Climate Path Analysis for Transport in 2030 by Bundesverband der Deutschen Industrie e.V.

Climate Path Analysis for Transport in 2030 FEBRUARY, 2019

Climate protection plan aims to reduce transport CO2 emissions by around 40%1

Transportation:

To slow global warming, Germany has set itself the goal of reducing greenhouse gases by 80 to 95 percent by 2050 (relative to 1990).

1612 Mt

Emissions have practically not sunk at all in the transportation sector, and based on initial 2016 estimates appear to have even risen higher than 1990 levels.2

69% Road passenger transport

28% Road freight transport

Starting in 2015, new measures were developed to further reduce emissions. 1. Vs. 1990 2. Pure CO2 emissions in 2015, relative to 163 Mt CO 2e in 1990 and 166 Mt CO2e in 2016; shares per 2015 Climate Paths study Source: BMU (https://www.bmu.de/fileadmin/Daten_BMU/Download_PDF/Klimaschutz/klimaschutz_in_zahlen_sektorenziele2030_bf.pdf)

3% Rail, ship, and air transport

CO2

Specific sector goals defined for 2030 â&#x2020;&#x2019; Roughly 40% for transportation

Starting point: Cross-sector, cost-optimized paths for 80–95% reduction of greenhouse gases (GHG) by 2050

With current policy, Germany would achieve a 61% greenhouse gas reduction by 2050, for a gap of 19–34 percentage points from its climate goals 80% reduction of greenhouse gases is achievable with existing technologies and economically feasible 95% greenhouse gas reduction would test the limits of technical feasibility and acceptance and is conceivable only with the assumption of joint global efforts Required additional investments of ~€1.5–2.3 trillion by 2050 (~1.2–1.8% of GDP) and direct additional costs of ~€470–960B by 2050 (~€15–30B/a)

Starting point: Cross-sector, costoptimized paths for 80–95% reduction of greenhouse gases (GHG) by 2050

Successful relevant efforts open up new economic opportunities in globally growing "climate protection markets" (€1–2 trillion market volume by 2030)

But the upcoming transformation still holds considerable challenges for implementation: Mismanagement could incur significantly higher costs and risks The government must ensure integrated implementation by dovetailing climate and economic policy, securing critical infrastructure, incentivizing considerable investments, performing continuous monitoring, etc. 3

Efficient implementation would prevent macroeconomic losses ("breakeven")—an 80% reduction would not even require international synchronicity for this

Not even the 95% path would achieve goals for transport by 2030 Bubbles: Mt % change vs. 1990

1990 vs. 2030 Climate protection plan

2030 Reference

2030 80% climate path

2030 95% climate path

Energy

-61-62%

-48%

-53%

-64%

Industry

-49-51%

-44%

-50%

-51%

Transport

-40-42%

-13%

-22%

-26%

Buildings

-66-67%

-56%

-69%

-74%

Agricultural and other

Ag: -31-34% Other.: -87%

-54%

-62%

-61%

â&#x2C6;&#x2018; 2030

543-562

-55-56%

694

-45%

600

-52%

535

-57%

1. Greenhouse gas (GHG) sector accounting in the climate protection plan and the climate paths (based on the greenhouse gas inventory of Germany's Federal Environmental Agency) is not identical and therefore not fully comparable. Examples: In the GHGs inventory, blast furnace gas conversion is situated in the energy sector, but in the climate protection plan, it is in 4 the industry sector. Emissions from industrial buildings are in the industrial accounting of the GHG inventory, but in the buildings accounting of the climate protection plan.

CO2e

Basic approach: Climate paths optimized by abatement cost Average abatement costs compared to the current policies scenario (€/t CO 2e)

80% climate path

400 300 1

9 10 11 12 13 14 15 16 17 18

34 35 20

21 22 23 24 25

40 41

26 32

200

100 0 40

100

120

140

160

180

200

220

240

260

280

300

320

340

360

380

400

420

-100 Energy

Buildings

1 Shift in modes of transport (from road to rail, ship, and bus)

Transport

Agriculture

Add. GHG abatement in 2050 vs. current policies scenario (Mt CO2e)

