Decarbonising Road Freight: GETTING INTO GEAR Industry Perspectives www.shell.com/DecarbonisingRoadFreight #MakeTheFuture IN COLLABORATION WITH 1 DECARBONISING ROAD FREIGHT: GETTING INTO GEAR CONTENTS 3 Foreword 51 A New Paradigm: Solutions for Decarbonising 5 Executive Summary 52 Signals of Change 16 Where We Are Today 55 Inflection Point – Moving Beyond 17 The Drive to Decarbonise Planning and Design 18 GHG Emissions in Road Freight 57 Applying a Duty Cycle Perspective 25 The Deadlock: Barriers to 59 Solutions Decarbonisation 61 Make impact now 26 Decarbonisation Readiness Factors: Summary 65 Create a snowball effect 29 1. Market and Customer Demand 69 Build conditions for success 31 2. Regulatory Incentives 75 Scale 33 3. Technology Alignment 77 The Roadmap: Accelerating Decarbonisation 40 4. Clarity on Roles and Decision Making 78 Motivation and Immediate Focus 42 5. Ease of Asset Replacement 81 Technology Timelines 46 6. Ease of Infrastructure Replacement 83 Let’s Get Moving 49 Stakeholder views on Decarbonisation 86 Regional differences Barriers 87 India 90 China 93 United States 96 Europe 99 Acknowledgements and Sources 2 DECARBONISING ROAD FREIGHT: GETTING INTO GEAR FOREWORD The world today is going through a period of intense change. There are tremendous challenges from the immediate shock of the pandemic to the longer-term effects of climate change. But if there is uncertainty, 2020 also showed what the world can achieve when it works together: the hope that vaccines can provide. And across the world, businesses and governments are setting goals in line with the Paris agreement on climate change. Almost 1,400 businesses, more than 450 Trucks move almost everything that modern cities and more than 120 countries1 are part society depends on in daily life. During the of the largest ever alliance committed to stop pandemic, road freight played a vital role. Huibert Vigeveno adding to the amount of greenhouse gases With around 3 million companies operating Downstream Director in the atmosphere by 2050. In other words, about 217 million vehicles, the sector accounts Shell achieving net-zero emissions and doing so for about 9% of global carbon dioxide in just a few decades. Such goals demand emissions – and demand for road freight is set broad collaboration. to double before 2050. So how can a sector they include hydrogen as a fuel for heavier Decarbonising Road Freight: Shell’s made up of so many different parts jointly take trucks that travel further with a greater load. Route Ahead, we set out the actions In April last year, Shell also announced our the steps needed to reduce emissions? The solutions include the need for greater we are taking to help reduce emissions in own ambition to be a net-zero emissions regulation, increased production and this sector. energy business by 2050 or sooner, in step This report is driven both by urgency and the improved infrastructure to sustain growth. The with society and our customers2. This will need for collaboration. It is based on more principle of collaboration runs throughout. The solutions provide a plan of action, a path require working with others in a way and than 150 interviews across the industry, from towards net-zero emissions by 2050 in the at a scale we not seen before. In 2020, logistics companies to vehicle manufacturers Shell uses a contracted fleet of around 3,000 road freight sector. I believe this is possible we published the Decarbonising Shipping: and regulators. It identifies 22 solutions for the heavy-duty trucks and delivers fuels to almost because of the steps the industry has already All Hands on Deck report. This amplified sector to start reducing emissions right now all of our 45,000 retail sites worldwide. As taken – and its will to go even further. The our work with customers and partners in and increase the speed of the transition to well as supplying fuels, lubricants and vehicle report shows an industry that is not only sectors where it is hardest to reduce carbon low- and zero-emission vehicles. charging services, Shell is also expanding engaged and prepared to change, but ready emissions. The report helped to inform Shell our hydrogen projects, from production to to get into gear for the journey ahead. strategy and encouraged carbon reduction The solutions include immediate action refuelling networks. In our companion report commitments in the sector. It gives me great through the increased use of existing pleasure to introduce our second report, technology, such as battery-electric based on a second collaboration, this time technology for the shorter-range, lighter with the road freight sector. vehicles used in cities. In the longer term, 3 DECARBONISING ROAD FREIGHT: GETTING INTO GEAR RESEARCH OBJECTIVES 1 Research interviewees This research paper reflects the perspectives of over 150 executives and experts, representing 123 organisations across almost all segments of the road freight sector and 22 different countries (see Exhibit 01). It