the economic literature.

The informal sector has been expanding as more economies have started to liberalize. This pattern of expansion began in the 1960s when a lot of developing countries didn't create enough formal jobs in their economic development plans, which led to the formation of an informal sector that didn't solely include marginal work and actually contained profitable opportunities. In the 1980s, the sector grew alongside formal industrial sectors. In the 1990s, an increase in global communication and competition led to a restructuring of production and distribution, often relying more heavily on the informal sector.

Over the past decade, the informal economy is said to account for more than half of the newly created jobs in Latin America. In Africa it accounts for around eighty percent. Many explanations exist as to why the informal sector has been expanding in the developing world throughout the past few decades. It is possible that the kind of development that has been occurring has failed to support the increased labor force in a formal manner. Expansion can also be explained by the increased subcontracting due to globalization and economic liberalization. Finally, employers could be turning toward the informal sector to lower costs and cope with increased competition.

Such extreme competition between industrial countries occurred after the expansion of the EC to markets of the then new member countries Greece, Spain and Portugal, and particularly after the establishment of the Single European Market (1993, Treaty of Maastricht). Mainly for French and German corporations it led to systematic increase of their informal sectors under liberalized tax laws, thus fostering their mutual competitiveness and against small local competitors. The continuous systematic increase of the German informal sector was stopped only after the establishment of the EURO and the execution of the Summer Olympic Games 2004, which has been the first and (up to now) only in the Single Market. Since then the German informal sector stabilized on the achieved 350 bn € level which signifies an extremely high tax evasion for a country with 90% salary-employment. 

According to the Swedish International Development Cooperation Agency (SIDA), the key drivers for the growth of the informal economy in the twenty-first century include:

• limited absorption of labour, particularly in countries with high rates of population or urbanisation
• excessive cost and regulatory barriers of entry into the formal economy, often motivated by corruption
• weak institutions, limiting education and training opportunities as well as infrastructure development
• increasing demand for low-cost goods and services
• migration motivated by economic hardship and poverty
• difficulties faced by women in gaining formal employment

Historically, development theories have asserted that as economies mature and develop, economic activity will shift from the informal to the formal sphere. In fact, much of the economic development discourse is centered around the notion that formalization indicates how developed a country's economy is; for more on this discussion see the page on fiscal capacity. However, evidence suggests that the progression from informal to formal sectors is not universally applicable. While the characteristics of a formalized economy – full employment and an extensive welfare system – have served as effective methods of organizing work and welfare for some nations, such a structure is not necessarily inevitable or ideal. Indeed, development appears to be heterogeneous in different localities, regions, and nations, as well as the type of work practiced. For example, at one end of the spectrum of the type of work practiced in the informal economy are small-scale businesses and manufacturing; on the other "street vendors, shoe shiners, junk collectors and domestic servants." Regardless of how the informal economy develops, its continued growth that it cannot be considered a temporary phenomenon.

Policy suggestions

Informal beverage vendor in Guatemala City

 

As it has been historically stigmatized, policy perspectives viewed the informal sector as disruptive to the national economy and a hindrance to development. The justifications for such criticisms include viewing the informal economy as a fraudulent activity that results in a loss of revenue from taxes, weakens unions, creates unfair competition, leads to a loss of regulatory control on the government's part, reduces observance of health and safety standards, and reduces the availability of employment benefits and rights. These characteristics have led to many nations pursuing a policy of deterrence with strict regulation and punitive procedures.

In a 2004 report, the Department for Infrastructure and Economic Cooperation under SIDA explained three perspectives on the role of government and policy in relation to the informal economy.

• Markets function efficiently on their own; government interference would only lead to inefficiency and dysfunction.
• The informal economy functions outside of government control, largely because those who participate wish to avoid regulation and taxation.
• The informal economy is enduring; suitable regulation and policies are required.

As informal economy has significant job creation and income generation potential, as well as the capacity to meet the needs of poor consumers by providing cheaper and more accessible goods and services, many stakeholders subscribe to the third perspective and support government intervention and accommodation. Embedded in the third perspective is the significant expectation that governments will revise policies that have favored the formal sphere at the expense of the informal sector.

Theories of how to accommodate the informal economy argue for government policies that, recognizing the value and importance of the informal sector, regulate and restrict when necessary but generally work to improve working conditions and increase efficiency and production.

The challenge for policy interventions is that so many different types of informal work exist; a solution would have to provide for a diverse range of circumstances. A possible strategy would be to provide better protections and benefits to informal sector players. However, such programs could lead to a disconnect between the labor market and protections, which would not actually improve informal employment conditions. In a 2014 report monitoring street vending, WIEGO suggested urban planners and local economic development strategists study the carrying capacity of areas regularly used by informal workers and deliver the urban infrastructure necessary to support the informal economy, including running water and toilets, street lights and regular electricity, and adequate shelter and storage facilities. That study also called for basic legal rights and protections for informal workers, such as appropriate licensing and permit practices.

