EUROPEAN COMMISSION

Brussels, 20.7.2016

SWD(2016) 244 final

COMMISSION STAFF WORKING DOCUMENT

Accompanying the document

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

A European Strategy for Low-Emission Mobility

{COM(2016) 501 final}

Table of Contents

1. General context and policy framework    

2. Existing EU policies for sustainable transport    

2.1. Low emission vehicles    

2.2 Switching towards low emission alternative energy for transport    

2.3 Efficiency of the transport system    

2.4 Cross-cutting initiatives    

2.4.1 Transport research and innovation    

2.4.2 EU financing and co-operation instruments    

2.4.3 Support to cities and local communities    

2.5 Action in international aviation and maritime    

2.5.1 International developments    

2.5.2 EU level action in international aviation and maritime    

2.6 Taxation    

3. Developments under current trends and policies    

3.1 Identifying the GHG emissions gap for transport    

3.2 Key assumptions of the Reference Scenario    

3.3 Reference Scenario main results    

4. Pathways towards low-emission mobility    

4.1 Policy measures    

4.1.1 Moving towards zero-emission vehicles    

4.1.2 Switching towards low emission alternative energy for transport    

4.1.3 Efficiency of the transport system    

4.1.4 Transport fuels in the EU ETS    

4.1.5 Cross-cutting initiatives    

4.2 Description of the pathways/scenarios    

4.2.1 Central scenarios    

4.2.2 More ambitious pathways/scenarios for low-emission mobility    

4.3 Analysis of impacts of the pathways/scenarios    

4.3.1 Moderation of energy demand    

4.3.2 Energy security    

4.3.3 Decarbonisation    

4.3.4 Other environmental impacts    

4.3.5 Research, innovation and competitiveness    

4.3.6 Impacts on transport as a business    

4.3.7 Economic impacts    

4.3.8 Social impacts    

5. Conclusions    

ANNEX I: Historical developments in transport activity, energy use and emissions    

ANNEX II: Analytical work on low-emission mobility    

ANNEX III: Overview of policy measures    

ANNEX IV: Models and model-based scenarios used in preparing the analytical work    

Table of Figures

Figure 1: Passenger and freight transport projections (average growth rate per year)    

Figure 2: Evolution of total final energy consumption and GHG emissions between 1995 and 2050    

Figure 3: Evolution of final energy use in transport by type of fuel     28

Figure 4: Decomposition of CO2 emissions in the Reference scenario (2005-2030)    

Figure 5: Energy savings relative to Reference scenario 2016, in Mtoe (left side) and change in energy intensity for 2010-2030 and 2010-2050, in % (right side)    

Figure 6: Final energy demand in transport by fuel in 2030 (in % of total)    

Figure 7: Alternative fuels and energy carriers in transport in 2030 (in % of total energy demand)    

Figure 8: Share of electricity in road transport energy demand (in %) and total electricity demand in transport (in Mtoe)    

Figure 9: Oil products used in transport (difference to REF2016, in Mtoe) and oil dependency (in %)    

Figure 10: Decomposition of CO2 emissions for passenger transport for 2005-2030 (% change)    

Figure 11: Decomposition of CO2 emissions for passenger transport for 2005-2030 (in Mt of CO2)    

Figure 12: Decomposition of CO2 emissions for freight transport for 2005-2030 (% change)    

Figure 13: Decomposition of CO2 emissions for freight transport for 2005-2030 (in Mt of CO2)    

Figure 14: Evolution of well to wheel CO2 emissions for 2005-2030 and 2005-2050 (in %)    

Figure 15: Evolution of NOx and PM2.5 emissions for 2010-2030 and 2010-2050 (growth rates, in %)    

Figure 16: External costs of air pollution and noise for 2010-2030 and 2010-2050    

Figure 17: Light duty vehicles by type of powertrain in 2030 and 2050 (in %)    

Figure 18: Liquid and gaseous biofuels in 2030 and 2050 (in % of total liquid fuels and in Mtoe)    

Figure 19: Gross average costs, average co-benefits and net average costs of emission reductions in the decarbonisation pathways/scenarios    

Figure 20: External costs of congestion and accidents for 2010-2030 and 2010-2050    

Figure 21: Share of transport energy demand by mode in 2014 (%)    

Figure 22: Specific consumption of passenger cars (EU fleet average)    

Figure 23: Share of transport energy demand by energy carrier in 2014 (%)    

Figure 24: Share of transport energy demand by energy carrier in 2014, by mode (%)    

Figure 25: Evolution of greenhouse gas emissions by sector (1990=100), EU28    

Figure 26: Greenhouse gas emissions from transport by mode in 2013    

Figure 27: Shares in EU transport CO2 emissions in 2015 (model estimates)    

