Alternative fuels proposal threatens ambitious truck emission standards

A proposal to count the quantity of alternative fuels in Europe’s fuel mix towards CO2 reduction targets for heavy-duty vehicle manufacturers would create uncertainty for industry and ultimately increase emissions, writes Eamonn Mulholland.

Dr. Eamonn Mulholland is a researcher at the International Council on Clean Transportation (ICCT), a non-profit public policy think tank.

May you live in interesting times is an expression that can be interpreted as both a blessing and a curse. The regulation of Europe’s trucking sector emissions warrants the blessing of the expression well.

In 2018, Europe remained the only major market yet to regulate CO₂ emissions from the heavy-duty sector – both the United States and China adopted truck fuel consumption standards in 2011, followed by India in 2017.

Fast forward to this year and Europe has proposed a set of standards that, if adopted, would be one of the most ambitious heavy-duty CO₂ standards globally.

Still, the road from proposal to regulation is long and winding, and one hotly debated provision on alternative fuels looms, threatening to weaken the standards’ effectiveness.

This move from laggard to leader was spurred by the European Climate Law, and the EU’s pledge to go carbon neutral by 2050. It was clear Europe’s truck sector, which is still today almost entirely fossil-fueled and emits a quarter of transport CO₂, would need a quick transformation to contribute its fair share.

To rectify this, the European Commission proposed this year that nearly all new trucks and buses should emit 90% less CO₂ by 2040.

The industry had already shown its willingness to commit to such a pathway, with manufacturers responsible for three quarters of the EU truck sales planning for at least half of them to be emission free by 2030.

Most policy makers have supported the proposed targets so far, with the Council of the European Union voting in agreement (although seeking slightly less ambition overall), and the European Parliament’s environment committee voting similarly (although seeking slightly more ambition overall).

These key votes around the proposal have left the file largely unchanged, however, policymakers have debated the role that alternative fuels (such as biofuels and e-fuels) should play in CO₂ standards, echoing the discussions from the car and van standards just last year.

To date, Europe’s CO₂ standards have been designed to regulate tailpipe emissions. Fuels legislation such as the transport target in the Renewable Energy Directive focuses on the greenhouse gas intensity of the fuels themselves.

The two policy streams have been kept separate for a good reason: Manufacturers have no control over the fuel supply, and fuel suppliers have no means of reducing tailpipe emissions.

Nevertheless, there has been a push to blend the two streams through a mechanism known as a carbon correction factor (CCF).

The proposed mechanism is straightforward: Europe’s diesel contains an approximate 7.5% share of alternative fuels. Some policymakers want this share to be accounted for when manufacturers are determining the emissions of their trucks.

Manufacturers have a fast-approaching 15% reduction target for 2025, so a CCF would boost them halfway with no extra effort needed.

You might think that manufacturers would be in favour of making their targets more achievable, but five of Europe’s seven main truck manufacturers have spoken out against the idea.

This is because a CCF would create significant uncertainty for them regarding what CO₂ reductions they need to aim for each year.

Under a CCF, truck makers would be counting on a certain share of alternative fuels to contribute towards their target and would plan their sales portfolio accordingly.

But it would be difficult to predict exactly what the alternative fuel volume will be since some flexibility exists in the transport target set by the Renewable Energy Directive.

For example, renewable electricity in transport counts towards this target and, if member states decide to focus heavily on electrification, it could result in a lower share of alternative diesel.

This uncertainty makes it difficult for truck manufacturers to accurately predict their own vehicle CO₂ targets. The penalties for non-compliance are high; the average truck manufacturer faces roughly €50 million in fines if they miss their target by just 1%. With so much at stake, the desire to remove any uncertainty is understandable.

The list of reasons to keep a CCF out of the standards is long. A recent ICCT study shows that such a mechanism would effectively reduce manufacturers’ targets by 8% each, resulting in an additional 200 million tonnes of CO₂ emitted by 2050_.

Further, the total cost of ownership of trucks powered by alternative fuels – including hydrotreated vegetable oils, e-diesel, and biomethane – aren’t expected to reach parity with diesel before 2040. In contrast, electric trucks, ranging from light urban delivery to heavy long-haul, are expected to reach parity with diesel in less than 5 years.

Although electric trucks are more energy-intensive to produce and their electricity is still partially derived from fossil fuels, they still offer a more effective option for decarbonising the heavy-duty sector.

Their superior efficiency yields a lower level of life-cycle emissions per kilometre than any alternative today – an electric truck sold today emits 57% less than its diesel counterpart over its lifetime, even when accounting for the growing share of alternative fuels mixed in.

So far, the Council and the Parliament’s environment committee have both decided against this provision of the CCF. But as eyes turn toward the plenary vote later this month, the issue is undoubtedly bound to rear its head once again.

Alternative fuels were avoided by the slimmest of margins during plenary in the car and van CO₂ standards last year, and history finds a way to repeat itself.

Whatever the outcome of the vote, interesting times indeed lie ahead.