Transformation path mobility until 2030

-48 % reduction in emissions (2019 – 2030)  €220 billion additional investments (until 2030)

 Share of new registrations of battery-electric passenger cars 2030 < 90 % | stock < 14 million.  Blending by 2030 > 22 % green fuels (H², PtL, biofuels) | > 3.3 million t PtL import  Switch to rail by 2030: + 40 billion passenger-kilometres; + 22 billion tonne-kilometres

Maximum ramp-up of electromobility and ambitious blending of carbon neutral fuels

The national climate targets require a reduction in CO₂ emissions in the transport sector to 85 million tonnes by 2030 and climate neutrality by 2045. The BDI study Climate Paths 2.0 outlines the extremely ambitious transformation path required for this: It leads to an accelerated market ramp-up of alternative drive systems with a particular focus on electromobility for passenger cars and commercial vehicles as well as power-based fuels (renewable fuels of non-biological origin, RFNBO) and advanced biofuels for the indispensable climate protection contribution of the existing passenger car fleet. The prerequisites are the timely and ambitious expansion of refuelling, charging, transport and energy infrastructures and the provision of 100 percent renewable electricity for electromobility and RFNBO. Also, incentives must be created to ensure the market ramp-up of alternative drives and fuels. The marketable availability of RFNBO is also crucial for climate neutrality in air and maritime transport as well as the remaining non-electrified rail transport. The two levers – modal shift and increased efficiency – must remain to be pushed with uppermost ambition.

Transport: Drive change with greatest GHG reduction contribution

Reduction of GHG-source emissions in the transport sector 2019 – 2045

Million tonnes of CO² equivalent

164

4 7 5 5

14

19 Reduction in international air and maritime transport 2020 to 2045 Reduction from 2020 to 2030 Reduction from 2031 to 2045

122

47 79

96

2019 Development of transport performance Change of mode of transport Efficient Drives Drive change Green fuels** Reduction in years Reduction according to climate paths

Increase in road freight transport From passenger car, truck and airplane to busses, rail and inland waterway vessels Drive efficiency and smart transport management 70 42 5*

21 85 Reference path

42

Target path

BEV in passenger cars, BEV and FCV in trucks PtL and biofuels in remaining vehicle fleet, air and maritime transport

In the reference path, too, a substantial drive change is expected by 2045 – but development will be slow

*In 2030 reduction of 21 Mt CO²e with the help of green fuels vis-à-vis 2019. But in 2045 5 Mt CO²e less savings than in 2030, as fewer green fuels will be used in national transport due to the change in drive. This results in a reduction of 16 Mt CO²e by green fuels in 2045 compared to 2019. ** H² in fuel cell drives included under drive change | Note: Source balance without emissions from electricity | Source: BCG-analysis

Assuming that the tightened sectoral target for climate protection in transport is to be achieved without any loss of mobility for the population and the economy, and in a socially and economically balanced manner, the focus in the remaining nine years must be on a coherent bundle of instruments. This must be implemented in a way that is open to all technologies and consistent with the Fit for 55 projects currently being discussed at European level. The BDI study Climate Paths 2.0 concentrates on which instrument bundle can be used to implement the two central levers of drive and fuel change. Levers that are not addressed in depth in the study but are indispensable for achieving the climate protection target in transport are modal shift and increased efficiency, also on account of digitalisation.

Drive and fuel-switching technologies widely available: Strengthen incentives for market ramp-up

According to Climate Paths 2.0, two instruments could stimulate the accelerated ramp-up of electromobility for passenger cars: Comprehensive investment support for the rapid development of charging and refuelling infrastructures and the continuation of purchase incentives for alternative drive systems to the extent required by the actual market ramp-up. The drive change in road freight transport must be promoted above all by continuing and strengthening the incentives for alternative drives in the truck toll until battery-electric and fuel cell trucks are available broadly in the market. A technology demonstrator program should be launched for alternative powertrains in aviation. The market ramp-up of RFNBO (according to the study exclusively power-based liquid fuels: Power-to-Liquid, PtL) must be secured by means of appropriate quotas and a funding mechanism.

If the ramp-up of electrification is slower than estimated by the authors of the study, the blending rates for carbon neutral fuels in particular would have to increase more quickly in order to achieve the national climate targets for transport. However, reaching the climate target in 2030 alone requires at least 22 per cent of blending of green fuels (PtL, H2, biofuels), including at least three million tonnes of PtL. If the ramp-up of electromobility succeeds more quickly, more RFNBO can already be made available directly before 2030 for international transport in air and maritime transport, which will also be dependent on these fuels in the long term, even if battery-electric or hydrogen drives become available.

Two key instruments could flank this transformation: increased support for the development of efficient and demand-oriented charging and refuelling infrastructures for passenger cars, commercial vehicles, aircraft, and rail vehicles and carbon price signals for road transport. The development of charging and refuelling infrastructures must take place well in advance of the market ramp-up of alternative drive systems in order to alleviate users’ concerns about the lack of charging and refuelling facilities. A carbon price signal should result from a European emissions trading system for road

2030

9,3 million

Charging points at home

4,7 million

Charging points at the employer

1million

Publicly accessible standard charging points

0,24 million

Quick charge points

500

H² refueling stations for cars and trucks, others for aircraft and rail vehicles

transport and from the restructuring of the energy taxation, as is currently being discussed at European level.

