Benchmarking the growth of zero-emissions trucking

Posted Tuesday, 22 January 2019, 10:57

In my last blog entry, I argued that the super credits system proposed by the European Commission to spur the adoption of zero- and low-emission vehicles (ZLEV) puts the incentives in the wrong place. It disproportionately rewards truck segments that already have separate drivers for electrification. I also proposed a fix to improve the super credits system involving the freight activity of the different truck segments.

Last month, the European Council reached its position on the CO2 standards for trucks, and in particular, on the thorny topic of ZLEV incentives. While Council’s position leaves the proposed super credits scheme largely untouched, at the insistence of more ambitious Member States, it includes provisions that instruct the Commission to assess the future introduction of a benchmark system for 2025 and to take into account the freight activity of the different truck segments.

Parliament’s position from November of last year, on the other hand, does away with the super credit system and proposes instead the introduction of a ZLEV benchmark. In Parliament’s proposal, a manufacturer that surpasses the ZLEV sales benchmark would be rewarded with a more lenient CO2 reduction target (bonus). Conversely, if the benchmark threshold is not met, it would be penalized with a more stringent CO2 target (malus). Parliament’s position includes no differentiation between truck segments based on their freight activity, though.

What remains now is for Council, Parliament, and Commission to reach an agreement during trilogues (one of them is taking place today); an expedited one at that, given the EU elections calendar. So, what is it going to be, benchmark or super credits? 

Although super credits can improve the cost-effectiveness of zero-emission trucks as a compliance strategy, they have the perverse consequence of eroding the environmental benefits of the CO2 standards. In principle, Parliament and Council seem to agree on this issue: the former abandoned the super credits system, and the latter included provisions that would allow doing so in the near future.

The benchmark system, on the other hand, relies on the assumption that the market will be ready to accept a certain share of zero-emission trucks in the future and compels manufacturers to expand their product portfolio and commercial strategies to satisfy the demand and to contribute to its growth. A recent survey found that interest in electrified trucks is taking off faster than anticipated. About 40% of the over 500 surveyed haulers said they would buy electrified trucks during their fleet renewal.

Incumbent European manufacturers and new competitors are gearing up and expanding their offerings to meet this future demand. The table below shows a summary of the current and planned zero-emission truck offerings in Europe.

Manufacturer Model Stage Production GVW Battery capacity Range VECTO group (est.)
Daimler Trucks eCanter In production 7.5 tonne 83 kWh 120 km 1
eActros Customer tests 2021 26 tonne 240 kWh 200 km 9-RD
MAN eTGM, 6x2 Customer tests 2021 26 tonne 225 kWh 200 km 9-RD
eTGM, 4x2 Customer tests 2021 32 tonne 149 kWh 130 km 5-RD
CitE Prototype 2021 15 tonne 110 kWh 100 km 3
Volvo Trucks FL Electric Customer tests 2019 16 tonne 300 kWh 300 km 4-RD
FE Electric Customer tests 2019 27 tonne 300 kWh 200 km 9-RD
Renault Trucks D Z.E. Customer tests 2019 16 tonne 300 kWh 300 km 4-RD
D Wide Z.E Customer tests 2019 26 tonne 200 kWh 200 km 9-RD
DAF LF Electric Customer tests Not announced 19 tonne 222 kWh 220 km 4-RD
CF Electric Customer tests Not announced 37 tonne 170 kWh 100 km 5-RD
Scania R 450 Hybrid (pantograph) Customer tests Not announced 40 tonne Not apply (overhead) 10 km (battery powered) 5-LH
BYD T5 In production (U.S., China) 7.3 tonne 155 kWh 250 km (0)
T7 In production (U.S., China) 11 tonne 221 kWh 200 km 2
T9 In production (U.S., China) 36 tonne 435 kWh 270 km 10-RD
Tesla Semi Customer tests (U.S.) 2019 (U.S.) 36 tonne Not announced 800 km 10-LH
Nikola Tre Prototype 2023 40 tonne Not apply (fuel cell) 1200 km (on hydrogen) 5-LH

To minimize the uncertainty associated with postponing crucial decisions until the planned 2022 review of the truck CO2 standards, the ongoing trilogues should fix in place the regulatory design. This is essential.