15 Expansion and low-carbon conversion of district heating

29 "Methane pill" and other agricultural measures

16 New kilns and grinding plants for cement and lime production

30 Post-combustion CCS in refineries, blast furnace gas electr. generation

4 Expansion of solar thermal energy for industrial heat supply

17 Drive change in heavy commercial vehicles (OH lines, gas, FCV, BEV)

31 Post-combustion CCS in steel production

5 Expansion of solar thermal energy for space heat and warm water supply

18 Expansion of heat pumps

32 Post-combustion CCS in ammonia production

6 Other effects in the transport sector

19 Expansion of gas power plants

33 Appliances and processes in buildings: Efficiency, energy source switch

7 Plant modernization in methanol, ammonia, steam cracker

20 Agriculture (e.g., fermentation of manure in biogas plants)

34 Further expansion of heat pumps, district heating, and solar thermal

21 22 Ref. rate incr. to 1.7% p.a., KfW 40 level in new build as of 2030

35 Drive change in passenger road transport (BEV, PHEV, FC, gas)

10 Vehicle efficiency in road freight transport

23 Expansion of photovoltaics

36 Biogas and PtG in the industrial sector

11 Devices and processes: efficiency and energy source substitution

24 25 Drive change in LNF and cars (BEV, PHEV, gas, FCV)

37 1.9% refurbishment rate, near passive-house efficiency of new buildings

12 Steel: Efficiency in blast furnace-converter route, arc furnace optimiz.

26 Lower consumption in road vehicles

38 Synthetic fuels in transport (PtL, PtG)

13 Biomass in low- and medium-temperature heat (< 500°C)

27 Further expansion of wind power and photovoltaics

39 Further drive change in road freight transport (OH lines, gas, BEV, FCV)

14 Substitution of HFCs and PFCs, e.g., in cooling and air conditioning

28 Oxyfuel CCS in cement production

40 Synthetic fuels in space heating and warm water generation

Energy efficiency in electric motors/cross-sectional technologies

Expansion of wind onshore and wind offshore

41 Full decarbonization of gas power generation with PtG GHG abatement refers to emissions caused in 2050 and represents the deviation from GHG emissions in the Current Policies scenario 2050. Abatement costs show direct macroeconomic abatement costs. They result from cumulative GHG abatement between 2016 and 2050 and cumulative costs and savings between 2016 and 2050 and are discounted to 2015. Investments are annualized at a real interest rate of 2%. Electricity costs in all sectors were valuated with system costs, imports with border-crossing prices Source: BCG

Industry

GHG emissions in transport sector in Germany Mt CO2e

2015: 161 Mt. 150

100

0 1990

Reference Sector goal in climate protecttion plan: 40% GHG reduction by 2030

80% climate path 95% climate path

2000

2020

2030 2034 2036 2040

2050 6

Climate paths achieve 40% greenhouse gas reduction in transport sector by 2034/36

200

Electricity-Scenario: 40% target requires use of all possible levers GHG savings in Mt of CO2 by lever4

+5% passenger transport +30% freight transport

2015

Development of transport volume

7 +35% passenger transport by rail and bus +60% freight transport by rail and ship

Change in mode of transportation

15 -20% real consumption of new cars, light commercial vehicles, and trucks

Efficiency

10M e-cars1 3M CNG vehicles 140K e-Trucks2 New drive systems

220 PJ biofuels 140 PJ e-fuels3 19

Carbonneutral fuels

-40%

2030

1. Passenger and light commercial vehicles 2. Overhead line hybrids, battery-powered trucks, and fuel cell trucks 3. In nationwide transport, plus 50 PJ in international aviation Abbreviations: CNG = compressed natural has, PJ = petajoule 4. Source accounting Source: Prognos; BCG

161

Shifts in modes of transport

35% more passengers for rail and bus Passenger transport volume (in billion domestic transport pkm) 1.184 11 116 77

1,184 1,182 11 11 119 128 74 84

1,138 10 106 65

1,184 11 140 90 23 17

854

2000

956

2015

980

2030

Reference

978

956

2015

2020

2025

943

Rail transport

-16

2015

2030

2030 sector target

Domestic aviation Note: pkm = person kilometers Source: Prognos, BCG

961

Base year

2030

Reference

Motor coaches

Passenger vehicles

6 10 -16

2020

18 -35

2025

-53

2030

2030 sector target

Non-motorized transport 8

1,015 10 89 62

1,138 10 106 65

Shifts in modes of transport (billion pkm; based on shares in 2015)

Shifts in modes of transport

60% more freight transport by rail and inland waterway Freight transport volume (in billion domestic transport volume tkm)

