The decarbonisation focus has, to date, been on low-carbon power generation. However, that alone won’t meet climate targets. Transport must be one of the next areas for cutting emissions.
The COP26 climate conference endorsed cutting greenhouse-gas emissions to net zero by 2050 or 2070 to achieve the Paris Agreement’s global warming objective. HSBC has modelled pathways that can reduce emissions by 81 per cent by 2050 with transport accounting for a fifth of this fall.
For land-based transport – including cars, trucks and trains – which represents around 75 per cent of transport emissions, it means eliminating petrol and diesel use by 2040. For ships, our model assumes carbon emissions in 2050 are half the 2008 level. For aviation, we assume that emissions are capped permanently at 2019 levels.
Currently, 77 per cent of transport’s fuel consumption is oil derivatives – mostly diesel and gasoline – with another 15 per cent from bunker fuels.
Electric cars are leading the energy transition. We expect global electric-vehicle penetration to reach 20 per cent by 2025 and 68 per cent by 2035. The European Union plans to ban selling internal-combustion-engine vehicles from 2035, and sharply increased adoption is forecast for the other key regions – North America and mainland China.
Heavy goods vehicles account for 18 per cent of transport emissions, or 2.9 per cent of the global total. The main alternatives to diesel are batteries and hydrogen fuel cells.
Declining costs have made electrification of trucks economic. But the charging stations for cars may be insufficient to power more energy-demanding heavy battery trucks.
Hydrogen’s high-energy density thus makes it more attractive for long-distance transport. However, 96 per cent of hydrogen generation emits CO2, and zero-carbon ‘green’ hydrogen is expensive. Carbon-capture and storage technology might reduce some emissions, creating lower-carbon ‘blue hydrogen’ – but using renewable electricity could cut costs by 30 per cent by 2030.
Pre-pandemic, aviation contributed 12 per cent of transport-related greenhouse gases and 1.9 per cent of the total. Kerosene’s high energy density makes it hard to replace, and rising traffic has more than outweighed fuel efficiencies.
The Paris Agreement excludes cross-border emissions from planes or shipping, but pressure is growing. From 2027, the vast majority of international flights will adhere to a carbon offsetting and reduction scheme to address emissions above 2020 levels.
Airlines have used the pandemic to permanently retire inefficient aircraft, typically four-engine, long-haul planes. However, their debt burdens will slow this process.
If electric aviation is limited to small regional aircraft, and until hydrogen-powered flight is feasible, the best option is sustainable aviation fuel – a non-fossil, low-carbon alternative to kerosene that can be made from green power, used cooking oil, agricultural or municipal waste, or crops grown on low-grade land.
The industry sees it accounting for 97 per cent of aviation decarbonisation between 2030 and 2035, and although it currently costs two to three times kerosene’s price, increased demand could see costs fall.
The shipping industry is committed to cutting CO2 emissions by 30 per cent by 2030 and at least 50 per cent by 2050. Energy-efficient ships, slower speeds, avoiding bad weather, cleaning hulls to reduce friction, and better ports and container logistics can help, but meeting targets will require alternative energy sources.
Ports currently lack refuelling infrastructure for liquid natural gas. Hydrogen fuel cell technology is in its infancy. However, ammonia – a mix of hydrogen and nitrogen gas – is easier to liquefy than hydrogen, has a higher energy density, and is easier to transport.
But wind-assisted propulsion could also reduce shipping’s emissions. Wind passing round tall rotors creates a sideways force that propels a ship forward.
First published 5th November 2021.
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The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Henning Cosman.
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