Figure 28: Domestic transport emissions and emissions from international aviation, EU28    

Figure 29: Cabotage in the EU in 2014 by host country    

Figure 30: Inter-linkages between models    

Figure 31: EU28 Gross Inland Consumption (Mtoe, left; shares (%), right)    

Figure 32: EU28 energy production (Mtoe)    

Figure 33: Gas - production, net imports and demand (volumes expressed in bcm)    

Figure 34: EU power generation (net) by fuel (Mtoe – left, shares – right)    

Figure 35: Net power capacity investments by plant type (MWh – for five year period)    

Figure 36: Decomposition of electricity generation costs and prices (€'2013 MWh)    

Figure 37: Investment expenditures (5-year period) - demand side, million €'2013 (left, excluding transport) and supply side, million €'2013 (right)    

Figure 38: Decoupling of EU energy use and intensity from GDP (2005=100)    

Figure 39: Evolution of final energy demand by sector (Mtoe – left, shares – right)    

Figure 40: Evolution of final energy demand by fuel (Mtoe – left, shares – right)    

Figure 41: Industrial energy demand versus activity (value added)    

Figure 42: Final energy demand in the residential sector    

Figure 43: Trends in transport activity and energy consumption    

Figure 44: Evolution of CO2 emissions (Mt) by sector    

Figure 45: Non CO2 GHG emissions (Mt CO2 eq.)    

Figure 46: Development of the EU28 emissions/removals in the LULUCF sector in Mt CO2 until 2050    

Figure 47: Illustrative levelized cost of electricity (expressed in €'2013/MWh-net)    

Figure 48: Evolution of activity of light duty vehicles by type and fuel    

Figure 49: Projected evolution of energy system costs    

Figure 50: Changes in the excise duty rates for diesel by Member State from 2025 onwards    

Figure 51: Final energy demand in transport by fuel in 2050 (in % of total)    

Figure 52: Alternative fuels/energy sources in transport in 2050 (in % of total energy demand)    

1. General context and policy framework

Transport is the backbone of the economy, an enabler of growth and jobs, essential for the functioning of the single market and the free movement of goods and people. Market integration, economic growth and transport activity are strongly related.

The global transition towards a low-carbon economy has started, supported by the Paris Climate Agreement. Transport will need to play an important role in this transition. The transition towards a low-carbon economy also represents a major opportunity for jobs and growth in the transport sector, as markets for low-emission mobility grow globally.

This transition will be supported by a number of disruptive trends, such as digitalisation and new technologies. Transport is increasingly becoming an on-demand service as consumer needs and perceptions of mobility solutions evolve. Taken together, these trends also imply important competitiveness challenges and significant effort will be required from businesses and regulators to turn them into growth and employment opportunities for Europe. A forward looking and long-term policy approach with the aim of ensuring a regulatory and business environment that is conducive to meeting the competitiveness challenges that the transition to low-emission mobility implies is a vital precondition. The analysis carried out in this paper provides insights on the necessary tools to do this.

2. Existing EU policies for sustainable transport

Since 2007 overall emissions from transport have continuously decreased. This section discusses the most important 9 EU policies for reducing greenhouse gas (GHG) emissions and other transport externalities, covering three main areas: (1) low emission vehicles; (2) switching towards low emission alternative energy for transport and (3) efficiency of the transport system.

Many of these policy measures were adopted in the context of the 2020 Energy and Climate Policy Framework and the 2011 Transport White Paper.

The 2020 Energy and Climate Policy Framework was agreed by the European Council in March 2007. It set three targets to be attained by 2020: 20% GHG emissions reduction compared to 1990, 20% of all EU primary energy to be provided by renewables, and a 20% improvement in energy efficiency. The transport sector plays a role in the implementation of these headline targets, and four main pieces of legislation have relevance for the EU transport sector:

(I)The revised Directive on the European Emissions Trading System (EU ETS Directive);

(II)The Effort-Sharing Decision (ESD) introducing national GHG reduction targets for non-ETS sectors (including transport) for all Member States;

(III)The Renewable Energy Directive (RED) laying down targets for the overall use of renewable energy and for its use in transport 10 ;

(IV)The Energy Efficiency Directive (EED) establishing a set of binding measures to help the EU reach its indicative 20% energy efficiency target (for the whole energy system, including transport). 11

New specific transport-related measures were also included to curb GHG emissions from road transport. The Fuel Quality Directive was revised to require a reduction in the GHG intensity of EU transport fuels and CO2 emissions performance standards for cars and vans were adopted, also contributing to energy efficiency improvements.

