Road mobility is lagging behind reducing GHG emissions

• So they need to step up and indeed they have set ambitious targets

• We doubt that the target will be hit. The adoption of battery electric vehicles could slow down

• Moreover the needed trajectory is substantially steeper compared to the historical trend

Where do we stand in terms of GHG emissions for road mobility

According to Eurostat, the EU emitted 3,541 Megaton of greenhouse gas emissions in 2021 and the mobility sector accounted for 22% of that total or 782 Megaton. EU 27 GHG emissions were down 28% at the end of 2021 compared to 1990. However this doesn’t apply to emissions from road mobility, which are 16% higher compared to 1990. Emissions from the different sub-categories of road mobility show increases of between 12% (emissions by cars) and 64% (emissions by light duty vehicles) compared to 1990. In 2021, the Netherlands emitted 175 Megaton and the mobility sector accounted for 15% of those emissions or 25.5 Megaton. According to the CBS, the mobility sector in the Netherlands emitted 29.6 Megaton in 2022, meaning that there is a moderate downward trend excluding the impact of the pandemic compared to 1990 when the mobility sector emitted 32.2 Megaton. So if we take this all together the mobility sector clearly lags behind in terms of reducing greenhouse gas emissions compared to whole-economy trends both in the EU as a whole and the Netherlands. For the EU, the trajectory for emissions in road mobility needs to change completely.

Road transport is the biggest emitter in the mobility sector. It is responsible for around 95% of the total emissions of the mobility sector. Passenger cars account for around 50% of emissions of the mobility sector. Commercial vehicles account for around 40% of the GHG emissions (38% for EU 27, 43% for NL). This is the sum of emissions and percentages of heavy duty, light duty vehicles, buses and construction traffic.

Policy by the Netherlands to reduce emissions from road mobility

The EU and the Netherlands have set the goal to reduce emissions of greenhouse gasses (GHG) by at least 55% in 2030 compared to 1990 levels and make the EU climate neutral by 2050. The policy in the Netherlands is aimed at a reduction of 60% by 2030 and to be net zero in 2050. To reduce GHG emissions by the mobility sector, the EU and the Netherlands have set ambitious targets for this sector. In this section we discuss the emission targets and policy announced by the Dutch government and the European Commission (EC) to reduce emissions for the mobility sector. We start with the Netherlands followed by that of the EC. The Dutch government’s target for the mobility sector is to reduce greenhouse gas emissions to 21 Megaton in 2030, this means a reduction of 8.6 Megaton compared to 2022. Every sub-category needs to contribute its share. As there are no sub-sector targets we assume that the reductions are all the same in percentage terms. The total reduction target is 8.6 Megaton by 2030 so cars need to emit 4.4 Megaton less by 2030 and commercial vehicles 3.8 Megaton less.

Policy on cars

The Dutch government’s policy is that every new car sold from 2030 onwards has to be a zero-emission car. This can be battery electric car or a hydrogen fuel cell electric car. In the Netherlands, the fleet of 8.8 million passenger cars was responsible for roughly 14.8 Megaton greenhouse gas emissions in 2022. In 2030 the fleet of cars that emit greenhouse gasses is expected to be 6.3 million passenger cars (internal combustion and hybrid vehicles). This is based on the assumption that the share of battery electric vehicles in total sales will increase by 9% annually to reach 100% in 2030 and that the annual sales will roughly remain around 440,000 on average. The total greenhouse gas emissions of these 6.3 million passenger cars could be around 10.7 Megaton. So, by introducing the measure that all new passenger cars in 2030 have to be zero-emission cars, greenhouse gas emissions could drop from 14.8 megaton to 11 Megaton or a reduction of 3.8 Megaton by 2030. So based on these assumptions and our own calculation making and an approximation of emission per vehicle and fleet we expect cars to emit 3.8 Megaton less by 2030. This falls short of the 4.4 Megaton needed (mentioned above).

What if the reality differs from these assumptions? For example, what if the adoption of battery electric cars were to slow in pace. At some point in time the consumers that could afford battery electric vehicles already bought them and consumers that can’t afford them decide to drive longer with their cars that emit emissions. As a result total sales will slow and the amount of battery electric vehicles in the total fleet will rise more slowly. Therefore emissions would decline at a slower pace than the above mentioned scenario. We think that if the total fleet has 500,000 less zero-emission cars then emissions could only reduce by 3 Megaton compared the above estimate of 3.8 Megaton. So the Dutch government may need to fine-tune the policy in the coming years to make zero emission cars more affordable via for example subsidies. Another option is that the government may opt to speed up the adoption of zero-emission vehicles by consumers if it turns out to be that there are more challenges to bring down emissions of commercial vehicles.

