| Sectors & Activities/Transport Transport poses a significant threat to achieving carbon targets, yet it is intrinsically linked to social and economic development. For this reason, it represents a particular challenge for policy makers. It is not surprising, therefore, that transport is a key component in the EU’s existing and planned policy measures to reduce CO2 emissions. Most developed are those measures targeted at the automotive sector, where the European Commission has an overall objective of limiting average CO2 emissions from new cars to 120g/km by 2012. This objective, however, is unlikely to be achieved by the current system of voluntary agreements between the Commission and the Association of European Automobile Manufacturers, which has lead to calls for binding limits to be placed on car manufacturers. The Commission has taken a tough stance, proposing a binding 130g/km limit by 2012, with the 10g/km shortfall between the Commission’s overall objective and its binding emissions limit to come largely from measures such as eco-tyres, low energy air conditioning and increased use of biofuels. Despite hard lobbying by the industry, EU legislation is proposed later this year to confirm the 130g/km target for 2012 . As might be expected, therefore, manufacturers have been working hard to reduce emissions, not just from the vehicles themselves but arising from the production process. OMEs and first and second tier suppliers are all improving and innovating their products to minimise overall environmental impact. Despite the controversy surrounding current technology “first generation” biofuels, the EU has for some time required member states to set targets for the sale of biofuels of 5.75% by the end of 2010. Last year the EU toughened its position, announcing a 10% by 2020 target for biofuels. The UK Government’s response to biofuels - the Renewable Transport Fuel Obligation (RTFO) - was set up under the Energy Act 2004, and is modelled on the Renewables Obligation on electricity supply. It places a legal obligation on transport fuel suppliers to supply a specified proportion of their overall road fuel supplies to UK customers from biofuels (which will be achieved in practice by blending). The RTFO obligation levels are 2.5% by 2008/09, 3.75% by 2009/10 and 5% by 2010/11. The Government is however reviewing the indirect impacts of biofuels with a view to ensuring that the targets are met in a sustainable way. In the face of annual growth in automotive emissions of about 1% in the UK, the Chancellor announced in his 2007 budget a review of options for decarbonising road transport, particularly cars. Part I of the resulting report - the King Report - looked at technology options for low-carbon cars, and was published in October. Part II, dealing with policy recommendations, was published in March 2008. Part I concluded that a 30% reduction per km emissions can be achieved by driving the same cars as we do today through technology in new ‘green’ models such as battery-electric hybrids and also through the use of cleaner fuels such as biofuels. No doubt we will see policy mechanisms increase over the next few years to incentivise green technology in the automotive sector. Some of the key policy recommendations in Part II include: lobbying for an EU emissions target of 100g/km by 2020 and setting a mechanism for reviewing the targets every 7-10 years; developing a Low-Carbon Transport Fuel Obligation to work alongside the RTFO; assessing whether road transport should be included in carbon trading schemes such as the ETS; developing flexibility (eg trading) between fuel and vehicle targets; promoting research and development as well as consumer “green” choices. As yet the UK Government has not made any proposals on the recommendations of Part II of the King Report. Equally controversial are emissions from international aviation, which are estimated to have risen by 70% over the period 1990 to 2002. Early July 2008 the European Parliament voted decisively to include in the EU ETS, from 2012, all flights to, from and within the EU. This measure - the subject of fraught international negotiations and heavily criticised by the aviation lobby - will mean that aircraft operators, like all other operators in the scheme, will be required to operate within gradually reducing emission caps and/or buy allowances from other operators. These changes will be brought about by amendments to the Emissions Trading Directive, and is subject to formal approval. Particularly controversial is the fact that this latest extension to the EU ETS will bring in non-EU entities for the first time, and the imposition of a cap and trade scheme on such bodies has been argued to be in contravention of international law. The shipping sector is another significant component of overall emissions across the transport sector, reckoned to account for around 5% of total emissions globally, and expected to grow significantly over the coming years. The Commission has recently expressed its desire to bring the shipping sector into the ETS at some point. Another transport sector which has so far escaped direct emissions regulation is the rail sector, but not for much longer. Whilst EU policy measures have largely overlooked rail, the UK’s new Carbon Reduction Commitment (CRC) planned for 2010, discussed elsewhere, is likely to impact on rail operators. The Government is currently minded to include in the CRC all non-rail energy use emissions within the rail sector e.g. emissions from offices, stations and depots. It proposes to exclude from the CRC’s remit all energy use emissions from rail itself e.g. emissions from underground trains, overland trains and trams, for both haulage and passenger service. This exclusion is on the basis that the Government, in the Energy White Paper, is committed to exploring the potential inclusion of surface transport within the ETS. The message is clear and growing; to be competitive any player in the transport sector needs to be in tune with the wider sustainable transport agenda. Businesses will need access to the best and latest research and technology, be in tune with governmental and inter-governmental strategies, develop links with research agencies, institutions and industry-wide initiatives, and tap into investment grants, capital funds and other finance vehicles which are at the forefront of financial initiatives in this area. On the training side, companies may want to consider initiatives on obtaining skills training, or joint ventures. And as significant users of energy, manufacturers and operators may need to consider more efficient ways of procuring their energy needs, for example by using surplus land to site renewables, or to develop a sustainable generating facility. With Martineau’s nationally recognised transport expertise, especially automotive, together with its investment and commitment to all aspects of the climate change agenda, we deliver wider commercial solutions. Our experience in this area includes advising clients on:
Ben Thornber Updated May 2008
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