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Taking transport green will require huge change across society and business. We explore key issues for the sector.

Road transport accounts for over 10% of global greenhouse gas emissions, with emissions rising faster than in many sectors. In the run-up to November's COP26 climate conference, UK Prime Minister Boris Johnson made cars one of the UK Presidency's four focus areas, calling on governments to abandon use of the internal combustion engine (ICE) and transition to electric vehicles (EVs). The UK's Committee on Climate Change, a government advisory body, argues global road transport emissions must fall to zero by 2050 to meet Paris Agreement goals and transition to a full EV fleet worldwide is required by then, alongside other actions, including increased public transport use, walking and cycling.

COP26 ambitions

The UK Presidency's ambition for COP26 with regard to the automotive sector is:

  • For governments to ensure all new car and van sales are zero emission vehicles (ZEVs) by 2035 in advanced markets or 2040 in all other markets, and to agree policies to accelerate uptake of ZEVs; 
  • For manufacturers to commit to selling only ZEVs by 2035; 
  • For fleet-owning businesses to commit to achieving zero emission fleets by 2030 and join the EV100 initiative; and 
  • For civil society to build support for the above measures.

A number of countries and industry bodies are already working on this path via the Zero Emission Vehicle Transition Council (ZEVTC). The body consists of ministers and representatives from the EC, California, Canada, Denmark, France, India, Germany, Italy, Japan, Mexico, the Netherlands, Norway, Spain, South Korea, Sweden, the UK and the US.  ZEVTC first met in November 2020 with the goal of overcoming political and technical barriers and accelerating production of green vehicles. This will involve boosting investment, bringing down costs and increasing ZEV uptake. Key issues include ensuring lifecycle sustainability of ZEVs and ensuring infrastructure is in place such as EV charging points and hydrogen refuelling facilities.

The EV100 initiative, meanwhile, is promoted by The Climate Group, a non-profit organisation that works with business and government leaders, and aims for electric transport to achieve widespread adoption by 2030. Its members commit by 2030 to:

  • Electrify their directly controlled fleet;
  • Place requirements for EVs in service contracts;
  • Install EV charging at all premises to support staff use; and
  • Install EV charging at all premises to support customer use.

Fleet owners and operators will be key drivers of the EV revolution, particularly in the burgeoning delivery space. Such firms, likewise, have the scale and capital to deploy EV fleets quickly and navigate the inevitable logistical issues.

Electric dreams

Electric transition in passenger cars is well underway and increasing in industrialised nations. The Financial Times reported in October that one in 12 cars sold across continental Europe between April and June 2021 was a battery-only vehicle (BEV). Including hybrid PHEV/MHEV models this rises to one in three, with sales of electric cars in Europe expected to total 1.17m in 2021.

But it is only recently that momentum has built to make the prospect of complete transition to BEV seem possible and many feel we remain a good distance from the tipping point for widespread EV adoption in mature economies.

The IEA Global Electric Vehicle Outlook provides a comprehensive review of the trends. Its 2021 edition shows EVs have experienced massive sales growth over the past decade. More than 10 million electric cars were on the world’s roads in 2020 ­– up 43% over 2019 ­– with BEVs driving that expansion. 2020 was a record year, with Europe accounting for 1.4 million registrations – overtaking China, which had 1.2 million registrations in 2020 and a fleet of around 4.5 million electric cars. By contrast, Europe has 3.2 million. The US registered 295,000 new EVs in 2020, but initial steps taken by the new Biden administration, including a goal for 50% of all new passenger vehicles to be electric by 2030, look set to boost production.

Recent estimates have 425,000 electric buses currently on the road, with some estimating that by 2050 they will form four-fifths of the global bus stock. Public EV buses have benefited from significant governmental support, including under the EU CEF Transport Blending Facility programme.

Banning polluting cars

A growing number of countries have gone a step further than tightening emissions standards and incentives to ensure the phase out of new ICE cars and vans. Seventeen nations have announced 100% ZEV sales targets or the phase out of new ICE vehicles by 2050. Many include bans by 2040 or before, with Norway setting its target date for 2025. The UK began with 2035 but brought this forward to 2030:

  • Step 1 will see the phase out for the sale of new petrol and diesel cars and vans in 2030; and
  • In Step 2, the UK will require all new cars and vans to be zero emission at the tailpipe from 2035.

