COP26 – climate change and the automotive sector 

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he UN’s IPCC estimates that the transport sector accounts for approximately 23% of total energy-related CO2 emissions. The IPCC also argues that there is a danger that transport emissions could increase at a faster rate than emissions from other end-use sectors as per capita transport demand accelerates.

Rising incomes and the development of infrastructure in developing countries over the decades to 2050 will put upward pressure on greenhouse gas (GHG) generation. As economies develop more industrial activities, the GHG-intensity of economic output goes up as people and goods in new supply chains move about more. Higher final household demand for consumer goods also follows higher incomes – particularly as economies move from being per capita low-income to middle-income.

Breaking down the transport total, the IEA estimates that road vehicles – cars, trucks, buses and two- and three-wheelers – account for nearly three-quarters of transport CO2 emissions.

However, it also says that the Covid-19 pandemic caused a big decline in road transport in regions with lockdowns in place – dropping by between 50% and 75% in the first half of 2020, with global average road transport activity almost falling to 50% of the 2019 level by the end of March 2020. However, as the pandemic eases and economic activity picks up, so will transport-related emissions.

Regulators and governments cannot ignore the sizeable position of transport in the mix of national GHG emissions.

To take the UK’s case, if the target is for the country’s economy to be net carbon zero by 2050 – as the UK’s government has set out – then transport must be addressed. The UK’s 2050 net zero target – one of the most ambitious in the world – was recommended by the Committee on Climate Change, the UK’s independent climate advisory body.

Net zero means any emissions would be balanced by schemes to offset an equivalent amount of GHG from the atmosphere, such as planting trees or using technology like carbon capture and storage. It is a tall order if a government also wants to create the conditions for economic growth that raises incomes and well-being for its population. Transport is the constant beat at the heart of economic activity.

The goal of a greener road transportation sector, for both goods and people moving, also coincides with another important end-user benefit: better fuel economy for lower vehicle running costs.

National governments have also factored in other elements of the national interest – for example lowering oil imports and reducing traffic congestion on the roads – which also has negative economic impacts. There is also rising evidence of the harmful health effects of small particulates and gases that come with other tailpipe emissions – most notably, nitrogen oxides.

There is therefore a confluence of factors that make policymakers generally attracted to managing transport sector activity – and things like the overall modal split, especially in highly populated cities.

A look around the world shows a variety of policy making and regulatory levers at work, some better than others, within the general aim of reducing the transport sector’s consumption of energy and especially fossil fuels. From a national strategic point of view, economies also benefit from having industrial sectors that are internationally competitive and that embrace emerging advanced technologies.

In automotive, that means having products meeting acceptable performance criteria – including running costs (or total cost of ownership) of which fuel economy will be a significant part. The market has generally been moving in the direction of – for a given class of vehicle – improved fuel economy being in the long list of consumer wants. Against that, manufacturers are under pressure to pack vehicles with ever more features and equipment – which comes with some weight penalty, even allowing for advances in design and materials that can counter that.

The US, for example, has its CAFÉ rules that come at the problem via manufacturers from a fleet average fuel economy direction (with penalties for non-compliance). The EU has also opted for manufacturer sanctions and fines tied to average fleet CO2 levels. Beijing’s approach has been more chaotic and led by national economic and strategic priorities – which have recently put electric vehicles (EVs) centre stage in its longer-term development plans.

The CAFÉ framework in the US was subject to considerable political debate during the Obama and Trump presidencies. Automakers – particularly the US domestics – have had to strike an uneasy balance. They do not want anything too tough from the regulators, but they understand the direction of travel around the world and want US standards that don’t diverge from international norms, broadly speaking, even if the projected greener powertrain mix and associated investments add cost in the short term.

The way we consume transport and the equipment – both hardware and software – that facilitates is subject to transformative change. Environmental concerns – conflated with more efficient product performance aims that also meet other concerns and customer needs – will continue to be at the heart of the mix, all along the value chain.

As the industry transitions away from fossil-fuels, larger societal considerations also come increasingly into play. The GHG contribution of journeys made by different transport modes – especially in urban areas – will be under considerable scrutiny. How we move around and why has always been something of a movable feast, defined by required economic and social interactions alongside the prevailing mobility technologies of the times we live in.

The automotive industry and transportation sector will have to continue to adapt to changing end-use demands and regulatory frameworks. There is at least a positive backdrop and opportunity in the form of the emerging advanced CASE technologies at the disposal of large companies with big R&D budgets.

The companies that can ultimately best exploit the very latest technologies alongside business models that also meet rising environmental concerns and regulatory requirements will be tomorrow’s winners.