aims to: 158 road freight stakeholders 35 49 40 28 6 Take a comprehensive view. Clarify a practical way forward. CEOs and Logistics leads Sustainability Strategists Policy and Many decarbonisation studies focus Road freight leaders who participated senior and experts leads and and regulation on specific challenges or stakeholder in this research are at a point where executives experts innovation specialists groups in isolation. Given the they need to make decisions around experts interdependency of factors, the sector decarbonisation. We worked with them needs a more comprehensive view, to converge on a set of solutions and a representing 123 organisations which includes economic, regulatory and roadmap that can help the industry act organisational factors. now and clarify the path forward. 3 of top 5 3 of top 5 4 of top 5 2 of top 5 2 of top 5 5 leading Reflect the voice of the industry. The primary driver for publishing this report Third pparel Truck FMCG² Retailers NGOs³ No one stakeholder group can do this is to highlight the insights participants Party OEMs¹ alone, and everyone will have a role shared with us through interviews and Logistics to play. It is essential to understand the working sessions, not the views of Shell or 53 Europe⁴ 45 Asia 25 North America unique motivations and challenges of Deloitte. All engagements with interviewees different groups and geographies, to were conducted in a manner that respects develop solutions that will make an impact. competition law boundaries. 39 27 35 19 26 3PL⁵, Shippers CEOs and Technology Industry groups, NGOs, logistics and private senior and regulators and fi nanciers companies fl eet executives infrastructure and owners providers couriers Notes: 1 OEM refers to original euipent anufacturers, or for the purposes of this report it refers to truck anufacturers 2 FMC refers to fast-oving consuer goods copanies 3 NOs refer to non governental organisations 4 regions indicate organisations’ headuarters, but ost participating organisations operate globally 5 3PL refers to third-party logistics copanies. 4 DECARBONISING ROAD FREIGHT: GETTING INTO GEAR Executive Summary 02 Research highlights Road freight is the most visible and most To meet the targets set out in the Paris flexible part of the global supply chain. Agreement, absolute emissions from road 2. Road freight decarbonisation is Trucks move virtually everything modern freight will need to decline almost 60% by Why should close to an infl ection point due to society depends on for daily life. During the 2050, despite a possible doubling of road the sector increasing regulatory and market pressure, COVID-19 crisis, we have all experienced freight volume over the same period. This change? and will evolve faster than many just how critical road freight is in bringing means that the sector will need to realise expect. essential goods to where they are needed an emission intensity reduction of over 80% 3. To converge on a viable low- and zero- 5 the most. However, road freight is a highly in less than 30 years . More pressingly, the emission technology, the sector needs to fragmented sector, and with around three sector’s emission intensity will need to decline 1. The sector is adopt a duty cycle perspective. facing several million companies operating some 217 million by around 30% before 2030. On the current Can the barriers to vans, trucks and buses globally, it is also a trajectory, the road freight sector will not meet sector decarbonisation ‒ 4. Through collaboration around major source of greenhouse gases (GHGs). the targets of the Paris Agreement. It is clear a change? especially limited a catalogue of 22 solutions, The sector accounts for around 9% of global concerted effort is needed to break down the infrastructure, the sector will be able to reduce CO₂ emissions, with the US, Europe, China challenge and co-ordinate the industry around insuffi cient emissions now and accelerate a and India responsible for more than half of meaningful solutions. regulatory shift to low- and zero-emission trucks. that total3. As the global economy returns to incentives and 5. The sector has defi ned a growth in the coming years and decades, so Through interviews with over 150 executives lacking demand from shippers. decarbonisation roadmap, which too will carbon emissions from road freight. and experts across the global road freight allows it to start deploying low- and sector, we have broken down what is often zero-emission trucks at scale by the Around 60% of the sector’s CO₂ emissions seen as an insurmountable problem into How fast late 2020s. are generated by the around 63 million manageable components. We did that by can the sector medium- and heavy-duty trucks (MDTs and applying a comprehensive, ecosystem-wide change? 6. Achieving signifi cant emissions reduction requires a concerted global HDTs respectively)4, which are the main focus lens to decarbonisation, focusing on three effort, with leading regions and of this research.