An ongoing policy debate considers the value of government tax breaks for household services such as cleaning, babysitting and home maintenance, with an aim to reduce the shadow economy's impact. There are currently systems in place in Sweden and France which offer 50 percent tax breaks for home cleaning services. There has also been debate in the UK about introducing a similar scheme, with potentially large savings for middle-class families and greater incentive for women to return to work after having children. The European Union has used political measures to try and curb the shadow economy. Although no definitive solution has been established to date, the EU council has led dialogue on a platform that would combat undeclared work.

The World Bank's 2019 World Development Report on The Changing Nature of Work discusses the extension of social assistance and insurance schemes to informal workers given that, in 2018, 8 in 10 people in developing countries still receive no social assistance and 6 in 10 work informally.

Asia-Pacific

The International Labour Organization mentioned that in most developing nations located in the Asia-Pacific, the informal sector comprises a significant and vital percentage of the labor force. This sector constitutes around 60 percent of the labor force. Informal economy includes economic activities of laborers (legally and in practice) which are not or inadequately covered by official employment contracts or agreements. Informal employment means payment of wagers may not be guaranteed and retrenchment can be implemented without prior notice or compensation from employers. There are generally substandard health and safety conditions as well as nonexistence of social benefits which include sick pay, pension, and health coverage. The informal economy absorbs a larger part of the ever-growing workforce in urban hubs. In 2015, urban populations of Asian countries started to grow while the service sector also continued to increase. These developments contributed to the extensive expansion of urban informal economy in practically all of Asia.

In India, the country’s informal sector accounted for over 80 percent of the non-agricultural industry during the last 20 years. Inadequate employment denotes the option for majority of India’s citizens is to find work in the informal sector which continues to grow because of the contract system and outsourcing of production. An article in First Post (June 2018) said approximately 1.3 billion people or more than 68 percent of employed persons in the Asia-Pacific earn through the informal economy. It is prevalent in the countryside (around 85 percent) and almost 48 percent in urban locations. 2 billion of the global population (61 percent) works in the informal sector. According to an article published in Eco-Business in June 2018, the informal sector has emerged as an essential component of the economic environment of cities in this region. Henceforth, the importance of contribution of informal workers deserves recognition.

Electric vehicle conversion

From Wikipedia, the free encyclopedia

This elderly Fiat employs batteries that can be mounted in any position

 

In automobile engineering, electric vehicle conversion is the replacement of a car's combustion engine and connected components with an electric motor and batteries, to create an all-electric vehicle. Another option is to replace a large combustion engine with an electric motor (for power) and a small combustion engine (for speed), creating a hybrid electric vehicle or a plug-in hybrid electric vehicle. 

The general trend appears to be that ground vehicles will "go electric," and automakers have slowly but steadily responded to public demand by producing both hybrid electric vehicles which get 5.2–2.6 l/100 km; 45–90 mpg_‑US gasoline, and electric vehicles which get similar or better mileage by mpg equivalent efficiency rating. 

In general, commercially-manufactured electric vehicles are inhibited by the limited range per charge of batteries (up to 560 km, 350 miles), battery charge times that are slower than gasoline filling times, apparent greater initial cost over combustion engines, and potentially high service costs for used or worn-out batteries. Electric conversions are often inhibited by either the difficult labor and specialized knowledge involved in a do-it-yourself (DIY) conversion, or the expense of a purchased conversion service with conversion components, often costing US$8-12 thousand. There is a small but steadily growing DIY community for electric conversions.

Simple steps

Assumes a simple design of a DC or AC motor.

• Obtain an electric motor, electric vehicle (EV) motor controller, and batteries which match the car size and the performance characteristics (range, speed, power) desired. Smaller vehicles can use smaller ("8 inch") motors, and larger vehicles will require larger electric motors.
• Remove the combustion engine, fuel tank, muffler and exhaust, and other ICE related components.
• Keep the transmission, and design an adapter out of an aluminum plate material, or steel tubing, which will accept the electric motor and mount it to the transmission at the precise distance. Adapter plate machining (and other machining jobs) can be outsourced to a machinist.
• Design a coupler for connecting the motor shaft to the transmission.
• Mount the motor to the transmission, with coupler and adapter firmly mounted.
• Build compartments to house the batteries. Cutting out part of the auto body is possible, and steel tubing should be used to frame the compartment.
• Install the batteries and the motor controller, linking them up to the motor.

