RaboResearch - Economic Research

The EU's road to net-zero mobility: Highway or traffic jam?


  • The EU Green Deal aims to make the EU the first carbon-neutral area. To achieve this, emissions must be reduced on all fronts. Specifically, the transport sector needs to cut 90% of its emissions by 2050
  • This article outlines the main policies that the EU is deploying to accelerate the required shift to low-carbon and smart mobility
  • The policies cover a broad range of topics, from technical to financial, spanning the following focus areas:
    • Emission reductions, with updated CO2 standards for cars and vans and the launch of a dedicated Emission Trading System (ETS) for transport
    • Changing fuel choices, i.e. through increasing renewable fuel consumption targets
    • Infrastructure, through the development of the Trans-European Transport Network (TEN-T)
    • Deployment of alternative fuels (namely, electricity and hydrogen)
  • Given the size and extent of the proposed changes, the question remains whether the many stakeholders will be able to process them and take action fast enough to reach the targets within the set timeframe

A complete shakeup of the EU transport system

Since its appointment to the current 2019-2024 term, the European Commission’s (EC) legislative activity has been nonstop. The European Green Deal to make Europe the first climate-neutral continent by 2050 is one the EC priorities for its current term.

The Green Deal is a strategy designed to make the EU more sustainable, circular, and low-carbon. Its proposals affect many different sectors. For transport, in particular, it includes a roadmap of key policy actions to accelerate the shift to sustainable and smart mobility. This comprehensive roadmap has resulted in an unprecedented number of proposals being proposed by the EC in recent years. Figure 1 outlines the main proposals addressing the mobility sector that have been formulated to date.

Figure 1: Timeline on the deployment of key mobility decarbonization policies
Figure 1: Timeline on the deployment of key mobility decarbonization policiesSource: Rabobank 2022

Within the Green Deal that was published in 2019, the Sustainable and Smart Mobility Strategy contains the transport-specific elements needed to achieve the climate-neutral EU target. Further sector-specific elements were elaborated in the Package of Measures for Efficient and Green Mobility.

In July 2021, the European Climate Law was approved, setting an ambitious target to reduce all greenhouse gas (GHG) emissions in the EU by 55% by 2030. It was followed by a package of more specific measures aimed at an economy-wide 55% emissions reduction. The so-called Fit for 55 package comprises 13 cross-sectoral measures, including some of the elements initially required by the Green Deal. It also has specific measures applicable to the transport sector.

This year, in reaction to the war in Ukraine, the EC pushed to expand and accelerate some elements of the Fit for 55 package in the REPowerEU Communication and in the subsequent REPowerEU Plan.

Figure 2 illustrates the key targets introduced across the mobility sector by the expanded policy framework outlined above.

Figure 2: Key targets within EU policies to decarbonize the mobility sector
Figure 2: Key targets within EU policies to decarbonize the mobility sectorSource: Rabobank 2022

The following sections outline in more detail the building blocks that will connect a decarbonized economy on the route toward net-zero mobility in the region.

The European Green Deal and the Sustainable and Smart Mobility Strategy

The Green Deal is one of the six priorities stated by the European Commission for the 2019-2024 term. As such, it is not a binding instrument, but a ‘work program’ – a roadmap of the legislative actions and related investments needed to reach the EU’s green and circular ambitions. Given the task, and the post-Covid economic context, extraordinary tools have been put to use. For example, the EC has committed to stimulate at least EUR 1 trillion in sustainable investments over the next decade. To do so, it has combined 30% of its 2021-2027 long-term budget (a total of EUR 1.211 trillion) and the NextGenerationEU (NGEU) instrument, worth EUR 806.9 billion. In the Netherlands, specifically, the Recovery and Resilience Plan was launched to allocate these funds.

The Green Deal had already stated some transport targets that need be met in order to decarbonize the EU by 2050. For example, 75% of inland freight transport should be carried by rail and inland waterways. And 1 million public recharging and refuelling stations should be in operation by 2025 to fuel the expected 13 million zero- and low-emission vehicles on the road by then.