The 2011 Transport White Paper defined a long-term vision until 2050 for a transport sector that continues to serve the needs of the economy and of the citizens while meeting future constraints: oil scarcity, growing congestion and the need to cut CO2 and pollutant emissions in order to improve air quality particularly in cities. The White Paper covers four broad areas of intervention: internal market, innovation, infrastructure, international aspects. For each of these areas, a ten-year programme was defined with 40 specific action points, containing within each point a handful of specific initiatives of different nature, different time horizon and different economic/political relevance. 12 An implementation report of the 2011 White Paper has been concluded in 2016. 13

2.1. Low emission vehicles

European Regulations set CO2 targets for new passenger cars and vans (collectively LDVs) as follows:

(I)2015 car target: New cars registered in the EU must not on average emit more than 130 grams of CO2 per kilometre (gCO2/km) by 2015 in the official test, corresponding to a fuel consumption of around 5.6 litres per 100 km (l/100 km) of petrol or 4.9 l/100 km of diesel. The average emissions of a new car sold in 2014 were 123.4 gCO2/km. 14 Provisional data for 2015 indicate 119.6 gCO2/km. 15

(II)2017 light commercial vehicle target: New vans registered must not emit more than an average of 175 gCO2/km by 2017, corresponding to a fuel consumption of about 6.6 l/100 km of diesel. In 2014, the average van sold in the EU emitted 169.1 gCO2/km. 16  

(III)2020 light commercial vehicle target: by 2020, the fleet average to be achieved by all new vans is 147 gCO2/km, which corresponds to around 5.5 l/100 km of diesel.

(IV)2021 car target: by 2021 the fleet average to be achieved by all new cars is 95 gCO2/km. This means a fuel consumption of around 4.1 l/100 km of petrol or 3.6 l/100 km of diesel.

An important complementary measure to help car manufacturers to meet their specific CO2 emission targets is the Car Labelling Directive. 17 It requires EU Member States to ensure that relevant information is provided to consumers, including a label showing a car's fuel efficiency and CO2 emissions. It aims to raise consumer awareness on fuel use and CO2 emissions of new passenger cars which may influence consumers' choice in favour of cars that use less fuel and emit less CO2.

An evaluation of the existing Regulations 18 setting standards for light duty vehicles identified that the Regulations have been largely effective and have delivered CO2 reductions at lower cost than originally foreseen. However, there are a number of areas where they could be improved, including to better take into account the gap between CO2 emissions and fuel consumption values measured during laboratory tests at type approval and those encountered in real use. They are being addressed by the Worldwide harmonized Light vehicles Test Procedure (WLTP) that is in the process of being put in place at EU level (see box: "More reliable fuel consumption and CO2 figures for consumers and regulators" in section 4.1.1).

In addition, there are significant discrepancies between the real-driving emissions of certain air pollutants and the values measured in the laboratory at test procedure. In particular the NOx emissions of diesel cars – which form a large share of the EU market – often drastically exceed the laboratory values in real driving. This has a significant negative impact on air quality, especially in urban areas.

The evaluation of the Car Labelling Directive shows that the Directive was successful in increasing consumer awareness of the fuel economy and CO2 emissions of new passenger cars. However, the report identified a number of issues that prevented the Directive from being more effective in stimulating the uptake of vehicles with lower fuel consumption and CO2 emissions.

For Heavy Duty Vehicles (HDVs), the first initiative to tackle GHG emissions in the EU was a strategy adopted in 2014. 19 Despite the economic importance of fuel consumption, CO2 emissions from HDVs are currently neither measured nor reported. The strategy focuses on short-term action to certify, monitor and report HDV emissions - an essential first step towards reducing them. To support this, the Commission has developed a computer simulation tool, VECTO, to calculate fuel consumption and CO2 emissions from new vehicles (trucks and buses).

In addition, the Clean Vehicles Directive 20 mandates public procurers to consider fuel consumption, CO2, and pollutant emissions when purchasing road transport vehicles, giving them various options to do so. The conclusions of the evaluation of the Directive show that it is relevant, and that it resulted in a benefit/cost ratio of 1.2. 21 However it has had limited effectiveness and efficiency and as such reduced CO2 emissions much less than originally expected.

Heavy goods vehicles, buses and coaches in the EU must comply with certain rules on weights and dimensions for road safety reasons and to avoid damaging roads, bridges and tunnels. 22 The impact assessment of the Directive 23 estimated that these measures will contribute to 7 to 10% of GHG emissions reduction in 2030 compared to the baseline.

Tyres sold in the EU are subject to energy labelling requirements through Regulation (EC) No 1222/2009. Tyre labels help consumers choose vehicle tyres that are more fuel efficient, have better wet braking and are less noisy. As tyres account for 20 to 30% of a vehicle’s fuel consumption, choosing energy efficient tyres results in significant fuel cost savings.