Elements of a conversion

• Almost any vehicle can be converted to electric. Many people prefer to pick a vehicle that is light and aerodynamic in order to maximize distance traveled per battery charge. There must also be adequate room and load capacity for batteries.
• If obtaining a vehicle for conversion, chose a car which has an undamaged body (unless also doing the body work).
• The battery pack, which provides a source of electrical power. The most commonly available and affordable batteries are lead-acid flooded type. Next are the AGM (Absorption Glass Mat) sealed maintenance free batteries, a little more powerful and expensive. Then there are the more exotic batteries like Ni-MH and Li-ion; more difficult to find but light and longer lasting, maintenance free, and much more expensive. The new lithium batteries are showing some promise for EVs in the near future.
• The charger which restores energy to the batteries (which may be mounted within the vehicle or at a special charging station at some fixed location)
• The power controller, which regulates the flow of energy between the battery and the electric motor(s), controlled by an electronic throttle.
• One or more electric motors and their mechanical attachment to the driveline
• Power conductors connecting the battery, controller, and motor(s)
• Accessory equipment to power auxiliary equipment such as power brakes and heating system
• Control circuitry and equipment to allow control and interlocking of the various components
• Instrumentation specific to the operation and maintenance of the conversion

Hobbyists and conversions

Eliica prototype

 

The full electric Formula Student car of the Eindhoven University of Technology

 

Hobbyists often build their own EVs by converting existing production cars to run solely on electricity. There is a cottage industry supporting the conversion and construction of BEVs by hobbyists. Universities such as the University of California, Irvine even build their own custom electric or hybrid-electric cars from scratch. 

Short-range battery electric vehicles can offer the hobbyist comfort, utility, and quickness, sacrificing only range. Short-range EVs may be built using high-performance lead–acid batteries, using about half the mass needed for a 100–130 km (60–80 miles) range. The result is a vehicle with about a 50 km (30 miles) range, which, when designed with appropriate weight distribution (40/60 front to rear), does not require power steering, offers exceptional acceleration in the lower end of its operating range, and is freeway capable and legal. But their EVs are expensive due to the higher cost for these higher-performance batteries. By including a manual transmission, short-range EVs can obtain both better performance and greater efficiency than the single-speed EVs developed by major manufacturers. Unlike the converted golf carts used for neighborhood electric vehicles, short-range EVs may be operated on typical suburban throughways (where 60–80 km/h, 35–50 mph speed limits are typical) and can keep up with traffic typical on such roads and the short "slow-lane" on-and-off segments of freeways common in suburban areas. 

Faced with chronic fuel shortage on the Gaza Strip, Palestinian electrical engineer Waseem Othman al-Khozendar invented in 2008 a way to convert his car to run on 32 electric batteries. According to al-Khozendar, the batteries can be charged with US$2 worth of electricity to drive from 180–240 km (110–150 mi). After a 7-hour charge, the car should also be able to run up to a speed of 100 km/h (60 mph).

In 2008, several Chinese manufacturers began marketing lithium iron phosphate (LiFePO
₄) batteries directly to hobbyists and vehicle conversion shops. These batteries offered much better power-to-weight ratios allowing vehicle conversions to typically achieve 120–240 km (75–150 mi) per charge. Prices gradually declined to approximately US$350 per kW·h by mid-2009. As the LiFePO
₄ cells feature life ratings of 3,000 cycles, compared to typical lead acid battery ratings of 300 cycles, the life expectancy of LiFePO
₄ cells is around 10 years. LiFePO
₄ cells require more expensive battery management and charging systems than lead acid batteries.

Solar power

On-board solar cells can be used to power an electric vehicle. The small power generated by solar cells mounted on a vehicle means that the other components in the system must be special to compensate for this. For example, the body of even a small conventional car converted to electric is still too heavy to be driven by on-board solar cells. A practical solar-powered vehicle is designed from the ground up with specially made parts.

Conversion process

Most conversions in North America are performed by hobbyists who typically will convert a well used vehicle with a non-functioning engine, since such defective vehicles can be quite inexpensive to purchase. Other hobbyists with larger budgets may prefer to convert a later model vehicle, or a vehicle of a particular type. In some cases, the vehicle itself may be built by the converter, or assembled from a kit car. 

A two-stage vehicle is a vehicle that has been built by two separate manufacturers. The result is a standard, complete vehicle. In this process, vehicles may be converted by a manufacturer (as was done by Ford Motor Company to create the Ford Ranger EV). Alternatively, in a process known as "third-party (power)trainization", an independent converter will purchase new vehicle gliders (vehicles without a motor or related equipment) and then perform the conversion, to offer a two-stage vehicle. 

In some countries, the user can choose to buy a converted vehicle of any model in the automaker dealerships only paying the cost of the batteries and motor, with no installation costs (it is called pre-conversion or previous conversion).

Industry

The electric vehicle conversion industry has grown to include conversion car garages, aftermarket kits and vehicle components.

