Europe crawls towards low-carbon transport

This article was first published by Oxford Energy Forum

On the back of the Paris climate deal and record high global temperatures, Europe is slowly crawling towards a 2030 low-carbon strategy for transport. Later this year the European Commission is supposed to present a strategy paper, followed by concrete policy initiatives over the next year or so. This article looks into what Europe has done so far in the context of 2020 initiatives and what the key lessons are for the forthcoming action with timeline 2030.

What transport emissions are and where they will go

European Environment Agency numbers (data from the EEA document ‘Greenhouse gas emissions from transport’) indicate that in 2013 European Union transport greenhouse gas (GHG) emissions (including aviation and shipping) were 1,161 million tonnes of CO2 equivalent. This is 20 per cent up from 1990 levels. Transport is the only sector which has seen emissions rise in the past quarter of a century, to the point that it currently represents 28 per cent of the EU’s overall GHG emissions. However, on a positive note, transport emissions peaked in 2007; 2013 emissions are 12 per cent down from that pre-global financial crisis level of 1,314 million tonnes. It should be noted that these transport numbers only include emissions from combustion of fossil hydrocarbons – mostly diesel, petrol, kerosene, and heavy fuel oil. Upstream emissions from the production of all energy sources used for transport, including electricity and all emissions from biofuels, are excluded. Especially the latter is a serious omission, as this piece will show.In October 2014 EU leaders agreed that sectors outside the Emissions Trading Scheme (ETS) should reduce their GHG emissions by 30 per cent compared with 2005 levels. Transport is the biggest of these non-ETS sectors, followed by buildings and agriculture. Assuming that transport should also contribute with a 30 per cent reduction, this means that surface transport should reduce its emissions by 23 per cent from 2013 levels. Against a baseline scenario expecting stabilization, this is no small task. And if the five-year ‘review-and-tighten’ process enshrined in the Paris deal takes effect in Europe too, we should plan for hitting lower numbers in 2030.>Unsurprisingly the refining sector is feeling the pinch of lower demand for its products; since 2009, 22 refineries in Europe have closed, leaving 84 in operation. Hitting European reduction targets would surely mean closing another 15 or 20 by 2030; an inevitable consequence of success.However, using less oil is an undisputed net economic boon for a continent 90 per cent dependent on imports, the value of which represented €300 billion in 2013 or 2.5 per cent of EU GDP.In any case, if the world takes its Paris pledges seriously, low oil prices are here to stay, not because of oversupply but lack of demand. Low oil prices are not an excuse for inaction – they are a consequence of success.Can Europe take credit for the emissions drop since 2007? The short answer is – only a very little bit, because most of the policies implemented either failed or disappointed. The long answer follows below. Without doubt, the potentially most effective policy Europe has adopted is the regulation to reduce CO2 ght: 1.538em;">emissions from cars to 95 g/km in 2021 – which is 40 per cent below the 2007 level of 158 g/km.

It is also the first disappointment. Between 2009 and 2014, the year the regulation was adopted, official average CO2 emissions of new cars dropped from 146 to 123 g/km, a sizeable 16 per cent cut in five years. Sadly though, real-world fuel consumption (hence CO2 emissions) from new cars dropped by only 3–4 per cent, from 173 to 167 g/km, according to figures aggregated from 11 databases of logged fuel consumption of individual car models (see ‘Mind the Gap 2015: Closing the chasm between test and real-world car CO2 emissions’, Transport & Environment, 28 September 2015). This less-than-1 per cent per year efficiency improvement is lower than what had been achieved before legislation (1–1.5 per cent). The gap between official and real-world fuel consumption has grown to 40 per cent and for some recently introduced models it is even 50 per cent. Manufacturers achieved the vast majority of official CO2 cuts simply through exploiting loopholes in the test cycle.

The test procedure will change in 2017, and it will close quite a few of the largest loopholes. But under pressure from the industry, the effect of the loopholes will still be carried over in the new test through a much (15–20 per cent) weaker 2021 CO2 standard. So we currently have a reasonable standard on a poor test; we will end up with a poor standard on a reasonable test. Real-world CO2 is expected to drop over the next five years to 140–145 g/km in 2021; a far cry from the expected 110 g/km when it was introduced. Cars in 2021 will only be some 18 per cent more efficient than in 2009; much more is possible, even at negative societal cost.

