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Published 29 July 2022
As part of our series on net zero (click here to view our previous article) and how our new Corporate Insurance & Risk team is helping our clients to work towards their goals, we take a look at the transport industry and in particular what Decarbonisation is and why businesses need to be aware of the changes in legislation and what actions they can take.
In July 2021 the UK Government released its ambitious Transport Decarbonisation Plan (‘TDP’) setting out its aim of reaching net zero by 2050.
The UK’s transport industry is a significant contributor to carbon emissions. Data collected for The Department for Business, Energy and Industrial Strategy over 1990-2019 calculated that transport produced 27% of the UK’s total emissions in 2019. Of this, the majority (91%) came from road transport vehicles. Decarbonising transport is therefore essential if the UK is to meet its net zero target. This article is an overview of some of the challenges faced in the net zero journey and how decarbonisation of fleets might be achieved. It is far from a straightforward task.
The starting point on the route to net zero is for transport companies to evaluate their existing carbon footprint and assess how efficient they are within their operations. After this, there needs to be thorough consideration of the options available for alternative fuel types, technology and the infrastructure required to facilitate any changes.
The amount of information available from a multitude of different sources can be overwhelming. Many operators are weighing up the right time to begin this process balancing the desire to be at the forefront of the net zero strategy, the understandable hesitation about incurring significant costs now when the technology and supportive infrastructure is not at the level it needs to be for viability, and the reputational implications of both. Road haulage companies with the largest fleets in the market are finding themselves caught in the unenviable situation where the desire is there to be at the forefront of the net zero strategy, however there is marked hesitation about investing the vast sums required prematurely. Significant investment in a system that later develops or shifts focus to a far more effective method of decarbonisation may result in even further expenditure being required which could have been avoided. On the other hand, there are certainly reputational implications for the industry leaders who are not seen to be making any changes at this stage. In an era where customers are demanding a higher standard of environmental responsibility, it is far from ideal for leading transport companies to appear not to be taking proactive steps to reach net zero, nor does waiting for ‘the right time’ sound an attractive strategy if companies are then left in a position where huge changes are having to be pushed through last minute.
As of 1 April 2019, quoted companies must report on their global energy use and large businesses must disclose their UK annual energy use and greenhouse gas emissions. This is required by the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. In-house Sustainability Teams are becoming commonplace within large scale road transport organisations, who will be responsibility for this reporting. With smaller companies however, who do not meet the threshold of legal obligation to report emissions, trying to establish the most effective means of transition can be even more problematic, and a lack of progression to decarbonise can have a knock on effect on the larger companies with whom they sub-contract.
Calculating current emission levels is not an easy activity either. In the UK fuel is purchased in litres, distance is recorded in kilometres but fuel consumption is measured in miles per gallon, so from the outset trying to compare and contrast alternative power options can seem a very daunting prospect. A transition of this magnitude is most certainly not going to be without its challenges, and with the road transport industry already feeling the blows of Brexit, COVID and the rocketing costs of fuel, trying to factor in the methodology and costs of decarbonising entire fleets could not really have come at a more difficult time. The complexity of the transition cannot be underestimated for fleet managers. They will be moving to a new world where they will need to consider a host of issues not typically associated with internal combustion engines running on diesel.
For fleets consisting of cars and light commercial vehicles (‘LCV’), the move to electric vehicles (‘EV’) seems the most obvious choice and within that category there are several types of EV to choose from. The Office for Zero Emission Vehicles (‘OZEV’), a team working across Government to support the transition to zero emission vehicles (‘ZEV’) is focusing on ensuring there is sufficient support for the take-up of plug in vehicles, as well as funding to support charge point infrastructure across the UK, with the hope that this will contribute to economic growth as well as help reduce GHG and air pollution on our roads. OZEV is the body responsible for the supporting charging infrastructure on the wider roads network and aims to prioritise innovation to put the UK at the forefront of the design, manufacture and use of zero emission vehicles, however there is growing concern in the transport industry that the focus is primarily on cars and LCVs and the full spectrum of vehicles on our roads are not properly being considered.