Vehicle types

Electric bicycle

A bicycle with an aftermarket hub-motor in the front wheel

 

An electric bicycle is a conventional bicycle that has been fitted with an electric motor. Converting an existing bicycle by retrofitting it with a "conversion kit" is the simplest and least expensive electric vehicle conversion option. Most often electric bicycles or "e-bikes" are powered by rechargeable batteries however some experimental electric bicycles run directly on or recharge their batteries via solar panels, fuel cells, gas generators or other alternative energy sources. Some experimenters have even used supercapacitors to store energy. Using an on-board generator may impact the legal jurisdictional definition of an electric bicycle. A few types of electric bicycles are able to re-capture a small amount of energy from braking and can re-charge the batteries while braking or traveling down hills (regenerative braking). 

Some electric bikes have features where the motor can move the bicycle by itself (immediate start) if the rider chooses not to pedal with a button or throttle controller, while others require the rider to pedal at all times (pedal assist). This latter type may in some jurisdictions allow the vehicle to be used on bicycle trails that otherwise prohibit motorized vehicles of any kind.

Many battery technologies are available for powering electric bikes. The most common and least expensive battery technology is sealed lead acid but LiFePO₄ is fast becoming the battery of choice for the e-bike. 

Converting one's bike to electric with a conversion kit is an easy and affordable solution for most people interested in learning more about electric vehicle conversion. 

There may be some problems with the warranty however on the original bicycle being converted, if an electric bike conversion kit is added. Low-speed scooters are not typically suitable for on-the-road use. These may be configured for either standing or sitting use. Some local laws apply bicycle laws to scooters, such as helmet and pedestrian right-of-way considerations.

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  Electric scooter
  
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  Custom drag bike
  
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  Solar cruiser
  

Economy coupe

Owing to its light weight and efficiency, a light vehicle can make an excellent choice, particularly if care is taken in component selection and placement. It is possible to obtain conversion kits for some popular light vehicles, most notably the rear motor, rear drive Volkswagen Beetle, its Type 3 evolution, and its successor, the front motor/drive VW Golf. 

By converting a light vehicle it is possible to use a smaller motor, which both weighs and costs less than a larger motor. A lighter overall vehicle weight will reduce power consumption in start-and-stop traffic and increase range in many practical driving conditions. In the same way that a gasoline-powered economy car is cheaper and more efficient to run, an electric-powered economy car is as well.

Compact sedan or coupe

A compact sedan may be a better choice than a subcompact owing to better load capacity and more room for battery placement. Some commercial EV Conversions use vehicles in this size range. One example is a 1992 Honda Civic. In this conversion, the back seat was retained, and there is still enough room to sink nine flooded lead-acid batteries low in the trunk where the spare tire was located, as well as another nine batteries under the hood. Another example is a 1987 Mitsubishi Tredia where the rear batteries have been raised above the trunk floorspace, sealed, and externally vented. With suspension modifications, increasing shock length & spring rating, the car must still be below GVWR, even with the driver and passengers. Exceeding the total design weight of the vehicle would be illegal in some states, and might result in cancellation by an insurance company.

There is an effort by several engineers in California to make the Toyota Prius a "Plug-In Hybrid Electric Vehicle," or PHEV, whereby the first 40 miles are driven by all-electric power, then the gasoline engine comes on to re-charge the batteries, only if the commute is further than 40 mi. If it is less, one can just plug it into the utility grid to re-charge the batteries. The process is done by removing the nickel-metal hydride batteries, and installing different batteries, and a different battery management system.

Since 30 April 2009, the Electric Car Corporation have been selling the Citroën C1 ev'ie, an all-electric conversion from the Citroën C1.

Full-size sedan

Full-size sedans and minivans are generally considered to be poor candidates for EV conversion. As the suspension and tires are already operating close to the maximum permissible, it may be necessary to make substantial modifications in these areas. It may be easier to obtain upgraded suspension components for some smaller vehicles, if these are also typically used for sports racing (particularly autocross). Starting with a heavy vehicle and adding batteries will result in poor performance in acceleration, handling, braking, and economy of operation.

One of the possibilities is using the body of Audi's D2 platform A8 (1994–2003) Audi A8 or sports sedan S8 (1998–2003 or older European market models where the German model weights 1730 kg) Audi S8 both of which are all aluminium monocoque "Audi Space Frame" vehicle, which helped to significantly reduce weight without being any less rigid.

Sports car

For a person interested in sports car performance and appearance, the creation of a satisfying conversion will likely lead to a number of difficulties in such details as battery disposition, as such vehicles generally have available space distributed in small volumes around the vehicle. This leads to complexity in securing and wiring batteries. These vehicles can offer stunning performance in the lower speed ranges owing to light weight and rear wheel drive, and may also offer good range due to their superior aerodynamics. 

The 1969–1976 Porsche 914 is one of the more successful sports car conversions, as well as being one of the most popular. Once converted, it boasts better performance in range, acceleration and top speed than most other vehicles. Also, its low acquisition costs contributes to its popularity as a conversion candidate. Some manufacturers of conversion kits have made a kit specific to the 914.