On trucks, Europe has not yet achieved anything in terms of CO2 legislation; fuel efficiency has been stagnant (‘Europe’s lost decade of truck fuel economy’, Transport & Environment, 2 December 2015) for 20 years now, meaning that emissions grow along with vehicles miles travelled.

In terms of modal shift, stagnation is the word again; changes have been very limited apart from a big loss in share of rail freight in the 1990s. Since then, gains in some west European countries have been offset by strong losses in many east European member states.

A good trend, though, has been the progressive introduction of kilometre charges for lorries; this already covers 15 countries, the latest being Belgium on 1 April 2016. There is strong evidence (‘Price sensitivity of European road freight transport’, Significance et al.,, June 2010) that such charges encourage fuller and cleaner lorries, shorter distances, and modal shift to rail.

Renewable energy policy in transport has so far been an outright failure. Almost all of the current 5.5 per cent renewable energy in transport is biofuels; and some 75 per cent of these biofuels is made up of biodiesel from virgin vegetable oil. Unobtrusively, on 10 March the European Commission uploaded an explosive report (‘The land use change impact of biofuels consumed in the EU’, ECOFYS, 27 August 2015) on the damning climate impact of such fuels. The report only looks at emissions from land-use changes, such as forest clearing, ploughing, and peat draining resulting from biofuels consumption in Europe. This type of emissions, for biodiesel alone, is already some 30 per cent higher than the full lifecycle emissions of fossil diesel. Add in direct emissions – from tractors, fertilizers, and the like – and lifecycle biodiesel emissions are 80 per cent (!) higher than those of fossil diesel (‘Globiom: the basis for biofuel policy post-2020’, Transport & Environment, April 2020). This further strengthens findings from an earlier study (‘Assessing the Land Use Change Consequences of European Biofuel Policies’, October 2011) for the Commission. Biofuels used in Europe currently increase, not reduce, transport GHG emissions and the picture will not change until 2020. Notwithstanding this, all biofuels are still counted as having zero emissions, giving governments all over Europe a reason to mandate or subsidize them: it helps them meet their climate obligations, on paper. A huge policy mistake and a huge accounting error that needs to be fixed as soon as possible.

Shipping emissions have dropped strongly, by 23 per cent since their 2007 peak. This has little to do with trade which is close to pre-crisis levels, or with better ships (‘Historical Trends in Ship Design Efficiency, The Impact of Hull Form on Efficiency’, CE Delft, March 2016), but has everything to do with high fuel prices and fleet overcapacity, both of which give strong incentives for so-called ‘slow steaming’ – sailing more slowly, giving big savings in fuel consumption. Aviation emissions are close to pre-crisis levels; possibly the inclusion of the sector in the EU ETS for intra-EU flights has made a modest impact in controlling emissions but ETS carbon prices that equate to 1–2 cents per litre of kerosene are unlikely to have made a major difference.

In short – EU climate policy in transport has made precious little difference yet. Most of the 12 per cent drop in emissions between 2007 and 2013 has to do with lower economic activity and high oil prices.

But much can be done if only we learn lessons and use opportunities

The good news is that Europe has laid some useful foundations for further actions and that prospects for change are better than they were.

By far the most important change in the energy, climate, and transport landscape since the financial crisis has been the precipitous drop in the prices of solar and wind power and in the cost of batteries. Solar panel prices have dropped by some 85 per cent in the past seven years; wind prices by some 60 per cent.

Cars and surface passenger transport

Recently Bloomberg released a report (‘Electric Vehicles to be 35% of Global New Car Sales by 2040’, Bloomberg New Energy Finance, 25 February 2016) on the future of electric vehicles (EVs) – stating that the price of batteries had dropped by two-thirds since 2010. This equates to a drop of 20 per cent per year; close to a revolution. These are stunning numbers and the end is not in sight, leading Bloomberg to predict a ‘Kodak moment’ for internal combustion vehicles at some point in the 2020s. In China, 52,000 electric cars were sold (‘Electric Vehicle Sales Continue to be Unstoppable in China – Up 170%’, Inside EVs, March 2016) in January and February 2016. This is on track to smash Europe’s 59,000 (‘Alternative Fuel Vehicle registrations: +20.0% in 2015; +21.1% in Q4’, European Automobile Manufacturers Association, 5 February 2016) in the whole of 2015 by a factor of five or so.