A more detailed approach to address the targets proposed in the Green Deal is outlined in the Sustainable and Smart Mobility Strategy, which sets more sector-specific targets. By 2030, the EU should have a fleet of at least 30 million zero-emission vehicles and have 100 climate-neutral cities. High-speed rail traffic should be doubled and scheduled collective travel (public or shared) under 500km should be carbon neutral. There should be a large-scale automated-mobility sector and zero-emission marine vessels ready for market by 2030. Zero-emission large aircrafts are expected to be operational by 2035. Furthermore, in 2050, nearly all road vehicles should be zero-emission, rail freight traffic should double, and high-speed rail traffic will have to triple. The strategy puts together  all of the more specific actions to be launched under 10 flagships programs: from boosting uptake of zero-emission vehicles to enhancing transport safety and security. These flagships hint at future legislative developments.

Package of Measures for Efficient and Green Mobility

To achieve its ambitious emissions reduction targets, the EU transport sector must be optimized in a consistent way. The Package of Measures for Efficient and Green Mobility lays the ground to deploy an intra-EU transport system. It covers developments in infrastructure and related systems like IT, with urban mobility at its core. There are four different proposals that aim to deploy a smart and sustainable TEN-T, increase long-distance and cross-border rail traffic, enable intelligent transport services for drivers, and promote cleaner, greener, easier urban mobility.

The TEN-T will be developed in three phases: the main transport veins (the “TEN-T core”) by 2030, an ‘extended core’ network by 2040, and a fully operational network by 2050. For example, the TEN-T has to achieve recharging capacity for cars, vans, and trucks at a 60km distance on its core by 2025, and to enable higher speeds for train services (160km per hour for passenger services and 100km per hour for freight) by 2040 across the extended core.

Rail is a key modal choice to help cut GHG emissions, since it accounts for less than 0.4% of direct GHG emissions in transport. To this end, the EU has launched an Action Plan to boost long-distance rail travel. The plan tries to improve the data exchange between mobility providers, allowing easier cross-border contracts and agreements. During 2022, the rail sector can submit proposals for cross-border pilot projects. Policy options such as special VAT taxation will be also explored.

In line with the EU’s digital priorities outlined in the European Strategy for Data, the EC also wants to unleash the potential of Intelligent Transport Systems (ITS) to optimize the logistics sector and achieve cost reductions and safety improvements in transport. This would be done mostly through the digitalization of the transport system, enabled by updating the ITS Directive. The proposal to update the directive reacts to the initiatives (e.g. high-level discussions, the promotion of 5G in the automotive sector, and standards creation) of industry groups such as the European Automotive and Telecoms Alliance (EATA), the 5G Automotive Alliance (5GAA), and the CAR 2 CAR Communication Consortium. The EC attempts to achieve a large-scale automated mobility sector, multimodal electronic tickets for passengers by 2030, and zero fatalities in transport by 2050.

Fit for 55 and follow-up packages

Fit for 55 is a massive legislative package of 13 proposals launched by the EC in 2021 to enable the 2030 GHG emissions reduction target of 55%, as set in the European Climate Law. Read an extensive analysis of the package in Rabobank’s report Fit for 55’s Impact on the European Food Value Chain.

Fit for 55 includes eight proposals to boost the deployment of new mobility options, mainly through influencing fuel choices and promoting the reduction of emissions associated with transport.

Table 1: Transport related proposals and main action points included in the Fit for 55 package
Table 1: Transport related proposals and main action points included in the Fit for 55 package

It also has to be noted that the Fit for 55 package not only addresses the transport sector, but all EU economic activity. In this regard, policies may interact or overlap and some policies may unintentionally support or cancel out other ones. Given the unmatched political and financial support, the demand-driven change can also outpace supply. Under these circumstances, unforeseen supply bottlenecks are likely to happen.