The crux of the matter is then, how to combine Parliament’s, Council’s and Commission’s positions into a viable compromise that all three institutions can get behind? Here’s our suggestion: A bonus-only benchmark with freight activity weighting (here’s the detailed amendment). 

Taking Parliament’s benchmark proposal as a starting point, removing the penalties for failing to meet the criterion leaves a bonus-only benchmark with a 5% ZLEV sales target for the year 2025. Manufacturers that outperform the ZLEV sales target would be rewarded with a higher (i.e., less stringent) CO2 target, and there would be no penalty for underperforming manufacturers. As proposed by Parliament, the CO2 target adjustment is done using the so-called ZLEV factor. The ZLEV factor can range from 1, for manufacturers that fail to meet the ZLEV target, to 1.03, for manufacturers that exceed the ZLEV target by 3 percentage points or more. That is, following Parliament’s proposal, the ZLEV incentives can only relax the CO2 target by a maximum of 3%.

Let’s now add Council’s component to the mix. In its position, Council recommends assessing a “possible differentiation per sub-group combined with mileage payload weighting factors.” We certainly agree this is the correct way forward, since not all ZLEVs are the same. In the Commission’s proposal, the calculation of the fleet average CO2 emissions of a manufacturer uses a set of mileage payload weighting (MPW) factors to account for the differences in freight activity between diesel truck types. Our proposal is to use these factors in the calculation of a manufacturer’s ZLEV sales. For example, a zero-emission long-haul tractor-trailer would count as 6.5 in the ZLEV accounting, but a 4x2 regional delivery rigid electric truck as 1.

Following ACEA’s suggestion, the zero-emission range of these vehicles should also have a part in the equation. To ensure that zero-emission trucks claimed by the manufacturer are indeed designed for their intended mission, a minimum range must be required for each truck type. Long-haul vehicles should have a range of at least 400 km, regional delivery vehicles at least 200 km, and urban delivery vehicles at least 100 km. The proposed mileage payload weighting factors for the ZLEV accounting, as well as the range requirements for each regulatory category are summarized in the table below.

Regulatory category MPWs for ZLEV accounting (Based on Commission’s proposal)  Minimum zero-emissions range (Based on ACEA’s proposal)
4-RD 1.0 200 km
4-LH 2.9 400 km
5-RD 3.2 200 km
5-LH 6.5 400 km
9-RD 1.8 200 km
9-LH 5.8 400 km
10-RD 2.8 200 km
10-LH 6.0 400 km

Lastly, and reflecting the spirit of the Commission’s proposal, zero-emission trucks from non-regulated categories can take part in the incentive mechanism, however their contribution should be capped at half of the total incentive. In particular for this proposal, non-regulated trucks can only contribute up to half of reported ZLEV sales of a manufacturer.

So, how does this proposal translate into zero-emission truck sales? Let me illustrate this with some examples. A hypothetical manufacturer, with a typical fleet composition, sells 40 thousand trucks in the regulated categories and 6 thousand in the non-regulates ones. If said manufacturer chooses to focus on zero-emission long-haul trucks, it would need to sell around 350 zero-emissions tractor-trailers to meet the 2025 benchmark, and around 570 units to reap all the ZLEV incentives. That’s not a lot of trucks, and significantly less than the 1,200 units that would be required to get the same benefits under the super credits system. If on the other hand, a manufacturer decides to focus on the easier to electrify segments, it would need to sell more zero-emission trucks than under the super credits system to get the same benefits.

The bonus-only benchmark proposed by the ICCT eliminates the negative consequences of not achieving the ZLEV sales targets, provides higher incentives for the harder-to-electrify segments, and can be smoothly integrated into the current regulatory design. Our proposal also combines key elements from both the Council and Parliament positions, meaning it should be an appealing compromise in the upcoming negotiations.

PS. ACEA privately distributed today to Council representatives a document titled “Super-Credits or Benchmarks. What is better to drive down emissions of heavy-duty vehicles?”, in which they make the case for super credits and criticize the benchmark approach. ICCT’s benchmark proposal should appease their concerns.