Another popular sports car used for conversion is the 1984–1989 Toyota MR2. Reasons for its popularity are low weight before conversion, low cost to purchase the car, and available locations within the car to place the large batteries that most people use (lead-acid and its derivative technologies). The later MR2 body style (Mark 2) does not seem as popular, and as of March 2008, there is only one known conversion.

A 1983 Mitsubishi Starion was converted to all-electric in 2009 by Carmel Morris and Nathan Bolton in Australia. This sports vehicle had divided front/rear battery load for well-balanced low center of gravity performance. The battery pack consisted of 45 x 3.2v nominal lithium-ion batteries. The tar weight of the final result was not much greater than the original specification, allowing the sports car to be engineering road-certified as a four-seat vehicle. The builders wanted to prove that an electric car conversion could also include other options such as power steering and air conditioning (as is the norm for new electric vehicles), without sacrificing excess energy or comfort. Information on the successful Electric Starion conversion can be found on the web. 

The Bradley GT II as well as other VW-based kit cars are very popular conversion candidates due to their being inexpensive, extensive support groups as well as their simple sports car design. Availability of conversion kits for these cars are quite prevalent with commercial retail establishments that specialize in EV conversions.

Light truck

Light trucks are especially suitable for hobbyist conversion because it is easy to locate batteries remote from the passenger compartment and there is a good load handling capacity for the use of heavy batteries such as the flooded lead-acid batteries commonly used in golf carts. Light trucks also offer substantial utility in use simply because they are trucks. Even if a portion of the weight capacity is removed by the presence of batteries within or below the cargo bed, much or all of the spatial utility remains. A light truck is highly recommended as a first conversion effort because of the simplicity of component layout. With proper battery placement the stability of a late production truck can be improved over the ICE version. While a number of suitable vehicles are available in pre-2002 models, the modern evolution of this type has become taller, heavier, bulkier and less efficient, and their excessive height makes under-bed battery placement essential to keep the center of gravity low enough for stability on curves.

Other trucks – full size and most SUVs

These are rarely converted due to their excessive weight, and aerodynamic inefficiencies. To make the situation worse, many modern trucks and SUVs continue to get bulkier, heavier, and their high stance means the height of the center of gravity leads to instability while making high speed turns, a distinct disadvantage if there is not enough room between the frame rails to enable low battery mounting. As a direct result, the payload carrying capacity and thus the GVWR of the vehicles goes down. Such a trait is not desirable because it limits the weight of the battery pack that can be carried, limiting the maximum battery-to-vehicle weight ratio that could be achieved for the vehicle when converted to an EV. (Such considerations are important due to price, weight, and performance limitations of current battery technologies.) For a given battery type, reducing the battery-to-vehicle weight ratio always results in reduced vehicle range per charge. However, despite these mostly unavoidable limitations, several SUVs and larger trucks have been successfully converted to electric power by hobbyists. Some examples include the "Gone Postal" van converted to an EV racer by Roderick Wilde and Suckamps EV Racing, the Land Rover EV converted by Wilde Evolutions, and the 1988 Jeep Cherokee EV converted by Nick Viera.

Classic Cars

Although technologically feasible, classic cars are not widely converted in order to maintain a car's authenticity. The German company ReeVOLT has however made it one of their business branches to convert old Trabants for use in tourism in the east of Germany in connection to the car's regional historic significance and to allow easy access to environmental zones such as city centers and in particular the partially car-free island of Rügen. The car is considered ideal for conversions because of its low used price and low weight due to the small size and resin fiber construction.

Electric buses

The principal efforts in the development of autonomous electric buses (this is, without trolleys and wires) have involved limited production of very expensive fuel cell vehicles.

The most economically effective development in this area involves the creation of hybrid electric buses (mainly plug-in hybrids), well suited to this application owing to frequent stops and starts and effective energy recovery and release in this cycle.

Another solution is the conversion to battery electric buses that follow the principle of replacing (discharged batteries) instead of recharging. 

Transdev York in the United Kingdom currently operate the world's first diesel-engined buses that have been converted to full-electric propulsion. A fleet of five late 1990s Dennis Trident 2 open-top double-decker buses, operated for a local City Sightseeing contract, have been converted from diesel to electric power.

Racers

Hotrod

While this type of vehicle is usually made to be a "street-legal" performance machine, it may also be developed for occasional use as a drag racing vehicle. The leading vehicle in this field is the "Maniac Mazda" a Mazda RX-7 sports car converted from rotary engine to electric by Roderick Wilde. This vehicle can outrun Dodge Viper and Ferrari sports cars in quarter-mile drag races.