2.2 Switching towards low emission alternative energy for transport

Europe is still heavily dependent on liquid fuels and therefore on imported oil for transport. While oil prices have recently reduced, long term prices are projected to remain high. 24 Furthermore, the supply of oil is to a large degree sourced from politically unstable regions raising concerns relating to security of supply, future price volatility and the potential results of price shocks.

Policies have been adopted at EU level to reduce the GHG intensity of fuels, increase the supply of low emission alternative fuels 25 including renewables, and introduce enabling infrastructure. In the future, as market penetration of electric vehicles is expected to grow the challenges that this may impose for the electricity network may need to be addressed.

The use of renewable energy is promoted by the Renewable Energy Directive (RED) 26 requiring that the share of renewable energy in the EU is 20% of gross final energy consumption by 2020, reflected through national targets. It also contains a target for each Member State to have a 10% share of renewable energy in transport by 2020. This provision is complemented by Article 7a of the Fuel Quality Directive (FQD) 27 obliging fuel suppliers to reduce the GHG intensity (gCO2/MJ) of fuels supplied by 6% in 2020 compared to 2010.

The 2015 renewables energy progress report 28 indicated that achieving the target for renewable energy in transport is challenging but feasible, with some Member States making good progress. At EU level, the share of renewable energy in transport reached 5.9% in 2014. A mid-term evaluation of the RED indicated that in transport the mandatory target has been important for the deployment of renewable energy in the sector, mainly through implementation of national blending obligations. However, progress has been slow; the main reason has been policy uncertainty at the EU level regarding biofuels, low competitiveness of biofuels in terms of prices and the increasing awareness that certain biofuel production pathways may increase overall GHG emissions when emissions from indirect land use change (ILUC) are taken into account. In addition, there has been a lack of commercially available alternative, advanced biofuels. 29

There have been concerns about the sustainability of biofuels supplied in the EU, particularly with regards to their indirect impacts and potential to cause ILUC. In order to mitigate these impacts, both the RED and the FQD were amended by Directive 2015/1513/EU (the "ILUC Directive") which introduced a cap on the amount of food or feed based biofuels (7%) that can be counted towards the 2020 target for renewable energy in transport. Member States also have the option of applying this cap towards obligations to meet the FQD. The legislation introduced an indicative sub-target for ‘advanced’ biofuels that is to be set by Member States by April 2017, and increased the contribution that renewable electricity in transport makes to the RED targets.

For aviation, biofuels meeting the sustainability criteria of the RED are exempted from obligations under the EU ETS and aviation fuels can also contribute towards the FQD target. In addition, the European Advanced Biofuels Flightpath, launched in 2011 by the European Commission, aims to achieve 2 million tonnes of sustainable biofuels in aviation by 2020. 30 , 31 However, due to the current price gap with conventional jet fuel demand for sustainable alternative fuels in aviation has so far been limited and there has been no regular production of aviation alternative fuels in Europe. 32

In January 2013, the European Commission adopted the European Alternative Fuels Strategy for all modes of transport indicating action was required on alternative fuels infrastructure, common technical specifications, consumer acceptance and technological development, including advanced biofuel production. The Directive on the deployment of alternative fuels infrastructure 33 , part of the 2013 Strategy, requires Member States to submit to the Commission national policy frameworks for the market development of alternative fuels and their infrastructure by November 2016. It specifies the required coverage and the timing by which specific infrastructure in the different modes must be put in place, the development of harmonized EU-wide standards for recharging points for electric vehicles and refuelling points for natural gas (LNG, CNG) and hydrogen, and the provision of consistent and clear consumer information. The impact assessment showed that investing in a minimum recharging/refuelling network is the most efficient way to promote alternative fuel vehicles. 34 , 35 The implementation of the Directive will also be a driver for the market uptake of natural gas and biogas vehicles and vessels in the EU. The level of ambition in Member States will be crucial for the deployment of alternative fuels in the EU.

Adding new loads – such as electric vehicles – brings additional challenges to the electricity network that at certain times, and in certain segments, already operates at its limits. Efficiently integrating those new loads will only be possible if full use of flexibility is made, with charging done at high production times and during those periods when there is no network congestion. For this to happen, consumers need to have access to the technical tools to manage demand (smart meters) and have a financial incentive to shift demand. The Electricity Market Directive 38 contains provisions for Member States to analyse the costs and benefits of the roll out of smart meters, and roll out those meters to at least 80% of all consumers by 2020 if the cost-benefit analysis is positive.

In addition, the European Commission is actively pursuing greater international cooperation and the global harmonisation of the technical requirements and tests for alternative propulsion vehicles, including electric vehicles. