* Electric vehicles rise to 2 mln globally last year
* Still only account for 0.2 pct of passenger vehicles
* Could reach 9-20 million by 2020, 40-70 million by 2025
LONDON, June 7 (Reuters) - The number of electric vehicles on roads worldwide rose to a record high of 2 million last year, but has a long way to go to reach levels needed to help limit an increase in global temperatures, the International Energy Agency (IEA) said on Wednesday.
In 2015, the number of electric cars, including battery-electric, plug-in hybrid electric and fuel cell electric passenger light-duty vehicles, was 1 million, the IEA said in a report.
Even though that doubled last year, the global electric car stock is only 0.2 percent of the total number of passenger light-duty vehicles in circulation.
"They have a long way to go before reaching numbers capable of making a significant contribution to greenhouse gas emission reduction targets," the IEA said.
"In order to limit temperature increases to below 2 degrees Celsius by the end of the century, the number of electric cars will need to reach 600 million by 2040," it added.
Research and development and mass production improvements are resulting in lower battery costs and this trend should continue, which should narrow the cost competitiveness gap between electric vehicles and internal combustion engines.
There is a "good chance" the global electric car stock could reach carmaker estimates of between 9 and 20 million by 2020 and between 40 and 70 million by 2025, the report said.
The electric car market is still concentrated in a limited number of countries. Globally, 95 percent of electric car sales are taking place in just ten countries - China, the United States, Japan, Canada, Norway, Britain, France, Germany, the Netherlands and Sweden.
Last year, China overtook the United States as the country with the largest electric car stock, with around a third of the global total, the report said.
Even though battery costs have fallen since 2009, they are still a major component of cost and drive up retail prices.
Therefore, financial incentives such as rebates, tax breaks or exemptions are important to support electric car deployment, but they might need to be phased out when electric car costs rival those of internal combustion engines, the report said.
Full report: https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf (Reporting by Nina Chestney; Editing by Mark Potter)