Autocross racer

EV's have proven successful in autocross competition. The electric motor's ability to deliver maximum torque at 0 RPM and a comparatively broad torque band provide good throttle response and allow running an autocross without any time lost to shifting gears. The short distance of the typical autocross requires less stored energy than most forms of motorsports. This minimizes electric vehicle's most obvious competitive disadvantage, the weight penalty of batteries compared to gasoline. 

The Batt mobile in autocross 2016 in Queensland Australia

Drag racer

Intended only for specialized straight line quarter-mile (acceleration) racing this type of vehicle is used only "off road" at specialized "dragstrips".

High speed straight line racer

Even more specialized than the drag racer, this is intended to obtain high speeds on long, straight, and flat raceways, such as the dry lake beds found in locations such as the Bonneville Salt Flats.

Closed circuit road racer

Closed Circuit Road racing, particularly any type of endurance racing, is one of the greatest challenges for EV's. Pound per pound, gasoline contains far more energy than even the most advanced of current batteries. An electric vehicle must be heavier or more efficient to run the same distance as its gasoline competitor. Endurance racing strategies include battery packs that can be changed quickly and "Dump charging"

Custom chassis

Suitable for a builder who is capable of constructing a kit car, with good abilities and equipment in machining and welding this can result in a unique vehicle. It is especially suitable for the construction of a lightweight vehicle that can offer exceptional performance. Many VW-based kit car companies have tube chassis ready to start with. 

A glider kit includes all components of a vehicle except the power train.

Novelty vehicle

A novelty vehicle or an electric powered art car may not be suitable for on-road use. Applications include electric vehicle show demonstrations, parades, parade floats, float towing, and eclectic off-road gatherings such as Burning Man. This vehicle is ideal for the beach (where not prohibited) and to promote tourist places but will usually require trailering to its operating site.

Registration of converted and newly constructed vehicles

United States

The ease of registration will vary by state. Some states require safety inspections, usually to ensure body integrity in areas subject to severe corrosion from winter road de-icing materials. In any case, for general registration all functional safety equipment should be operating – turn signals, brake lights, headlights, horn, etc. The windshield should have no running cracks (small stone chips and "stars" may be acceptable if not in the driver's principal line of vision). If the vehicle has been reconstructed from a salvage vehicle (a vehicle whose registration has been forfeited) inspection may be more severe to ensure compliance and the legitimacy of sources of salvage components by presentation of proper purchase receipts.

Registration procedures will vary by state and will usually be more difficult (even bizarre) in states with strict emissions requirements (even though a plug-in only conversion will be a zero emission vehicle). Arguing with DMV staff is typically futile in all jurisdictions, but there may be appeal procedures available but whose availability may not be openly publicized.

On the other hand, changing the registration allows a conversion to qualify for tax incentives available in some states, such as Oregon, for either the vehicle, the charging system, or both.

California (US) conversion registration and taxation

Registration of a converted existing, or newly self-constructed electric vehicle in California is no longer difficult.

This falls into two categories; First, if the vehicle is built from new frame components and possibly some salvage parts, (i.e., it has never been a previously titled motorcar previously, but it has brakes or axles that were obtained used/rebuilt.) In California if you "create" a car from scratch and want to register and title it with DMV, you need to go through the "Specially Constructed Vehicle Emission Control Program" or SPCNS for short, this is also called California "SB100" program. Or Second, a previously registered vehicle converted to electric propulsion. 

SPCNC: In the past, the process of registering an SPCNS vehicle required meeting with an outside referee at a community college or one of the states mobile referee stations to verify the vehicle. The current process happens at the DMV with the inspection being done by A DMV inspector. The inspector will need to be able to see the motor and batteries and verify that there in no internal combustion engine. The vehicle will still need a brake and light inspection By an outside inspector to verify its compliance with other vehicle codes.

Currently Registered Vehicles: If you are converting an existing vehicle and it is older than 1975, you may opt to not bother to get the vehicle converted to the "E" code unless you are looking for the Diamond Lane stickers, since these vehicles don't require a smog inspection. For vehicles newer than 1975 you will need to go the DMV and have the vehicle inspected as a conversion. The batteries and motor will have to be exposed so the inspector can see them and verify that there is no internal combustion engine. 

The next step requires the clerk at the local California Department of Motor Vehicles (DMV) office to call the Sacramento office. Only the Sacramento office can make this entry into the computer system. If the local clerk tries, the system will default to the "Q" code for hybrid. (These procedures are in place to inhibit fraudulent registration of ICE vehicles as Electric in order to avoid smog inspections.) A hybrid is not exempt from smog inspection. Before you leave the DMV make sure your printout has the proper "E" code or you will have to go back to do it again. 

There is weight fee of $87 for vehicles under 2,700 kg (6,000 lb) or $266 for vehicles from 2,700 to 4,500 kg (6,000 to 10,000 lb). This is in addition to any regular registration fees.

Energy security

From Wikipedia, the free encyclopedia

A U.S. Navy F/A-18 Super Hornet displaying an "Energy Security" logo.