REPowerEU, reacting to the war in Ukraine

Following the disruption in the energy supply to the EU due to the war in Ukraine, the EC published the REPowerEU Communication, outlining policy options to react to the resulting emergency situation. A few months later, the REPowerEU Plan, containing concrete policy actions, was published. The intention was to accelerate, as much as possible, actions to reach the targets formulated in the Fit for 55 package while also putting in place some emergency measures to replace the disrupted Russian energy supply. One example is to push up the (still under discussion) 2030 renewable energy supply target from 40% to 45%. Regarding transport, “electrification can be combined with the use of fossil-free hydrogen to replace fossil fuels.” To accelerate phasing out the Russian fuel supply there will be a legislative initiative to increase the share of zero-emission vehicles in public and corporate car fleets. The EC also commits to considering by 2023 a legislative package on greening freight transport.

The REPowerEU plan also includes non-transport-specific proposals that indirectly impact mobility. They are mostly aimed at accelerating the deployment of renewable power generation and green hydrogen, which can also result in a significant shift in fuel choices. The list includes the EU Solar Strategy to double today’s installed photovoltaic capacity, reaching 320 GW by 2025 and 600 GW by 2030; the accelerated and simplified permitting for utility-scale renewables; the delegated acts to establish the definition of green hydrogen; the accelerated deployment of hydrogen infrastructure to transport 20m metric tons by 2030; and the scaling up of biomethane production to 35 bcm by 2030. The latter corresponds with a 23% share of the approximate 150 bcm of Russian imports volume registered before the war.

The EC expects the REPowerEU plan to require a cumulative investment of EUR 210 billion between now and 2027.

Accompanying all of these ambitious economy-wide and sector-specific measures is a relevant stream of complementary rules. For hydrogen alone there is a whole list, including the so-called Hydrogen and Decarbonised Gas Market Package and the EU Strategy for Energy System Integration, that, in turn, includes the EU Hydrogen Strategy. There is also a whole list of rules related to ensuring critical raw materials supply.

Last but not least…

Fuelled by the climate emergency and pushed even further by the war in Ukraine and the resulting geopolitical threat to the fossil fuel supply feeding European transport, we have seen extraordinary legislative activity by the EC. Proposals have followed one after another at a pace not seen before.

This transformation drive covers all of the elements of the European transport system: fuel choices, combustion emission standards, transport modes, renewable targets and a carbon-free fuel supply, city mobility planning, new charging infrastructure deployment, and the financing instruments to support it all. What’s more, the reforms impact all economic sectors. Nevertheless, a few points remaining uncertain:

  • There is a frantic activity in Brussels. But, given the lengthy and cumbersome legislative process of the EC, there is still uncertainty regarding when and how ambitiously all proposals elements will be taken up across member states.
  • Key investment decisions will only be made when policies are certain. While there are some financing tools in place, the key regulations being discussed may not be fully enacted until 2024-2025.
  • Decarbonization of the whole economy has no historical precedent. Therefore, it is difficult to assess whether intended synergies may prevail over the challenges. Will they accelerate or otherwise delay the needed actions by all affected stakeholders (from municipalities to battery manufactures or logistic operators)?
  • Will all the necessary steps be taken in the required order? For example, will there be enough investments in the reinforcement of the power transport grid to enable the deployment of electric charging poles for passenger cars? This article (in Dutch) explains how power network congestion is already limiting decarbonization processes in the Netherlands.
  • There are, of course, a number of uncertainties out of legislative reach. These include future fossil fuel supply price scenarios due to the war in Ukraine and logistics congestions and possible bottlenecks in the supply of critical materials required for elements such as batteries.

We are facing historic, transformative times. It is abundantly clear that protecting the climate does not come at the expense of a strong economy. Investing in preserving the climate contributes to a stronger and more resilient economy as well. In our view, the road ahead holds as many opportunities as it does challenges.

Pablo Ruiz
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO

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