At the COP26 event in Glasgow, the International Transport Forum (ITF), the OECD’s intergovernmental think tank, held a virtual fringe meeting entitled ‘Decarbonising Transport: Driving implementation in hard-to-abate sectors’.

The discussion, involving the ITF’s expert analysts and a contributor from the European Commission, looked at the steps being taken to address carbon emissions reduction in three key ‘hard to abate’ sectors: heavy road freight, aviation and shipping. One of the key problems which all three sectors have in common is that carbon mitigation solutions have been hard to find: technological developments are expensive and are still not available at scale. If policies do not change, according to the ITF, transport as a whole will emit 16% more carbon dioxide in 2050 than 2015. Freight emissions will be 22% higher. To meet the 1.5 degrees Celsius target, emissions will have to be cut to a third of 2015 levels, indicating the magnitude of the task in hand.

One example highlighted by ITF analyst, Matteo Craglia, was the challenge involved in transitioning heavy road freight from diesel to electric or hydrogen. Until there are sufficiently dense charging networks in place, take up by carriers will be slow. New power networks, storage facilities or pipelines will require considerable investment but when there is so much uncertainty over which fuel technology will eventually be adopted, investors will continue to be put off by levels of market risk.

This suggests that government intervention, guidance or facilitation will be necessary, allowing the private sector to take action with confidence. However, whilst speed is necessary to meet climate change targets, governments must remain what the ITF’s analyst called ‘tech neutral’: policy makers must not pick winners or close the door to future technologies. This conundrum is likely to delay steps to implementation although a pathway approach which plots development timescales; assesses the fuels with the biggest decarbonisation potential; examines the economic case for each; assesses the role of transitional fuels as well as advising on how private investment can be encouraged will help the process. Not all options are viable or can be funded, so the role which public policy plays in facilitating the development of the most robust will be critical.

In the aviation sector, ITF’s Till Bunsen suggested that policies should be put in place to strengthen demand for advanced Sustainable Aviation Fuels (SAFs), partly by implementing carbon taxes or establishing emission trading schemes. At the same time, R&D should be supported which would enable production at scale whilst reducing the price.  Realistically ‘drop in’ fuels are the only option for fast greenhouse gas reductions for the long haul sector as these are compatible with existing technologies. More advanced fuel technologies (such as battery electric) are at a much lower stage of market readiness.

ITF’s ports and shipping expert, Olaf Merk, made the point that alternative fuels would not be developed if there were no market for low carbon shipping i.e. if conventional, high carbon options were still available to the market at a lower price. Instead, the negative externalities of bunker fuels should be ‘internalised’ via carbon pricing or regulation. The allocation of monies raised through a carbon tax could help with transition costs.

It seems very unclear across all the ‘hard to abate’ transport sectors how carbon emission targets will be met. Fuel technologies and their necessary ‘ecosystems’ (such as charging networks) are at very early stages of development and will need government facilitation and public/private investment on a massive, paradigm shifting scale. The risks of backing the ‘wrong’ technology are very real, costing the taxpayer many billions and delaying or even suppressing the development of options which had better carbon reducing potential.  Establishing pathway structures to aid the assessment of new technologies and guide public/private response and engagement will be crucial.

Although many industry practitioners, energy companies and politicians are ‘betting the house’ on game changing fuel technologies, there are other approaches which can have immediate effects. Increasing utilization of transport assets, for instance, by improving loading and routing efficiencies; addressing volumetric issues by reducing packaging; sourcing where possible from local suppliers or using less carbon emitting modes such as short sea shipping or intermodal. Expecting technology companies to pull a rabbit from out of the hat is not a viable proposition if governments, shippers and carriers really want to meet their carbon emissions reduction targets.

Source: Foundation for Future Supply Chain, November 8th, 2021

Author: John Manners-Bell

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