494 66 78

639 55 117

153

639 55 117

607 350

2000

467

703 61 133

777 72

161

836 82 189

509

544

565

Base year

-4

-5

19 5

-24 -46

2015

2030

Reference

2015

2020

2025

2030 sector target Domestic aviation

Note: tkm = ton kilometer Source: Prognos, BCG

2030

2015

2030 Reference

Inland waterways

Rail

2020

2025

2030

2030 sector target

Roads (trucks and light commercial vehicles) 9

836 76

Shifts in modes of transport (billion tkm; based on shares in 2015)

Efficiency

17% to 22% lower real consumption by newly registered combustion engines

(Ø real consumption 2015 = 100%)

100

-22 %

80 2015

80 2020

2025

2030

2015

-20 %

80 2020

2025

2030

2015

-19 %

2020

2025

2030

2015

2020

2025

2030

Most important levers: Efficiency improvements in motors,1 lightweight construction and aerodynamics, long trucks, more efficient loading, EcoDriving, (semi-) autonomous driving, digital traffic control,2 truck platooning, … 1. 48 volt, electrical chargers, variable compression, HCCI, … 2. Vehicle-to-infrastructure, parking space management, networked logistics, traffic congestion prevention, … Source: Prognos scenario analysis

-17 %

30 â&#x20AC;&#x201C; 40% new drive systems needed across all vehicle classes New drive systems

30%

Passenger vehicles Nr. of vehicles in million 44.4 0.6

29.9

46.6 0.9

29.3

45.9 1.9 1.8

Light comercial vehicles

40%

2.2 0.1

6.9 2.0 3.7

2.6 0.1 0.2

2.6 0.3 0.1 0.2

26.3

Nr. of vehicles in thousand 2.6

2.0

2.3

712

737

0.9 0.2 0.2

20.3

30% Trucks

Nr. of vehicles in million 44.7

New drive systems

710

728

2.0

720 21 22 31

624

1.3

13.9

15.9

14.9

11.6

2015

2020

2025

2030

2015

2020

2025

2030

2015

2020

2025

45 18 56

38 39

493

2030

Hydrogen

Natural gas Diesel

Hydrogen

Plug-in hybrid

Gasoline

Battery

Natural gas

Diesel

Overhead line hybrid

Source: Prognos; BCG

690

Plug-in hybrid

New drive systems

Passenger cars: Sharp increase in new registrations with alternative drives

44.4 0.6

29.9

46.6 0.9

29.3

45.9

44.7

1.8

6.9 2.0 3.7

… mean a sharp increase in new registrations 3.2

3.2 0.1 0.1

3.1

1.6

0.3 0.5

1.9

0.9

0.4

0.5

0.6 0.1 0.1

2025

2030

1.6

26.3 20.3 1.5

13.9

15.9

14.9

11.6

2015

2020

2025

2030

Hydrogen

Plug-in hybrid

Gasoline

Battery

Natural gas (CNG + LPG)

Diesel

Source: Prognos, BCG

2015

1.1 2020

3.1

0.9

Nine million (semi-) electrical vehicles …

Fuel-Scenario: Higher imports of carbon-neutral fuels GHG savings in Mt of CO2 by lever4

+5% passenger transport +30% freight transport

2015

Development of transport volume

+5 Mt

310 PJ biofuels 140 PJ e-fuels3

7 +35% passenger transport by rail or bus +60% freight transport by rail and ship

Change in mode of transportation

15 -20% real consumption of new cars, light commercial vehicles, and trucks

Efficiency

7M e-cars1 3M CNG vehicles 120K e-semis2 New drive systems

Carbonneutral fuels

-40%

2030

161

-5 Mt

Carbon-neutral fuels

Four- to fivefold increase in addition of carbon-neutral fuels

2,580 26 106

2,446

2,669 40 112

2,513

10/19% 2,507 28 37 81

2,177 10 176 105 112 124

2020

2,272 10 175

194 56

2025 scenario E

2030

143

404 10 42 85

1,695

2030 scenario F

Natural gas (synthetic)

Natural gas (fossil)

Gasoline/diesel/kerosine (synthetic)

Gasoline/diesel/kerosine (fossil)

Natural gas (biogenic) Gasoline/diesel/kerosine (biogenic) Note: Incl. sales for international aviation 1. For final energy consumption, respectively, excl. electricity and hydrogen Source: Prognos, BCG

x/y

521 10 42 84

31 79

2030 scenario E

Rates of addition1: biogenic/(biogenic + PtX) Nat. gas

50/55%

92/97%

Gasoline

7/16%

8/16%

Diesel

8/17%

10/18%

49 194

105

108 31 75 2015

15/23% x5

2,248 1,650

2015

Development in use of carbon-neutral fuels (in PJ)

