As we are becoming more conscious of the importance of sustainability, no industry could escape this trend and every sector is taking actions to accompany the change. Looking at the automotive industry, what are the alternatives to fossil fuel passenger vehicles? Philippe Sabuco from BNP Paribas
The automotive industry is under increasing pressure to reduce carbon emissions originating from fossil fuels. What are the alternatives to fossil fuel passenger vehicles?
Specialized Trade Solutions EMEA presents his view on this matter.
Phase-out of fossil fuel vehiclesTo meet national and international environmental targets, car manufacturers have developed alternative fuel-powered cars. Indeed, many countries have decided to ban the sale of new fossil fuel passenger vehicles by 2030-2040: China, France, Denmark, India, the Netherlands, the United-Kingdom, Norway, and Sweden... Some cities also signed the Fossil Fuel Free Streets Declaration, committing to ban emitting vehicles by 2030: Auckland, Barcelona, Brussels, Cape Town, Copenhagen, London, Los Angeles, Madrid, Mexico City, Milan, Paris, Rome, and Vancouver... The objective is clear: to reduce carbon emissions coming from fossil fuels – such as gasoline and diesel – that cause climate change.
In this context, three main alternatives to fossil fuel passenger vehicles have emerged:
- electric vehicles (EVs)
- fuel-cell electric vehicles (FCEVs)
Biofuel vehiclesBiofuels, such as ethanol or biodiesel, are alternative fuels produced directly from biomass (plants or organic wastes). In theory, biofuels are carbon neutral because the carbon dioxide that is absorbed by the plants during its life is more or less equal to the carbon dioxide that is released when the fuel is burned. In addition, biofuels are generally considered as renewable energy as plants use solar energy to grow (photosynthesis).
In 2018, the share of biofuels in total transport fuel demand slightly exceeded 3%. The world leading biofuel markets are ethanol in the USA (made from corn), ethanol in Brazil (made from sugarcane) and biodiesel in the EU (made from rapeseed oil). Biofuel markets are generally influenced by policies (quotas, incentives, etc.).
Electric vehicles (EVs)Electric vehicles represent a fast growing alternative to fossil fuel vehicles. EVs are using electricity to power an electric motor. The electricity consumed – that can be generated from a wide range of sources, including renewable sources such as solar and wind power – is stored in batteries. Today, most EVs are using lithium-ion batteries because of their high energy and power density, and long life span.
In 2018, global sales of new EVs passed two millions units (+70% more than 2017!), with around 50% of global sales in China. This acceleration is mainly due to the significant cost reductions, improved performance of batteries and government subsidies in some countries like China. Today, China, Europe and the US are leading the way with the largest stock of EVs currently in circulation.
Fuel Cell Electric Vehicles (FCEVs)EVs can also use fuel cell, instead of a battery, to power an electric motor. The fuel cell is using oxygen from the air and compressed hydrogen to generate electricity. Converting hydrogen gas into electricity produces only water and heat as a byproduct. If produced from renewable energy (solar, wind for instance), the use of hydrogen allows to fully decarbonize mobility.
As end of 2018, the accumulated sales of fuel cell vehicles worldwide reached 10,000 units. Three FCEVs have been introduced for commercial lease and sale: the Hyundai Nexo, the Honda Clarity and the Toyota Mirai. On average, these models can be refueled in 3 to 5 minutes and feature a range of 500km (c. 300miles). These aspects are widely acclaimed by consumers. However, to develop further the use of FCEVs, infrastructures are key: more hydrogen refueling stations are needed. It is the main challenge today.
Accelerate the use of alternative fuel-powered carsThe alternatives introduced above will definitely help to decarbonize – at least partially – car mobility. There is a long way to go, but progresses have been made and the pace will accelerate driven by regulation and consumer demand. Given its key role in Commodity Finance, BNP Paribas can contribute to this acceleration by financing the entire biofuel value-chain (from production to distribution), the components of the lithium-ion batteries (lithium, cobalt, manganese, nickel, and graphite) and by accelerating the development of hydrogenas an energy carrier.
This article was first published by BNP Paribas Switzerland.