Carbon pricing crucial to deliver on greening transport, Volvo boss says

The implementation of the EU’s carbon pricing scheme for road transport is crucial to drive the business case for electric and hydrogen trucks, Martin Lundstedt, CEO of the Volvo Group, told Euractiv in an interview.

While transport emissions in the EU have increased by 26% from 1990 to 2023, making the sector the ‘problem child’ of the green transition, the EU aims to cut emissions by 90% by 2050, in line with its climate agenda.

On Wednesday (10 April), the European Parliament is expected to adopt new rules for trucks and buses, which will drastically reduce the number of diesel trucks that can be sold in Europe, obliging truck makers to increase the share of zero-emission vehicles such as battery-electric or hydrogen trucks.

“We see it as tough, but we see it as feasible,” Lundstedt, CEO of the Volvo Group, which mainly produces trucks and buses, said about the new targets, adding that “we have the equipment available”.

“But the reality is that you can have equipment available, but you need to have infrastructure, you need to have grid capacity, you need to have the green energy, and you need to have the TCO [total costs of ownership] parity, […] and you need to have a supply chain,” Lundstedt said.

“And every of these factors are times each other because if any one of them are zero it’s zero.”

While the EU has over the last five years adopted several laws that should ensure the uptake of these conditions, such as the Alternative Fuel Infrastructure Regulation (AFIR) and the Renewable Energy Directive (RED), “Europe needs to move from PowerPoint to execution,” Lundstedt said.

In particular, to improve the competitiveness of zero-emission vehicles, “it is extremely important that we continue to work on carbon pricing,” Lundstedt said. “That is something that must happen in order to drive the demand side to the right solutions.”

As of 2027, the EU will start putting a price on the CO2 emissions of petrol and diesel combustion, by obliging fuel makers to buy emission certificates under a new carbon market scheme known as the ETS2. This is meant to drive up demand for greener alternatives.

While the exact impact on petrol and diesel prices is still unknown, the threat of a socially unfair burden has recently led Yasmin Fahimi, head of Germany’s Trade Union Federation, to question the introduction of the ETS2.

Lundstedt acknowledged that “if you want to drive a sustainable society, it must be environmentally, socially, ethically, and financially sustainable”, indicating that higher levies on carbon could be “balanced” with a tax reduction elsewhere, such as on work.

“But that is a longer discussion, of course,” he said.

Despite not questioning the EU’s CO2 targets for new trucks, Lundstedt also warned against the expectation of a “hockey stick”-like uptake of zero-emission trucks.

In 2023, diesel trucks still accounted for as much as 95.7% of new truck registrations in Europe, while electric trucks represented 1.5% of the market, up from 0.8% in 2022, according to the industry association ACEA.

“We cannot expect […] that everything should be fulfilled by 2028 to 2029 and then have the expectations that then suddenly the whole market will switch to battery-electric or fuel cell electric or, or hydrogen combustion,” he said.

“I’m not sitting in a corner and crying. I’m just saying that we have the products and equipment available, and now we need to continue to work in the whole value chain.”

[Edited by Donagh Cagney/Zoran Radosavljevic]