Transport in a zero carbon EU: Pathways and opportunities

Fit for 55 – but missing the 1.5 ̊C target. The transportation sector, including domestic transport, international shipping and aviation, accounts for almost 30% of the EU’s annual carbon emissions. In this context, the newly proposed Fit for 55 legislation aims at cutting the cord between the transport sector and fossil-fuel dependence, emphasizing the use of cleaner, emission-free technologies and alternative fuels. But comparing the resulting transport emissions pathway with science-based sector pathways from the Network for Greening the Financial System or the One Earth Climate Model, we find that the EU could face an implementation gap of up to 14 years, and around EUR75bn of investment would be needed per year until 2030 to achieve its aspirations to limit global warming to 1.5°C (see figure right hand side).

For road transport, this would mean an additional EUR4bn per year of frontloading investments until 2030. Road transportation is a sector that has high potential for decarbonization in the short and medium-term, accounting for 71% of overall EU transportation emissions in 2018. Low-emission technology, such as hybrid cars, and zero-emission technology, such as battery electric vehicles and hydrogen-fueled vehicles, will play a key role in this transition but electric charging infrastructure needs to increase four-fold to meet the expected growth of electric vehicles.

The shipping industry would need EUR8.6bn per year until 2030. While maritime transport is a critical component of EU external and internal trade volumes, as well as passenger travel, the sector needs significant CO2 reduction through increasing energy efficiency and the use of cleaner energy sources. However, the development of suitable alternative fuels for shipping is challenging due to energy density, technological maturity and commercial readiness, flammability on board and emissions such as methane and nitrous oxide. Alternative fuels (synthetic and biofuels) are not yet commercially available and require substantial investment in research and development to be ready for deployment by 2030. Yet, action is needed now: Ships ordered in the next five years will impact sector emissions for decades to come.

Finally, the aviation industry would need EUR4.5bn per year. In 2018, the EU aviation industry connected 1.2bn passengers but also contributed to 3.6% of total greenhouse gas emissions, with emission growth likely to continue if left uninterrupted. To comply with the 1.5 ̊C target, the EU needs not only a much quicker ramp-up of sustainable air fuels but also an increase of the fuel efficiency of the air fleet, both of which will result in higher air fares.

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Markus Zimmer
Allianz SE
Arne Holzhausen
Allianz SE