 

Energy security is the association between national security and the availability of natural resources for energy consumption. Access to (relatively) cheap energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries has led to significant vulnerabilities. International energy relations have contributed to the globalization of the world leading to energy security and energy vulnerability at the same time.

In the context of energy security, security of energy supply is an issue of utmost importance. Moreover, it is time to define "a global energy policy model, which not only aims at ensuring an efficient environmental protection but also at ensuring security of energy supply".

Renewable resources and significant opportunities for energy efficiency exist over wide geographical areas, in contrast to other energy sources, which are concentrated in a limited number of countries. Rapid deployment of renewable energy and energy efficiency, and technological diversification of energy sources, would result in significant energy security and economic benefits.

Threats

The modern world relies on a vast energy supply to fuel everything from transportation to communication, to security and health delivery systems. Perhaps most alarmingly, peak oil expert Michael Ruppert has claimed that for every calorie of food produced in the industrial world, ten calories of oil and gas energy are invested in the forms of fertilizer, pesticide, packaging, transportation, and running farm equipment. Energy plays an important role in the national security of any given country as a fuel to power the economic engine. Some sectors rely on energy more heavily than others; for example, the Department of Defense relies on petroleum for approximately 77% of its energy needs. Threats to energy security include the political instability of several energy producing countries, the manipulation of energy supplies, the competition over energy sources, attacks on supply infrastructure, as well as accidents, natural disasters, terrorism, and reliance on foreign countries for oil.

Foreign oil supplies are vulnerable to unnatural disruptions from in-state conflict, exporters' interests, and non-state actors targeting the supply and transportation of oil resources. The political and economic instability caused by war or other factors such as strike action can also prevent the proper functioning of the energy industry in a supplier country. For example, the nationalization of oil in Venezuela has triggered strikes and protests in which Venezuela's oil production rates have yet to recover. Exporters may have political or economic incentive to limit their foreign sales or cause disruptions in the supply chain. Since Venezuela's nationalization of oil, anti-American Hugo Chávez threatened to cut off supplies to the United States more than once. The 1973 oil embargo against the United States is a historical example in which oil supplies were cut off to the United States due to U.S. support of Israel during the Yom Kippur War. This has been done to apply pressure during economic negotiations—such as during the 2007 Russia–Belarus energy dispute. Terrorist attacks targeting oil facilities, pipelines, tankers, refineries, and oil fields are so common they are referred to as "industry risks". Infrastructure for producing the resource is extremely vulnerable to sabotage. One of the worst risks to oil transportation is the exposure of the five ocean chokepoints, like the Iranian-controlled Strait of Hormuz. Anthony Cordesman, a scholar at the Center for Strategic and International Studies in Washington, D.C., warns, "It may take only one asymmetric or conventional attack on a Ghawar Saudi oil field or tankers in the Strait of Hormuz to throw the market into a spiral."

New threats to energy security have emerged in the form of the increased world competition for energy resources due to the increased pace of industrialization in countries such as India and China, as well as due to the increasing consequences of climate change. Although still a minority concern, the possibility of price rises resulting from the peaking of world oil production is also starting to attract the attention of at least the French government. Increased competition over energy resources may also lead to the formation of security compacts to enable an equitable distribution of oil and gas between major powers. However, this may happen at the expense of less developed economies. The Group of Five, precursors to the G8, first met in 1975 to coordinate economic and energy policies in the wake of the 1973 Arab oil embargo, a rise in inflation and a global economic slowdown. NATO leaders meeting in Bucharest Romania, in April 2008, may discuss the possibility of using the military alliance "as an instrument of energy security". One of the possibilities include placing troops in the Caucasus region to police oil and gas pipelines.

Long-term security

Long-term measures to increase energy security center on reducing dependence on any one source of imported energy, increasing the number of suppliers, exploiting native fossil fuel or renewable energy resources, and reducing overall demand through energy conservation measures. It can also involve entering into international agreements to underpin international energy trading relationships, such as the Energy Charter Treaty in Europe. All the concern coming from security threats on oil sources long term security measures will help reduce the future cost of importing and exporting fuel into and out of countries without having to worry about harm coming to the goods being transported.

The impact of the 1973 oil crisis and the emergence of the OPEC cartel was a particular milestone that prompted some countries to increase their energy security. Japan, almost totally dependent on imported oil, steadily introduced the use of natural gas, nuclear power, high-speed mass transit systems, and implemented energy conservation measures. The United Kingdom began exploiting North Sea oil and gas reserves, and became a net exporter of energy into the 2000s.

In other countries energy security has historically been a lower priority. The United States, for example, has continued to increase its dependency on imported oil although, following the oil price increases since 2003, the development of biofuels has been suggested as a means of addressing this.