38 102 2 2030 scenario F

2030 2030 scenario E scenario F

Rates of addition: x = biogenic and y = (biogenic + PtX) Pt nat. gas

Pt kerosine

Diesel (biogenic)

Pt gasoline

Nat. gas (biogenic)

Kerosine (biogenic)

Pt diesel

Gasoline (biogenic)

Final energy consumption in the transport sector (PJ, excl. electricity/H2)

Carbon-neutral fuels

Deviation from climate paths: Shift of biomass to transport needed1 Use of biomass to generate energy by sector (in PJ) 1,078

1,077

108 110

505

Sewer gas, biogas

117

Liquid biogenic materials, biofuels

455

Solid biogenic materials, sewage sludge, biogenic share of waste, and landfill gas

2015

1. Shift of biomass from other sectors (e.g., industry) generally results in higher emissions there Source: AG Energiebilanzen e. V.; Prognos; BCG

337

523

2015

1,150 108

1,150

1,223

218

336

155

110

324

453

2030 95% path

2030 scenario E

2030 scenario K

265

Transport

Appliances and processes in buildings

Industry

Conversion

Additional imports may be necessary

Composition of biomass currently used to generate energy (in PJ)

Digitization offensive to improve efficiency in all forms of transport, e.g., with the promotion of digital rail programs, truck platooning, intelligent traffic control systems, …

Specific incentives for shifting modes of transport to rail, bus, and inland waterways, and for strengthening regional public transportation (e.g., master plan for rail freight transport, Pro-Rail Alliance, 740m trains, rail-/waterway expansion, …)

Incentives for infrastructure investment (esp. intelligent charging infrastructure, approx. 2,500 km of overhead lines for trucks, H 2 filling stations), e.g., via construction law, funding, investment guarantees, regulated infrastructure, …

Controls on the addition of biogenic fuels whether upwards or downwards, to prevent disruptions due to (national, sector-specific) CO2 prices, e.g., with auctions, ratios/caps, CO2 fleet accounting, …

Promotion of the industrial scaling of e-fuels nationally and internationally, e.g., with auctions, funding, mandatory mix ratios, CO 2 fleet accounting, …

Additional CO2 price trigger

for fuels/sources of energy in transport, e.g., with cap-and-trade, carbon tax, CO2-based readjustment of taxes on energy sources, higher toll rates for trucks, … (up to €250/t in 2030)

Subsidies for carbon-neutral vehicles or fuels, such as with tax breaks, purchase incentives, … (with lower CO2 price trigger; shortterm up to €6,000 per vehicles, subsequently decreasing) Details on following pages

Seven political areas for action

Three Variations of CO2-Pricing until 2030 Carbon Price only rapid, progressive increase to € 250/t in 2030

161

1 Scenario

€ 250/t in 2030

Diesel1: + € 0,66/l Gasoline1: + € 0,58/l

-45 Mrd. Pkm -20 Mrd. Tkm

97 Additional measures e.g. buying incentives for EV’s

161

Scenario

€ 150/t in 2030

Diesel1: + € 0,40/l Gasoline1:+ € 0,35/l

Self-financing buying incentive 3

-30 Mrd. Pkm -15 Mrd. Tkm

4.000 19 97 '20-'24

Scenario

€ 100/t in 2030

Diesel1:

+ € 0,26/l Gasoline1:+ € 0,23/l

-22 Mrd. Pkm -10 Mrd. Tkm

2015

'25-'29

1.000 '30

Subsidised buying incentive

161

2.500

Existing Traffic measures reduction

Modal shift

Emobility

Efficiency Renewable fuels2

6.000 3.500

28 97 2030

1. Price increase for the end consumer including taxes; real price 2. Renewable fuels (biogen) without any incentive on the energy tax level will need a CO2-Pricing of €250/T; PtX will even need a higher incentive Source: Prognos

'20-'24

'25-'29

2.000

'30

Carbon price only

Self-financing

Subsidies

Carbon price as main control mechanism

Carbon price with "self-financing" purchase incentive3

Lower carbon prices, higher purchase incentives

Carbon price trigger1 (e.g., carbon tax)

Rapid, progressive increase to €250/t in 2030

Progressive increase to €150/t in 2030

Linear increase to €100/t in 2030

Purchase incentives2 (e.g., purchase bonuses)

None

Purchase incentive of €4,000/vehicle sinking €1,000 in 2030, financed by carbon proceeds

