Decarbonization of transportation, feasible? By When?

Stay tuned > Decarbonization of transportation, feasible? By When?

- January 24, 2023

Author: Luca Manera, Investment Manager, Asteria IM

Net-zero transportation, are we there yet?

The journey to decarbonize the transportation sector will be long and noticeably one of the most challenging to reach neutrality by 2050, according to the IEA. This is due to the heterogenous modes of transportation which span from cars, planes to ships. Currently, global carbon emissions from transportation are estimated at 7 giga tonnes or 21% of total emissions in 2020, among the most carbon emitting sectors globally. Specific decarbonization pathways and milestones are needed to fully assess and track the progress towards net-zero emissions. This is especially true for this sector, as no one size fits all alternative technology currently exists.

Despite the sector specific challenges, a lot of progress has been made over the past few years to steer transportation  towards lower carbon intensity . These positive trends have accelerated recently driven by a combination of technological progress (battery autonomy, size and costs) and regulations.

Green light for low carbon vehicles!

The combination of improving technological performance and regulations has boosted the growth and adoption of low carbon vehicles. This is especially true for light-vehicles, such as cars and vans. Most recent figures point to a continued surge in sales, with sales forecasts in China to reach 6 million in 2022, compared to 3 million a year ago. This strength is shared across the globe, with sales in Europe estimated at 3.2 million and in the USA of 1.2 million1. Battery powered vehicles grew by 30% in Europe during the first six months of 20222.

Consumers are winning the race with an estimated offering of 551 different models to choose from across battery, fuel cell and hybrid vehicles, that compares with just 252 models available in 20193. As consumers embrace EVs, this creates a demand tail wind that supports manufacturers efforts to position themselves in this growing market. Volkswagen has announced the launch of its new plant from its battery business, estimating potential total sales of 20 billion by 2030, supplying enough power for 500,000 electric vehicles4. Likewise, Ford has recently published its battery and EV plan for the coming years, this includes an estimated 90% compounded growth rate of EV sales through 2026 and to increase capacity to over 2 million units by 20265.

Regulation is helping too. The recent Inflation Reduction Act in the US underscores the support of public incentives towards the adoption of low-emission vehicles, such as the extension of the $7,500 income tax credit for new electric vehicle purchases, and the addition of a new credit of $4,000 for used vehicles. In Europe, ministers have struck a deal to ban internal combustion engine vehicles sales from 2035 and recommend charging points every 60km, this is expected to be ratified soon in parliament.

Recent data in Europe highlights the momentum towards a net-zero pathway for  cars, with 40% of new cars sold being electric6. However, the journey to decarbonize the transportation sector is long, especially for heavy and long-haul transportation.

What about trucks, planes and ships?

As the strong momentum continues for cars, the urgency to tackle emissions for long-distance cargo increases. In fact, always according to the IEA it will take a significantly longer time to decarbonize trucks, planes and ships. For example, while market share for EVs is estimated to be above 75% in 2030, heavy duty trucks will be less than 30% in a net-zero scenario. This is due to the significant challenges that battery technology faces for heavy transportation such as larger and heavier battery packs and power density. According to IHS Markit, only 346 electric trucks were sold in Europe in 2021.This is eclipsed by Volvo Truck’s recently published figure of orders of more than 1,100 of its electric fleet globally7, a promising start to decarbonize long-haul trucks. On the other hand, planes and ships are less likely to benefit from electrification and will need multiple forms of technologies, materials and fuels to reduce their carbon-footprint.

Bond investors funding EV growth

The large investment needs to fund the decarbonization of the transportation sector requires to finance long-term strategic business transitions. Bond investors have seen increasing issuance of green bonds from automotive manufactures to finance the development of new EV design lines, battery plants and overall capex requirements to build the growth of electric vehicles. Most recent example is Honda’s inaugural issuance of USD2.75bn of green bonds in March and Volkswagen coming back to the green bond market with a total issuance of EUR1.5bn in June.

Everyone is in the driver’s seat

Finally, our choices and behaviours also drive down carbon emissions, this is especially true when we think about how we travel. This can range from small changes to our behaviour such as decrease the air-conditioning usage in the car to reduce fuel consumption, to prioritize public transportation in urban areas or pick a train-ride for a short-weekend trip. While the journey remains long to decarbonize the transportation sector, the first steps are surely in the right direction.


1 China Electric Car Sales Are Forecast to Hit a Record 6 Million This Year – Bloomberg

2 Electrified cars market share grows in Europe as total sales fall | Reuters

3 EV Models | Electric Vehicles | BloombergNEF (

4 Ground breaking in Salzgitter: Volkswagen enters global battery business with “PowerCo” (

5 Ford-EV-Plan-Update.pdf (

6Fuel types of new cars: battery electric 9.9%, hybrid 22.6% and petrol 38.5% market share in Q2 2022 – ACEA – European Automobile Manufacturers’ Association

7 Sales start for Volvo’s heavy-duty electric trucks (



Miriam Dippe, Partner

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Launched in 2019 with the support of the Reyl Group, Asteria is an asset manager entirely dedicated to impact investing. For Asteria, finance must adapt to the evolution of society and its needs, by integrating environmental and social issues into financial performance. In December 2020, Asteria announced a strategic partnership with Obviam, a Swiss impact investor with over 20 years of experience.


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