The European Commission has announced a €750 billion aid package to drive The European Union’s post-COVID economic recovery. At the heart of the package is the European Green Deal—a set of proposed legislation aimed at achieving climate neutrality in a number of industries including transport. Let’s take a look at the key points of the Green Deal and its implications for you as a transport owner and operator.
The stated target is to reduce emissions from transport by 90% by 2050. To achieve this, the European Commission will adopt a strategy for sustainable and smart mobility in 2020. This inevitably means that there must be an end date for fossil fuels. In line with that, subsidies for fossil fuels will need to stop and instead be directed towards alternatives such as bio-fuels and electric vehicles so that they can be competitive.
The challenge here is that the production capacity for bio-fuels is today very limited. Significant investment in new infrastructure for refueling and storage will be needed, as well as more recharging points for electric vehicles. It is estimated that one million public recharging and refueling stations will be needed by 2025. The EU will be supporting the development of recharging and refueling points where gaps exist. The Green Deal also lists hydrogen as a priority area with plans to allocate investments, increase cross-border cooperation and build partnership between governments, academic institutions and corporations through the European Clean Hydrogen Alliance
It will also work with the Alternative Fuels Infrastructure Directive, which may require each member state to devise plans to develop its own infrastructure for alternative fuels, with the intention of accelerating the process.
In March 2020, the European Commission proposed a Climate Law, which if passed by EU decision makers, would make the objective of carbon neutrality by 2050 a legal requirement. To me, this demonstrates a clear commitment to reducing CO2 emissions and improved predictability, which is positive It effectively means that the EU is heading towards phasing out investment that increases emissions.
It is estimated that current EU climate and energy policies will only achieve a 60% reduction by 2050 – which is far from the climate-neutral goal proposed under the Climate Law. Therefore, this September, the European Commission will propose to increase its emissions reduction target for 2030 (against 1990 levels) from 40% to a least 50% (and potentially even 55%). By June 2021, the European Commission will also make proposals to raise the ambitions in all other relevant policies to achieve a higher 2030 target. This is likely to include raising the already ambitious CO2 reduction target for heavy-duty vehicles. Currently it is a 30% reduction by 2030, which should be reviewed in 2022 at the latest.
The Green Deal also confirmed that the European Commission will propose more stringent air pollutant emissions standards for combustion-engine vehicles. Air quality standards will be aligned with the World Health Organization’s more stringent benchmark, and could impact the upcoming Euro VII standards, expected in 2026.
Embracing new technology will be key to achieving climate neutrality. In March 2020, the European Commission is due to adopt a new Industrial Strategy, which will outline which technologies have the greatest potential to deliver carbon savings. And here automation and connectivity are set to play a bigger role; especially in the development of smart traffic management systems that reduce congestion and pollution. The EU is already in the process of developing a platform and legal framework for C-ITS (Cooperative Intelligent Transport Systems), which you can read more about here.
The price of transport should reflect the impact it has on the environment. In the same way that road pricing based on the Euro VI standards have helped reduce NOx emissions, future road pricing will target CO2 emissions. These will be based on the declared values for all new trucks produced from 2019 onwards.
Under the Green Deal, the European Commission wants to shift 75% of road freight to rail and sea transport. Achieving this will be a major challenge since the capacity of Europe’s rail networks and inland waterways are not high enough. To better manage this, the European Commission will make a proposal in 2021.
By encouraging a shift towards a circular economy, the EU will reduce waste and ensure resources are used more efficiently. For vehicle manufacturers, there will be pressure to ensure long product lifespans, increase reuse and remanufacturing and recycling of materials. Transport operators can expect to see incentives for better care of vehicles to extend their lifetimes. There will most likely also be regulatory demands on ensuring the materials in a decommissioned vehicle are recycled.
The Green Deal sends a clear message about the irreversible direction transport needs to take towards a cleaner future. And it’s probably not just this part of the world that will be impacted. In fact, the EU is often a forerunner in climate policies which get adopted in other parts of the world as well. So regardless of where you live and operate a business, it’s important that you stay informed. Incentives on some fuels or restrictions and outright bans on others could be a make or break point in any investment you make in the near or far future.