Between those dates, new cars and vans can be sold if they have the capability to drive a "significant" distance with zero emissions. The UK also proposes to mandate annual targets for original equipment manufacturers (OEMs) for new ZEV sales from 2024.

Despite such steps, it is estimated that 2 billion ICE cars will be placed on the global market before bans take hold. The difference between building those 2 billion to current efficiency standards and building to more stringent, but economically feasible requirements, is estimated to be about 38 gigatons of emitted carbon. That is an additional ten years of carbon emissions from the global transportation sector at 2050 levels. Hence, ICE fuel-efficiency standards, such as the proposed Euro 7 benchmark to be introduced from 2025, remain key measures. Fuel efficiency standards reduce emissions and other pollutants and save consumers money at the pump. And, as boundaries of technical improvements are reached, OEMs will no longer be able to sell certain ICE or hybrid models, increasingly pressing them to switch development to ZEVs well ahead of looming vehicle bans.

The supporting policy environment

To avoid a cliff edge when vehicle bans kick in, countries need to adopt complementary policies promoting ZEV sales ahead of phase-out dates. Policies include rolling out EV charging infrastructure, adopting low emission zones in urban areas and requiring developers of new buildings to install EV charging points. In the UK alone, UK power regulator Ofgem estimates up to 19 million home charge points may be required.

Super-size problems

Unfortunately, the trend towards bigger vehicles such as SUVs is bucking the downwards CO2 emissions trend in some countries, and this is coupled with the fact that BEVs are heavier than petrol counterparts. This is despite the car industry delivering vehicles that improve emissions on older models. The worldwide market share of SUVs went up 15% between 2014 and 2019, growing to 40% of the global light passenger and delivery vehicles market. In North America and Australia, SUV sales were around 50% of new cars sold.

The case for hydrogen

Electric batteries have limitations in total power, meaning that so far they have been considered less suitable for HGVs, which travel long distances, pull heavy loads and where long stops for recharging increase costs. For lorries and large industrial vehicles, hydrogen fuel cells (FCEVs), perhaps in combination with electrification, are being actively considered. However, the refuelling infrastructure to support hydrogen vehicles remains embryonic.

In its Hydrogen Strategy, the UK Government views transport as a crucial early market, with over 300 hydrogen vehicles on UK roads and support for use via the £23 million Hydrogen for Transport Programme. It expects future hydrogen demand to be mostly depot-based transport such as buses, noting that FCEV buses have a range similar to diesel counterparts. It is, however, also planning to sponsor research and innovation on more difficult-to-decarbonise modes, such as heavy road freight. It expects diversification in transport end uses for hydrogen in the late 2020s and early 2030s leading to use across a range of transport modes, including HGVs, buses and rail, along with early stage use in shipping and aviation. Other European countries, such as France and Germany, are also developing hydrogen transport strategies.

However, as for EVs, the green credentials of hydrogen vehicles will depend on the hydrogen itself being produced with the minimum of CO2 emissions, as well as factors such as use of mined platinum and gold in the fuel cell stack. But while transition to EVs may seem the most viable option to propel decarbonisation of road transport, it comes with many challenges, and other alternative fuels should not be ruled out in the longer-term.

The road ahead

Car-makers are now embracing electric transition with vigour, incentivised by increasingly stringent emissions standards and changing stakeholder views on climate change. However, the provision of accessible EV infrastructure even in developed countries is patchy at best and will require more public funds. The other key task of reducing the cost of BEVs must also be addressed as there is a danger that mass-EV adoption will stall if price parity with ICE vehicles (at least including total running costs) is not reached in the next five years or so. The discussion at COP26 may also usefully focus on how lessons learnt can be applied in less developed parts of the world.

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Roddy Martin

Partner, Global Head of Automotive, Co-Head of India Practice, London

Roddy Martin

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