And of course there was the event every mainstream newspaper and website covered – Tesla’s unveiling of its electric Model 3 leading to – by mid-April – an eye watering 400,000 pre-orders from enthusiasts who had to stump up US$1,000 for the honour of being first in line to pay US$35,000 for a car at a point almost two years from now.

Will Europe capitalize on this opportunity or not? That’s the big question. In Norway the share of EVs in new car sales is close to 30 per cent; in Bulgaria exactly one (1) EV was sold in the last quarter of 2015. This shows that policy matters enormously.

For now, the continent seems, even in the wake of the VW diesel scandal, to cling to diesel as its prime technology, slowing down the transition to much more promising hybridization and electrification avenues. Europe gives diesel cars a fuel tax break worth €27 billion (‘Europe’s tax deals for diesel’, Transport & Environment, 23 October 2015), something no other region does. As a result, one in every two vehicles sold in Europe is a diesel; elsewhere is it one in 20. Diesel cars have some 10–15 per cent lower CO2 emissions compared with a same-size regular petrol car, but cost around €2,000 more; the comparison is therefore one of apples and oranges. Investing that money in hybridizing a petrol drivetrain gives 25–30 per cent CO2 benefits. Stimulating diesel is a very costly climate policy and isolates our carmakers on the world stage – even leaving aside the air quality problems we face as a result of 20 years of diesels dodging their emissions tests.

Japan has the lead in hybrids and, together with South Korea, in batteries; China and California are much more aggressive in promoting electric vehicles and Tesla is the undisputed leader in EVs. Europe needs to turn its defensive attitude on electrification into an awareness that there is no choice; if we don’t act Asia and Silicon Valley will rule the roost in 2030.

A key policy instrument is ambitious CO2 standards for new cars for 2025 and an associated ‘flexible mandate’ for ultra-low-carbon vehicles. That – supplemented with real-world testing to avoid a new round of exploitation of testing flexibilities – will convince Europe’s carmakers that there is indeed no choice but to invest in fuel efficiency and breakthrough technologies, after so many years of wavering.

‘Electrification’ is not just about electric cars. It is also about making Europe’s fragmented market work for the use of electric vehicles. With growing distances driven on a charge, international standardization of plugs and payment systems is urgently necessary.

The rise of smaller electric vehicles, including ebikes, is a tremendous opportunity to fill the huge current void between cars (often way too heavy and large for the task at hand) and bikes.

More broadly, electrification goes hand in hand with the sharing economy; an electric vehicle, after all, is expensive to buy and cheap to use, and hence an ideal asset for sharing. Electric vehicles can hence play an important role in delinking car use from ownership; an important precondition for smarter mobility with a much better match between demand and supply.

And the electric mode we have, rail transport, can be more smartly used. Booking a rail ticket for a trip that covers more than one company is close to impossible. No EU-wide booking sites exist that offer multimodal booking; simply because the railway undertakings, in contrast with airlines, do not share the necessary data with each other or with third-party providers. As a result people by default book air tickets for longer distances. Mandating the sharing of necessary data is surely a policy that should be thought through, especially for undertakings that receive public money for their services (most do).

Freight

Freight transport should not be overlooked; in 2030 it will represent some 40 per cent of surface transport emissions.

For trucks, we urgently need CO2 standards too, to break the two decades of efficiency stagnation mentioned earlier. Numerous market failures hold back the supply of, and demand for, better lorries; standards can break these failures. The EU is thinking of adopting a regulation to start monitoring truck CO2 emissions; the USA is in the process of adopting Stage 2 fuel efficiency standards and the expectation is that US trucks will be more economical than European ones within a decade. This is a real threat to the dominant 40 per cent share of the world’s truck market that EU manufacturers have today. Again Europe is sliding from a standard maker to a standard taker.