At the other end of the fleet spectrum, HGVs and specialised heavy duty transport vehicles - and in particular 44 tonne articulated lorries - will almost certainly be one of the most difficult types of vehicles to decarbonise. A far wider reaching set of factors needs to be considered for large vehicle decarbonisation, as environmental responsibility needs to be achieved without significant compromise on vehicle performance. If the technology, supporting infrastructure and current freight regulations are not where they need to be, the process of transition to a more carbon neutral fleet is likely to be even more costly and laborious, and ultimately risks being completely ineffective.
At the start of May, Trudy Harrison, Copeland MP and Transport Minister, announced at Logistics UK’s Future Logistics Conference that £200million will be allocated to a large scale trial to help the freight sector on the route to net zero. How these funds will be allocated will undoubtedly influence the future shape of the road transport industry.
As an industry, the appetite to learn, invest and change is most definitely there. What is hindering proactivity however is the viability of these new systems at the present time. Although a number of the leading OEMs have zero emission HGV prototypes ready to go imminently, there is nothing currently available in sufficient volume for the market. There are fears that when there however. they will be unaffordable to many. The supportive infrastructure which would be required to accommodate such a vast number of electric lorries is also just not ready. There is limited alternative fuel available on a large scale, nor a compatible refuelling network to support users even if there was and there remains a concern over the focus on zero tailpipe emissions instead of considering the ‘well to wheel’ total calculations as a cradle-to-the-grave approach. Parallel with this runs a frustration about a lack of regulatory reform in heavy goods transit regarding the weight and length of lorry / trailer combinations if there is to be a transition to battery powered lorries. In a recent consultation, the Government requested feedback on whether an increase in maximum vehicle weights for heavy goods ZEVs would be necessary, but despite the submissions received, there are no signs that regulations are going to be changed any time soon. Whilst the Government has noted an understanding of why raising weight limits above 44 tonnes is being pushed for, it has expressed concerns that those limits are in place for a reason, and to increase them could lead to problems with road structure and excessive road wear.
At the present time, alternative fuels seem to be the most realistic option in terms of availability and price to help transport businesses lower their GHG emissions and work towards the net zero target. The main options in place of diesel are HVO fuel (hydrogenated vegetable oil), Gas and Hydrogen. Not all are drop-in fuels and therefore fleets will still need to be adapted or replaced so whilst fuel exchange appears the most practical solution, there will still be a high cost.
The graphic below provides a summary of some of options being discussed in the industry at the moment, some more controversial than others. We have a separate advisory article discussing these in more detail and to receive a copy, please click to register you interest on the link at the end of this document.
With an almost inevitable and significant change to infrastructure, process and procedure being required for successful fleet decarbonisation, there will likely need to be retraining of staff, new health and safety protocols and a revision of regulatory risk controls. The last few years have demonstrated that those organisations which embraced risk and adapted quickly to a changing environment were the ones to have thrived. The road transport industry will be one of the most notably affected sectors with regard to operational changes in the journey to net zero and DACB are here to offer tailored advice and training on managing Safety, Health and Environmental risks to help reduce the possibility of incidents and regulatory scrutiny.
We have experienced lawyers on hand who can review policies and procedures, advise on typical compliance pitfalls, offer practical training sessions and advise on regulatory reporting requirements. Working with you we can help minimise the risks of claims against your company and HSE enforcement action, as well as avoiding such issues impacting on productivity and profitability.
If you have any questions about the services we provide, or would like copies of our longer information articles discussing alternative fuels, electric vehicles, alternative power options and the various options available for intermodal services and heavy duty vehicle fleets, please do not hesitate to contact our Corporate Insurance & Risk Team.
We also host regular webinars on key topics in the industry. Please click here if you are interested in registering for any of our webinars or receiving a copy of our linked articles regarding alternative fuels and other decarbonisation proposals.
DAC Beachcroft offers a multi-service Environmental, Social, and Governance (ESG) strategy, which identifies the firm’s ESG commitments as a business, and what its key sectors are doing to support clients on their own ESG journeys to help them adapt and thrive in a time of regulatory developments and increased litigation. To visit our ESG microsite, please click here.
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