This article was first published by EurActiv
Allow us to suggest one policy that could help member states deliver rapid emission reductions in a sector that for the longest time has resisted decarbonisation efforts: transport – road transport in particular. The Renewable Energy Directive now states that member states need to increase the share of renewable transport fuels to 14% by 2030. But only half of that, a 7% target for advanced fuels, is actually binding for member states. Importantly, ‘renewable electricity supplied to the road and rail transport sectors, shall be taken into account’ in the implementation of this target. But how can this be done? Unlike biofuels, renewable electricity supplied to electric vehicles and trains cannot be simply blended, using existing infrastructure. EVs are charged at a charging station or at home. How can this renewable electricity be counted towards meeting the binding, minimum 7% target?
From mid-2021, every EU member state must have a system in place to promote renewable transport fuels that includes renewable electricity. Such a system must be grounded in reality. It must recognise that crop-based biofuels have been a disaster. It must also meet the ‘surge’ of electric vehicles that is underway: millions of new EVs will be driving on the EU’s roads by 2030. It must anticipate that renewable electricity will continue to increase its share in the power sector: wind and solar are the cheapest new generation units for electricity. (A coal and nuclear comeback? Call us skeptical.) And the system must accept that EVs are more efficient than cars with an internal combustion engine. The Renewable Energy Directive recognises this fact and allows member states to count every 1 kWh charged into an EV four times towards its renewables target.
We looked at California and the Netherlands for inspiration on how to capitalise on these broad trends. Both have introduced a credit mechanism: such a credit mechanism gives fuel suppliers – for now, think companies delivering gasoline and diesel to gas stations – a choice on how to reach their minimum level of renewable transport fuels. All EU member states – except for the Netherlands and Germany – currently only allow fuel suppliers’ obligations to be met by blending a minimum percentage of biofuels with fossil fuels. The introduction of a credit mechanism would open up the field: renewable fuel credits could also be generated by counting the renewable electricity that is charged in EVs. In other words, a credit mechanism would dismantle the monopoly that biofuel blenders have had as the only suppliers of renewable fuels. Charge point operators, e-mobility service providers, utilities, car manufacturers … yes, even individual EV-owners would be able to generate renewable fuel credits.
A technology and fuel-neutral credit mechanism would not only offer a level-playing field to EVs. In addition, the value of the generated credits could help to accelerate the transition towards the electrification of the transport sector. For example, in the Netherlands, the value generated by the credits has helped charge point operators to improve the business case of their EV recharging points. In California, utilities need to earmark the value of the credits, and these earmarked revenues are used to offer rebates to their customers who buy an EV or to support additional EV recharging points. A well-designed credit mechanism can generate substantial revenues: based on conservative assumptions, T&E estimates that a Dutch-style credit mechanism could generate up to €5.7 billion in 2030 in credit value that can be spent on the EV transition, or other sustainable measures to decarbonise the transport sector, without requiring public subsidies.
A credit mechanism as outlined here gives member states the right incentives to accelerate a sustainable shift to EVs and the broader energy transition, leading to a virtuous cycle: more renewable electricity and more EVs lead to more credits, more credits to more revenue to be spent on sustainable transport electrification, which leads to more EVs and charging points, more credits, more revenue… and so on.
Which member state in their right mind, faced with meeting challenging climate targets, would refuse an idea whose time has clearly come? It’s high time to take renewable electricity seriously as a transport fuel.