Purchase incentive of €6,000/vehicle, sinking to €2,000 in 2030; subsidization necessary

1. Carbon price trigger as control mechanism in addition to current fuel price, including existing energy taxes and VAT 2. Incentivization of carbon-neutral vehicles/fuels with purchase of new passenger and light commercial vehicles 3. Cost side only; self-financing only in medium term (2025 – 2030) due to low proceeds at start

Considerable financial incentives required—three variations

Assumption: Progressive carbon price, regressive subsidies Carbon price only 2.04 1.89 1.55 1.40 2020

1.82

2022 2024

1.81

2.01 1.65

1.55 1.40

2026 2028

2030

2020

1.75

1.55

2022

2024

Diesel

Purchase incentives for carbon-neutral new vehicles (in €/vehicle)

Subsidies

2026

2028

2030

1.50 1.35 2020

2022

1.69

1.57

1.61 1.46 2024

2026

2028

2030

Gasoline 6,000

4,000

None

3,500

2,500

2,000

1,000 '20-'24

'25-'29

'30

'20-'24

'25-'29

'30

'20-'24

1. Base price from BDI price paths for diesel and gasoline: €1.35 for diesel and €1.46 for gasoline in 2030 Notes: Variation 1—carbon price starting at €50/t with concave increase to € 250/t; variation 2—carbon price starting at €50/t in 2020 with concave increase to €150/t; variation 3—carbon price starting at €30/t in 2020 with linear increase to €100/t Source: Prognos, BCG

'25-'29

'30

Real price development for fuels, plus carbon price1 (in €/l)

Self-financing

~ €250B in added investments to achieve 2030 transport sector target Cumulative added investments, not discounted

Added investments in both scenarios, 2015 to 2030 (cumulative, in B€, real2015) 36 1

4 6

18 24 17 26

243

Synthetic fuels: Production plants for ~190 PJ synthetic fuels (incl. international transport)1

Efficiency of rail, air, and inland waterways: More efficient drive technology and operating processes 1

6 24 21 21

38 26

27 26

Shift of traffic in passenger transport: Transfer of 53B pkm transport service from road to rail, bus, and non-motorized transport Further electrification of the rail system Shift in means of transport, freight transport Transfer of 46B tkm transport service from the road to rail and inland waterways Automation/digitalization and further electrification of the rail system Truck overhead lines: Expansion of the overhead line infrastructure on 2,500 km of German freeway More efficient trucks and light commercial vehicles: Long trucks, platooning, more efficient motors, … New drive systems for trucks: ~200K low-emission trucks (overhead line hybrids, hydrogen, battery, nat. gas) New drive systems for trucks: 1.0 – 1.3M low-emission light comm. vehicles (esp. battery and natural gas)

Charging infrastructure for electric vehicles and grid expansion for 7 – 10M (semi-) electrical vehicles More efficient passenger vehicles: More efficient motors/drives, lightweight construction, aerodynamics …

Scenario E

Scenario K

New drive sys. for pass. vehicles: 6.5 – 9M (semi-) electrical veh., 3M (biogenic) nat. gas, up to 4M hybrids, …

1. Excl. investments in electricity generation; incl. ~€9B for PtX use in international aviation Note: Added investment in research and development included only indirectly, without restructuring costs. PJ = petajoule, pkm = person kilometer, tkm = ton kilometer Source: BCG

256

Added costs of between €115 –126B by 2030 to achieve sector target Direct costs only; macroeconomic perspective; investments annualized, not discounted

Annual added costs of scenarios (in B€, real2015)

Cumulative added costs of scenarios (in B€, real2015) 18

11 -2

-9

1 2015

Capital costs

2020

Energy source costs

11 -2

-9

136

Energy source costs

116

-121

-127

Scenario E

Scenario K

139

-25

Scenario K

Capital costs

2025

24 -26 2030

Savings on energy source costs

Note: Direct macroeconomic added costs after energy source savings; added investments with real economic interest rate of 2% annualized. Energy source savings and costs excl. taxes, subsidies, or customs; electricity valuated with electricity system costs and imports with border-crossing prices. Cumulative added costs include ~€16B for PtX use in international aviation (for facility investments and electricity costs) 21 Source: BCG

Scenario E

126

115

The 40% transport sector target for 2030 is extremely ambitious compared to other sectors

Target achievement is possible, but only with the use of all conceivable levers in addition to significant investments

Activating these levers would require clear political reversals and strong financial incentives

Summary

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