November 9, 2021, Frontier Economics hosted by the eFuel Alliance presented their latest study on the potential to unlock decarbonising gains from road vehicles by using a ‘crediting system’ for renewable fuels.
Working as an incentive, these credits will enable a holistic, resilient, and technology-neutral climate policy when considering consumer preferences and emissions ‘beyond the tailpipe’.
The presentation was provided by specialists from Frontier Economics, David Bothe and Michael Zähringer, who are economists in policy and regulatory design, competition, and energy markets.
Zooming out for a holistic approach
Credible and effective climate protection requires a holistic view on the climate impact of different mobility options, notably, a full life-cycle assessment (LCA) which reveals the true emissions produced throughout the value chain. This requires factoring in production of batteries and vehicle production, the power and fuel mix, and even end-of-life considerations, like recycling.
Michael Zähringer highlights the need for a wider view: ‘In the long term, we need to reduce vehicle emissions over their entire lifetime - a crediting system for green fuels would be a first step in this direction’.
An unsubstantiated rejection
The European Commission’s published report Fit for 55 has established proposals to reduce carbon emissions across a range of industries – including road transport vehicles. One method to gain traction in this area is to widen the debate on renewable fuels, which are often forgotten, but are able to make combustion engines carbon neutral.
The Fit for 55 package introduced in July 2021 included a review of CO2 emission standards for new passenger cars and light commercial vehicles, classified as ‘fleet targets’. In this review, referred to as Impact Assessment (IA), the European Commission rejected the idea of introducing a crediting system for low-carbon fuels (LCF). This is due to the EC’s claim that the LCF-crediting system would be ‘very complex and entail significant administrative burden’, a claim that is yet to be substantiated and contrary to the direct link of the proposed crediting system to existing regulation.
Beneficial to consumers, manufacturers, and the environment
The report presented at the webinar shows that LCF-crediting constitutes a valuable low-carbon option to the benefit of the environment, consumers, and manufacturers. It can be implemented with limited additional administrative costs.
As a voluntary step, a crediting system would enable manufacturers and consumers, who are best placed, to choose the most suitable and cost-efficient low-carbon technology. Accordingly, introducing a crediting system is not just a ‘no regret solution’ for climate protection and road transport. On the contrary – it is a step towards a more holistic and resilient regulation that focuses on creating a level playing field for wide-ranging technologies. And therefore, is able to consolidate efforts to meet climate targets in dynamic and uncertain market environments.
Frontier regularly advises clients on a wide range of climate issues in the automotive sector.
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