Hello friends! Here’s my monthly take on the five most interesting developments in future fuels and vehicles trends. Items I selected include:
1. Maersk: Maersk Sets Net Zero CO2 Emission Target by 2050 ― Maersk announced earlier this month its goal to reach carbon neutrality by 2050. To achieve this goal, the company says carbon neutral vessels must be commercially viable by 2030, and an acceleration in new innovations and adaption of new technology is required. The company goes further than the IMO, which has pledged to halve GHG emissions by 2050 in its Initial Strategy released earlier this year. Future Fuel Outlook members can read more about the strategy here. Maersk says its relative CO2 emissions have been reduced by 46% (baseline 2007), approximately 9% more than the industry average. Even IEA’s projections in its recent World Energy Outlook envisions high and low sulfur fuel oil and marine gasoil still dominating the fuel mix in 2040 (84% of it to be exact), as the figure below shows.
Note: The NPS is IEA’s New Policies Scenario and serves as the baseline scenario in the analysis.
HSFO consumption in 2017 was just over 3 mb/d and IEA expects demand to drop by around 2 mb/d around 2020. Filling the gap is not straightforward: the supply of LSFO from refineries is limited to around 600 kb/d, and so a large part of the remainder would need to be met by MGO. This raises the prospect of a spike in diesel prices around 2020, IEA projects. I believe IEA’s 2040 projections do not account for movements toward meeting IMO’s Initial Strategy. For example, it doesn’t include an outlook on hydrogen/ammonia, thought to be a potential fuel for compliance down the road in that 2030-2040 timeframe.
2. Transportation and Climate Initiative: Nine States and D.C. to Design Regional Approach to Cap Greenhouse Gas Pollution from Transportation ― A coalition of nine Northeast and Mid-Atlantic states and the District of Columbia today announced their intent to design a new regional low-carbon transportation policy proposal that would cap and reduce carbon emissions from the combustion of transportation fuels, and invest proceeds from the program into low-carbon and more resilient transportation infrastructure. The states are: Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont, Virginia along with Washington, D.C. What kinds of policies could we be talking about? Improved public transit, transit-oriented development, zero-emission vehicles, innovative efficiency strategies and “other solutions.” Perhaps low carbon fuels? That was noted at a series of listening sessions that preceded the announcement.
Meantime, the state of Massachusetts released a comprehensive report with recommendations on the future of transport in the state. Among other policies on the table: establishing a goal that all new cars, light duty trucks, and buses sold in the state will be electric by 2040 and a low carbon fuels standard.
3. CNN: Shell Is First Energy Company to Link Executive Pay and Carbon Emissions ―Shell will establish short-term carbon emissions targets starting in 2020 after coming under pressure from investors, and in an industry first, it plans to link executive pay to hitting the targets. Major shareholders including the Church of England and Robeco have demanded that Shell do more to tackle emissions. They say its earlier goal of cutting carbon emissions by half by 2050 did not go far enough. Shell said in a statement that it would set carbon reduction goals that cover periods of three to five years. The targets will be set on an annual basis, and run to 2050. Climate Action 100+, a group of 310 investors with over $32 trillion in assets under management, said in a joint statement with Shell that it strongly supported the company in taking “these important steps.” Meantime, institutional investors in Exxon Mobil filed a resolution this week calling on the company to set and disclose GHG reduction targets for its products and operations. More than 1,000 institutional investors representing US$8 trillion (yes, that’s right) have called for fossil fuel divestment.
4. Fast Company: California Just Decided to Move to 100% Electric City Buses ―The California Air Resources Board (CARB), the state’s clean air agency, just voted on a new rule that will require cities to shift to 100% electric buses over time. The rule applies to all transit buses; school buses and privately operated buses aren’t covered. Starting in 2023, large transit agencies will need to buy electric buses 25% of the time (small agencies have a few extra years for this goal), then 50% by 2026. By 2029, agencies will no longer be allowed to buy a bus that isn’t electric. In late November, CARB released a report finding that:
“While overall, California has hit its 2020 climate target ahead of schedule due to strong performance in the energy sector, meeting future targets will require a greater contribution from the transportation sector. With emissions from the transportation sector continuing to rise despite increases in fuel efficiency and decreases in the carbon content of fuel, California will not achieve the necessary greenhouse gas emissions reductions to meet mandates for 2030 and beyond without significant changes to how communities and transportation systems are planned, funded, and built.”
The report lists eight priorities for the state to focus on in reaching its GHG targets. Among them: pilot testing innovative ideas to speed the adoption of clean, efficient transportation solutions across the state and complement deployment of new mobility options and technologies with policies supporting state environmental and equity priorities. The real issue the state, and many other areas of the world have that this report alludes to is the high cost of housing. Affordable housing is the leviathan to tackle with people pushed further and further out from their workplaces and further and further into their cars to get there.
California isn’t alone in setting heavy-duty zero emission vehicle (ZEV) policies: The EU Parliament recently voted to require zero emission vehicle target for heavy-duty vehicles (HDV) as part of new stringent fuel efficiency requirements; 5% by 2020 and 20% by 2030. Those targets are currently being negotiated in a trilogue discussion among the Parliament, EU Commission and EU Council. Future Fuel Outlook members can read more about the legislation and other developments in HDV fuel economy here. And lastly, a trivia question: which country has the second largest electric bus fleet (or will by next year) after China? It’s Chile, which took delivery of 100 electric buses that have started running in Santiago.
5. Slate: San Francisco Legalizes Itself ― This article discusses a major trend that’s occurring around the world: eliminating parking minimums in new construction. Hartford, Connecticut eliminated parking minimums last year. Other cities, like Buffalo, New York, New York City, and Cincinnati, have selectively relaxed the requirements in certain areas or for certain types of buildings. This month, Minneapolis approved a plan to get rid of parking minimums. And last week, San Francisco became the largest U.S. city to shed the requirement. What’s behind the movement? It’s about reducing GHGs by getting rid of cars without the need for an outright ban as well as improving resident livability and making housing more affordable. In 2016, two researchers found that parking minimums added $1,700 a year in rent for the average tenant, and the national deadweight loss for carless renters was nearly half a billion dollars.
 The NPS considers the impact of those policies and measures that are firmly enshrined in legislation as of mid-2018. It provides a cautious assessment of where momentum from existing policies might lead the energy sector in the absence of any other impetus from government.
Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.