The road to net zero: Decarbonising HGVs across Europe
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Significant investment is needed to help Europe’s heavy goods vehicle (HGV) fleet transition away from fossil fuels and ensure that greenhouse gas (GHG) emissions targets are met.
HGVs are the backbone of supply chains and are vital to Europe’s economy [1]. Transport accounts for 29% of Europe’s total GHG emissions, and this could increase to 44% by 2030 without sufficient intervention [2]. HGVs are a significant source of emissions: despite representing just 2% of vehicles, they contributed to 65% of road transport emissions in 2021 [3]. Limited progress has resulted in transport being decarbonised more than three times slower than the rest of Europe’s economy meaning that without widespread adoption of zero emission HGVs, Europe will be unable to meet its net zero targets [4].
On a positive note, Zero Emission Technologies (ZET) are expanding into the HGV sector, offering viable alternatives to GHG-emitting internal combustion engine (ICE) vehicles. Zero emission HGVs are now capable of ranges up to 800km, sufficient for even the most demanding HGV applications, including long-haul, which has daily driving averages of up to 500km [5].
Despite progress, investment in ZETs for HGVs is still very limited with over 99% of all HGVs in Europe still using ICE technology. Fleet operators face a number of barriers, including high upfront vehicle costs, and a lack of charging or refuelling infrastructure. To help overcome these challenges, the Green Finance Institute (GFI) is looking to partner with key organisations to create the solutions and supporting frameworks that investors and businesses need to derisk investing into zero emission HGVs, mobilising capital at the pace and scale needed for the sector to transition. Many of these solutions have been designed and tested in partnership with industry experts in the UK.
Limited adoption of ZETs
ZETs such as battery electric or hydrogen, are expected to play a key role in reducing HGV fleet emissions. Over 500 makes and models of zero emission HGVs are available worldwide and capable of average ranges of 240km in a single charge, sufficient for most duty cycles. In the UK, where the average daily HGV distance is around 100km [6], studies have shown that the lighter half of the HGV fleet could be electrified with technology available today without relying on development of public charging infrastructure.
A variety of companies are beginning to experiment with zero emission HGVs due to potential benefits such as lower running costs and improved driver experience. In the UK this includes SME hauliers, like Welch’s transport, and large retailers, like Tesco. Widespread adoption of these technologies, however, is still low. Out of a European fleet of 6.5 million HGVs, less than 10,000 currently use ZETs [7] due to high upfront cost of the vehicles and a lack infrastructure, among other barriers. In a sector where operational efficiency is vital and profit margins are typically no more than 2-3%, any incremental cost presents a significant challenge.[8]
Capital needs to be mobilised at pace and scale
Coordinated public and private sector action will be required to transition to zero emission HGVs. Regulation is expected to kickstart adoption: the EU CO2 Regulation for Heavy Duty Vehicles will require manufacturers to sell a minimum proportion of zero emission HGVs, starting with 15% in 2025, and increasing year by year, to 90% in 2040 [9]. This will not be sufficient in isolation; companies will need additional investment support.
In 2023, the GFI calculated that installing the necessary charging infrastructure and transitioning the entire 500,000 UK HGV fleet to battery electric from a low starting base of 0.1% adoption, would cost £100 billion. Transitioning the larger European fleet could cost as much as €1.56 trillion based on a similar level of adoption and calculating the figure on a proportional basis.[10]
Much of the capital required need to be mobilised by private companies, including SMEs, which often have low cash reserves. This is problematic when considering that electric HGVs typically cost 2-3x ICE vehicle equivalents, and hydrogen fuel cell 4-5x. Ensuring companies are supported in accessing the capital they need will therefore be a crucial step in the transition to zero emission HGVs.
Attracting global capital into the EU with targeted policy and public finance
There is appetite in Europe to increase investment and to improve the competitiveness of clean technologies and transport [11]. Alongside this, there are recommendations for the reform of EU pension fund investment [12] and greater private pension investment to help support the scale up of investment into decarbonisation. Creation of zero emission HGVs as a new asset class could therefore provide an attractive option for investors with a sustainable agenda.
Supporting the logistics sector to transition could also yield further benefits, since due to its interconnected nature, the industry is also often an enabler for other industries to grow. In a recent Logistics UK report for example, it was found that supporting the logistics sector could boost the UK economy by £8 billion per year. The focus of policymakers should therefore be on designing policy measures which attract global institutional capital into European zero emission HGV investments through attractive deal-flow and risk-absorbing measures.
GFI’s portfolio of solutions
In partnership with UK experts from logistics, energy, finance and government, the GFI has developed a portfolio of shovel-ready solutions that could unlock investment to accelerate adoption of zero emission HGVs. These have been developed through extensive stakeholder engagement and incorporate the needs of both the public and private sectors.
The GFI is looking to scale these solutions to support other European HGV markets to transition, so that zero emission HGVs can be developed into a viable asset class for investors and enable greater access capital at the scale required. Several solutions are tailored to the needs of SMEs.
Spain has the third highest road freight volume in the EU and has relatively low electricity prices compared to other EU-27 countries [13], making it a prime country for electrification of the HGV fleet. GFI Spain is expanding its work programme to explore and deliver zero emission HGV funding solutions.
If you would like more information on our HGV solutions, or to get involved in this work, please reach out to us at info@gfi.green.
1 Road Freight Statistics in Europe (2024) – Eurosender
2 Europe’s transport sector set to make up… | Transport & Environment
3 Truck CO2: Europe’s chance to lead | Transport & Environment
4 Europe’s transport sector set to make up… | Transport & Environment
5 The European heavy-duty vehicle market until 2040: Analysis of decarbonization pathways
6 HGV Haulage Statistics for the UK | Crown Oil
8 Delivering-Net-Zero.pdf p.10
10 Delivering-Net-Zero.pdf pg. 2 This figure has not been adjusted to account for national variations in costs, and is used purely to illustrate the amount of investment required.
11 The Draghi Report: A Strategy to Reform the European Economic Model
12 Draghi puts pension funds at work for the future of EU competitiveness | etui