Policy for commercial vehicles

From 2025, all new buses used in public transportation should be zero-emission buses and they must use regional produced renewable energy. From 2030, all buses used in public transportation should be zero-emission buses. In addition, all vehicles used by the state should be zero emission as well in 2030. In 2019, the European Clean vehicles directive (CVD) was adopted and in 2021 this directive was implemented in the Netherlands as the ‘Regeling bevordering schone wegvoertuigen’ (Pianoo, 2021b). The regulation obliges government agencies to tender a minimum percentage of clean vehicles in European tenders for vehicles and transport services. All modes of road transport are covered by the regulation. This regulation is forecast to reduce emissions by 0.4 Mton in 2025 (source CE Delft). Finally, there are also new developments in city logistics. For example, around 30 to 40 municipalities in Netherlands will introduce zero emissions zones for trucks and vans in 2025. The expected CO2 reduction of this measure is 1 Megaton (Klimaatnota 2022).

The effects of all the measures are taken together the mobility sector could emit around 8.6 Megaton less in 2030 (also based on calculations from the government and from CE Delft on the effect of the other measures). This is the total needed reduction for the mobility sector. So based on this the government could hit the target for mobility.

Will the target be reached?

We doubt that the target will be hit. The adoption of battery electric vehicles could slow down. Moreover the trajectory is substantially steeper compared to the historical trend. Road mobility emitted 32.3 Megaton in 1990. So between 1990 and 2022 emissions only fell by 2.6 Megaton. By 2030 the mobility sector needs to see emissions decline by 8.6 Megaton. Compared to historical standards this seems very steep and may be improbable. For personal cars affordability and charging infrastructure are the main challenges. For commercial vehicles to meet emission reduction targets there are three main challenges: the range and freight challenge, refuelling infrastructure challenge and the charging infrastructure challenge (see our ESG Economist – No easy road to decarbonizing mobility).

Policy by EU27 to reduce emissions from road mobility

The EU has set the goal to reduce emissions of greenhouse gasses (GHG) by at least 55% compared with 1990 levels and make the EU climate neutral by 2050. As indicated above the emissions of road transport are on an upward trajectory compared to 1990. So there not only needs to be a change in direction but also a substantial reduction in emissions. To reduce GHG emissions by the mobility sector, the EU has set ambitious targets for this sector.

Ban on new sales of cars and vans with internal combustion engines by 2035

A key policy is the ban on sales of new cars and vans with internal combustion engines by 2035. In June 2022, the European Parliament backed the European Commission’s proposal. Intermediate emissions reduction targets for 2030 would be set at 55% for cars and 50% for vans compared to 2021. Members of the European Parliament voted to ban the sale of new combustions engine cars by 2035. The Environment Ministers at the European Council agreed to this ban from 2035. However, the European Council left the door open to CO2 neutral fuels as decarbonization alternatives to electrification. The ban was approved by Parliament in February 2023 by a small margin. But it had to be formally endorsed by the Council on 7 March. This vote was postponed but in the end approved. EU ministers signed off on 28 March on the ban of sale of combustion engines from 2035. But there will be extra technical legislation setting out a workaround for e-fuels. This still needs to be approved by EU institutions.

ETS

On 22 December 2022, the European Council and Parliament agreed to create a new, separate emissions trading system for the buildings and road transport sector and fuels for additional sectors, in order to ensure cost-efficient emissions reductions in these sectors that have been difficult to decarbonise so far. The new system will apply to distributors that supply fuels to buildings, road transport and certain other sectors. The co-legislators agreed that the system will start in 2027. The linear reduction factor is 5.43% from 2028. So from 2028 the number of allowances will decrease by 5.43%. On top of that they will auction upfront 30% of the total volume of the number of allowances to secure a smooth transition path. In the case that energy prices were to be exceptionally high, the start of the new ETS would be delayed until 2028. Once the system has started if the price of allowances exceed EUR 45 over a certain period of time, additional allowances will be released increasing the supply on the market.

Other measures

On 14 February 2023, the European Commission proposed ambitious new CO2 emissions targets for new heavy-duty vehicles (HDV). The proposed targets for new HDV are as follow: 45% emission reductions by 2030 compared to 1990 levels, 65% emission reductions by 2035 and 90% emission reductions by 2040. So HDV should from 2030 on emit 45% less CO2 emissions compared to 2019 levels. Emissions in the HDV sector have been increasing year-on-year since 2014 (except 2020). Especially in the freight sector emissions are increasing rapidly. These vehicles run for 99% on internal combustion engines largely fuelled by diesel. City busses will have to be zero emissions by 2030 according to the plans.

Conclusion

The Netherlands has done better in terms of emission reductions for road mobility compared to 1990 than the EU. But both the EU and the Netherlands are lagging behind a net zero trajectory. Any way we look at it the targets are very ambitious and the annual pace of emission reduction is high compared to historical standards. So the task of bringing down emissions for road transport is enormous.