Promoting a change of drive system for passenger cars through purchase incentives for battery and H2 passenger cars

The market offering of electric vehicles from German and foreign manufacturers in Germany is diverse, but not all types of usage, e.g., long journeys with a lot of luggage and several people, are currently covered by battery electric drives in the passenger car segment. Direct acquisition costs affect primarily the decision in favour of a private passenger car. Fuel and maintenance costs play a secondary role. While the comparison between two combustion engines is still easy, many consumers are not aware of the currently still low costs of operating an electric car. The central instruments for accelerating drive change for passenger cars, therefore, remain purchase incentives via a purchase premium or via vehicle and company car tax, which will be successively reduced after 2025 and will have to be phased out in the long term. Close monitoring for possible readjustment is essential. The study presented focuses on achieving the national climate protection targets for transport. Therefore, battery electric vehicles (BEV) are the focus of the funding. However, we believe it is necessary to open the existing incentives to all technologies because of the continuing uncertainties regarding future European and international market developments. Plug-in hybrids (PHEV) and fuel cell vehicles also contribute to achieving the climate targets and, thus, must continue to be included.

Drive change in road freight transport through readjusted truck tolls

The market offer for alternative drive systems for trucks is currently still very limited. Further promotion must be open to all technologies, as the technology competition between battery and fuel cell trucks is still open. Therefore, a rapid change of drive systems for commercial vehicles requires a broad market offering of alternative drive systems as well as an instrument aimed at a sustainable full cost advantage of these drive systems. The truck toll has already proven to be an effective lever for fleet renewal in the past. A realigned truck toll based on the amended Eurovignette Directive from 2023 will presumably include the following components: CO₂ emissions depending on the drive system, noise emissions, and infrastructure costs. With these the existing incentives for alternative drive systems within the truck toll would continue and be reinforced. Implementation in German law must be carried out in coordination

with other European regulations such as energy taxation and European or national emissions trading for road transport. This is because road freight transport is already subject to considerable carbon price signals and will increase even further due to upcoming revisions at EU level.

From the perspective of German industry, the aim of the realignment of the truck toll in Germany must be to implement it in a revenue-neutral manner. What is needed is an overall balanced solution that both adequately takes into account the users’ contribution to infrastructure costs and does not jeopardise the necessary earmarked financing of road infrastructure. Distortions of competition in the form of additional purely national burdens on the German transport industry compared with international hauliers must be avoided. Therefore, in order to balance the burdens, close monitoring and flexible adjustments to changes in the individual instruments of the carbon pricing regime for road freight transport are needed. A supplementary positive incentive for a change of drive could be provided by adjusting the motor vehicle tax for commercial vehicles.

Decarbonisation of existing fleets, aviation, and maritime transport through PtX quotas and funding mechanisms

Achieving the national climate protection targets in transport for 2030 and 2045 requires the use of considerable quantities of low-carbon and carbon neutral fuels. According to the study Climate Paths 2.0, the required PtL demand of at least 39 TWh in 2030 or 3.3 million tonnes should be ensured by importing PtL and initially also be used to decarbonise road transport by 2030. To promote the market ramp-up, the authors propose the introduction of mandatory PtX quotas for road and air transport from 2025 with a gradual increase until 2030 to secure demand. Simultaneously, a funding mechanism – based on the “H2Global” initiative – should be introduced to create investment security for early production facilities.

Long-term increasing PtL demand across all modes of transport

PtL demand in transport 2030-2045

TWh; exclusively imports

123

Foreign investments in PtL* 2030-2045

billion €, real 2019, cumulated

115

39

3 1

96

10

41

1 3

90

9

35

2030

54 TWh

17

2045

295 TWh

36**

2030

€ 56 Billion

16**

2045

€ 275 Billion

PtL road transport PtL rail, air and maritime transport (domestic) Air and maritime transport (international)

All sectors

*Capacity to meet German PtL demand incl. international transports (starting from Germany) **With decreasing demand for PtL in road transport due to ongoing electrification, PtL capacities are being realloacted to international transport. Source: BCG-analysis

In our view, this instrument still needs to be developed further, as it does not take into account the particular challenges of decarbonising air and maritime transport operating in international competition. Competition-distorting national burdens must be avoided. Policymakers are also called upon to set a decisive course in cooperation with PtL-producing countries so that quantities corresponding to the PtL quotas are also available before 2030. This also requires international standards regarding sustainability and quality criteria, international certificate trading (book & claim procedure), and international specifications for the inclusion of sustainable fuels in the carbon footprints of users and their customers.

Advancing the modal shift

In addition to optimising the individual modes of transport, it is also important to optimise the interaction between them. Wherever possible, rail should take on a larger share of the transport and logistics chains. Important building blocks for this are, firstly, the appropriate upgrading of the interfaces between modes of transport. Secondly, it is important to consider and safeguard rail access far more than before when planning new logistics hubs and industrial areas. In addition to the importance of infrastructure expansion and digitisation creating the necessary capacities, targeted incentives also lead to greater use of rail for transport. The existing limitation of track access charges should be continued. Subsidies for equipment prices help to compensate for existing cost disadvantages of rail. Reducing electricity charges is helpful to promote rail transport further, which is already electric to a large extent. The observations on alternative drive systems and fuels in road transport apply equally to railways, even if the need for these in rail transport is far lower.