And Europe needs to think urgently on what zero-carbon freight looks like. Is it trolley trucks with catenary lines on the main motorway network, with diesel and/or batteries as backup for the last (dozens of) miles? Is it hydrogen made from sustainable electricity? Is it ‘power-to-liquid’? Biodiesel will surely not be available in the quantities required; vegetable oil-based biodiesel simply needs to be phased out as we have seen. Discussion on this vital topic is lacking.

The impact of truck policies can be reinforced by differentiating kilometre charges for the CO2 emissions of the truck. Hauliers can then be certain that a truck certified for better fuel consumption and lower or zero CO2 will produce a good payback, if not in fuel savings, then in lower road tolls. The Commission should make a proposal to mandate such a differentiation.

Aviation and shipping

A study (‘Emission Reduction Targets for International Aviation and Shipping’, November 2015) for the European Parliament throws up the challenge squarely:

‘If, as in the past, the ambition of these sectors continues to fall behind efforts in other sectors and if action to combat climate change is further postponed, their CO2 emission shares in global CO2 emissions may rise substantially to 22% for international aviation and 17% for maritime transport by 2050, or almost 40% of global CO2 emissions if both sectors are considered together.’

Paris left aviation and shipping unmentioned, leaving the current situation of inaction intact; a gaping hole in the Agreement.

Aviation remains one of the biggest anomalies in transport policy. It is the most carbon-intensive mode of transport and the fastest-growing one, yet it enjoys well-documented exemptions from fuel tax as well as from VAT on tickets; together these exemptions amount to some €30 billion a year. The inclusion of intra-EU flights in the EU ETS was a very modest start to remedying this situation; yet the fury this modest measure unleashed amongst the world’s airlines was again an illustration of how used the sector is to special treatment and privileges.

This fury has led the International Civil Aviation Organization (ICAO), a UN body, to say it wants to ‘develop’ a global market-based measure; in October its Assembly will vote on whether it will pass, and in what form. It is already clear that carbon offsets will be its mainstay; just as Europe has rightly decided not to use them for compliance with its climate targets. At the very least, Europe should make sure that any global action complements, not replaces, the ETS. The ICAO also recently adopted a CO2 standard for new aircraft; unfortunately it will make no difference to emissions (‘International Civil Aviation Organization CO2 standard for new aircraft’, International Council on Clean Transportation, 9 February 2016).

In shipping one important challenge is to close the massive gap between efficient and inefficient ships, and to ensure that the huge potential for further efficiencies, including speed and power reduction, is used. The current so-called ‘Energy Efficiency Design Index’ for 2020 and 2030 fails to do this (‘Historical trends in ship design efficiency 2016’, CE Delft, 1 April 2016) and needs to be tightened; it is truly a low-hanging fruit.

Both the aviation and shipping sectors need to find a zero-carbon energy source urgently. Airlines have been saying that biofuels will be part of the solution; however, they have resisted any binding measure towards that effect. Apart from that, availability of sufficient truly sustainable bioenergy is very challenging.

Options such as power-to-liquid need to be looked at urgently; but without a serious policy to mandate or incentivize such better fuels, fossil kerosene and marine fuel oil and gas oil will remain the mainstay for a long time.

Conclusion

Transport has, so far, been quite resistant to efforts towards decarbonization. EU policies adopted in the first climate package (for 2020) have, almost without exception, either disappointed (for example CO2 standards) or failed (biofuels). This is not so much due to the lack of technical options – study after study has demonstrated the potential for significant cuts at low or even negative cost. The challenge is a political one – between the resistance to change of the car, truck, oil, aviation, and shipping industries, and the inability or unwillingness of Europe’s institutions (including, and especially, the Council of Member States!) to overcome that resistance. 

As a result Europe is in real danger of losing its lead to the USA and Asia – not to mention failing to deliver on the Paris deal. The good news is that Europe can draw plenty of lessons from its first efforts for its second (2030) climate package and that, more than ever, there are opportunities for progress, especially in the fields of energy efficiency and electrification. It’s not yet too late, but the clock is ticking

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