• What the CO2 emissions deal means for trucks

    Ten months. That’s all it took for Europe to agree its biggest ever climate package for trucks. By EU standards that is miraculously fast. But it was the culmination of a radical change in approach that has taken place over the last nine years. Until 2016 the European Commission’s mantra was that the trucking market was a rational one, the implication being that increased transparency through a new test procedure and consumer demand would do the trick. Then the Commission’s stance changed abruptly.

    A few developments explain this ‘volte face’. The 2030 national climate targets put trucks’ increasing emissions in the spotlight. Then there was the realisation that new trucks actually hadn’t become much more efficient in nearly two decades. But what really destroyed the idea of the ‘perfect truck market’ was the cartel case. Once it became clear that all European truckmakers had been involved in massive price fixing cartel for over a decade, their game was up. On 19 July 2016 the EU issued the truckmakers a record €2.9bn cartel fine; the day after it announced it would be proposing truck CO2 standards – this happened in May 2018.

    So what does last week’s deal mean? The most important feature of the new deal is that for the first time there is now real, regulatory pressure on truckmakers to cut emissions. The targets of -15% in 2025 and -30% in 2030 don’t capture the full cost effective savings but they will give the market a real push. Truckmakers can comply in different ways.

    The first and default option would be to increase the fuel efficiency of their newly sold vehicles. That means more efficient engines, better aerodynamics, better tires and perhaps waste heat recovery and hybridisation towards 2030.

    A second option would be to increase the sales of CNG and LNG trucks which, in theory, can have lower tailpipe emission (although that remains to be confirmed in independent tests).  Regardless of whether gas is a possible compliance pathway, it is clear it has the same limitations as diesel when it comes to full decarbonisation of the sector, and is therefore a risky bet for truckmakers.

    The third option – and strategically the most relevant to achieve decarbonisation – is electrification (ie, battery and hydrogen). The trucks package creates a number of powerful incentives to encourage truckmakers to go electric. First there’s the 2025 benchmark, a non-binding target of 2% in 2025. If truckmakers meet and overachieve the benchmark by 3 percentage points they can reduce their 2025 target from 15 to 12.4%. Second there’s a 2-tonne additional weight allowance for electric trucks. For a battery truck that can easily mean a few hundred kilometres of additional range without any weight penalty. Third, there’s the zero counting of all-electric or hydrogen trucks in calculating their fleet CO2 emissions. Fourth, there’s a deal to give truckmakers up to a meter of additional tractor cab designs space from September 2020 onwards. This matters because batteries and hydrogen stacks require additional space, but also because the aerodynamic performance is critical for the highway driving capability of a truck. Finally, the Commission did not object to – and so approved – Germany’s decision to exempt electric trucks (and LNG) from its road tolls.

    However, as always there is also a fourth option: cheating. The main ways truckmakers can manipulate the standards is, first, by artificially inflating the 2019 baseline, for example by selling less fuel efficient models or postponing the introduction of new models; and, second, by manipulating the complex VECTO test procedure. The Commission shouldn’t just be ‘vigilant’ and monitor, it needs to immediately make resources available to double check the baseline and the CO2 values.

    Assuming the Commission prevents cheating, the trucks deal adds up to a very significant package. It won’t be enough to hit the 2030, let alone the 2050 climate targets – if all goes well the CO2 standard will cut EU truck emissions by 13.5% in 2030 – but it can be a game changer. Whilst some truckmakers such as IVECO may opt for a CNG/LNG strategy, most others are likely to opt for a combination of increased diesel efficiency and delivery-truck electrification (which could see 5-10% e-truck market penetration by 2025). Long-haul truck electrification won’t be driven by this regulation but the weight, toll and design changes will create opportunities which can be seized on by the OEMs, but also by new entrants such as Nikola, Tesla, BYD or Siemens.

    There’s an important lesson in the trucks deal for the wider climate debate. Yes, the development of new technologies requires significant investment. But the truth is that there’s also a huge economic return on investment. Investment and cost are not the same things. Cleaner trucks are a case in point. The 2025 standards will save truckers €20,000 per truck in reduced fuel bills over the first five years; the 2030 standards will save up to €60,000. Thanks to the standards we’ll reduce our dependence on imported oil and the European economy will add 80,000 additional jobs by 2030. This is what a greener economy looks like.

    And perhaps that is the real miracle – that for the first time in decades environmentalists, businesses and truckers are finding common cause. The result is we have started working with progressive business such as Ikea, Nestlé, DB Schenker, Carrefour, Geodis and many others to build the economically vibrant, innovative but, above all, decarbonised logistics sector we need.