Increasing energy security is also one of the reasons behind a block on the development of natural gas imports in Sweden. Greater investment in native renewable energy technologies and energy conservation is envisaged instead. India is carrying out a major hunt for domestic oil to decrease its dependency on OPEC, while Iceland is well advanced in its plans to become energy independent by 2050 through deploying 100% renewable energy.

Short-term security

Petroleum

Petroleum, otherwise known as "crude oil", has become the resource most used by countries all around the world including Russia, China (actually, China is mostly dependent on coal (70.5% in 2010)) and the United States of America. With all the oil wells located around the world energy security has become a main issue to ensure the safety of the petroleum that is being harvested. In the middle east oil fields become main targets for sabotage because of how heavily countries rely on oil. Many countries hold strategic petroleum reserves as a buffer against the economic and political impacts of an energy crisis. All 28 members of the International Energy Agency hold a minimum of 90 days of their oil imports, for example.

The value of such reserves was demonstrated by the relative lack of disruption caused by the 2007 Russia-Belarus energy dispute, when Russia indirectly cut exports to several countries in the European Union.

Due to the theories in peak oil and need to curb demand, the United States military and Department of Defense had made significant cuts, and have been making a number of attempts to come up with more efficient ways to use oil.

Natural gas

Compared to petroleum, reliance on imported natural gas creates significant short-term vulnerabilities. The gas conflicts between Ukraine and Russia of 2006 and 2009 serve as vivid examples of this. Many European countries saw an immediate drop in supply when Russian gas supplies were halted during the Russia-Ukraine gas dispute in 2006.

Natural gas has been a viable source of energy in the world. Consisting of mostly methane, natural gas is produced using two methods: biogenic and thermogenic. Biogenic gas comes from methanogenic organisms located in marshes and landfills, whereas thermogenic gas comes from the anaerobic decay of organic matter deep under the Earth's surface. Russia is the current leading country in production of natural gas.

One of the biggest problems currently facing natural gas providers is the ability to store and transport it. With its low density, it is difficult to build enough pipelines in North America to transport sufficient natural gas to match demand. These pipelines are reaching near capacity and even at full capacity do not produce the amount of gas needed.

Nuclear power

Sources of uranium delivered to EU utilities in 2007, from the 2007 Annual report of the Euratom Supply Agency

 

Uranium for nuclear power is mined and enriched in diverse and "stable" countries. These include Canada (23% of the world's total in 2007), Australia (21%), Kazakhstan (16%) and more than 10 other countries. Uranium is mined and fuel is manufactured significantly in advance of need. Nuclear fuel is considered by some to be a relatively reliable power source, being more common in the Earth's crust than tin, mercury or silver, though a debate over the timing of peak uranium does exist.

Nuclear power reduces carbon emissions. Although a very viable resource, nuclear power can be a controversial solution because of the risks associated with it. Another factor in the debate with nuclear power is that many people or companies simply do not want any nuclear energy plant or radioactive waste near them.

Currently, nuclear power provides 13% of the world's total electricity. The most notable use of nuclear power within the United States is in U.S. Navy aircraft carriers and submarines, which have been exclusively nuclear-powered for several decades. These classes of ship provide the core of the Navy's power, and as such are the single most noteworthy application of nuclear power in that country.

Renewable energy

The deployment of renewable technologies usually increases the diversity of electricity sources and, through local generation, contributes to the flexibility of the system and its resistance to central shocks. For those countries where growing dependence on imported gas is a significant energy security issue, renewable technologies can provide alternative sources of electric power as well as displacing electricity demand through direct heat production. Renewable biofuels for transport represent a key source of diversification from petroleum products.

As the resources that have been so crucial to survival in the world to this day start declining in numbers, countries will begin to realize that the need for renewable fuel sources will be as vital as ever. With the production of new types of energy, including solar, geothermal, hydro-electric, biofuel, and wind power. With the amount of solar energy that hits the world in one hour there is enough energy to power the world for one year. With the addition of solar panels all around the world a little less pressure is taken off the need to produce more oil.

Geothermal can potentially lead to other sources of fuel, if companies would take the heat from the inner core of the earth to heat up water sources we could essentially use the steam creating from the heated water to power machines, this option is one of the cleanest and efficient options. Hydro-electric which has been incorporated into many of the dams around the world, produces a lot of energy, and is very easy to produce the energy as the dams control the water that is allowed through seams which power turbines located inside of the dam. Biofuels have been researched using many different sources including ethanol and algae, these options are substantially cleaner than the consumption of petroleum. "Most life cycle analysis results for perennial and ligno-cellulosic crops conclude that biofuels can supplement anthropogenic energy demands and mitigate green house gas emissions to the atmosphere". Using oil to fuel transportation is a major source of green house gases, any one of these developments could replace the energy we derive from oil. Traditional fossil fuel exporters (e.g. Russia) struggle to diversify away from oil and develop renewable energy.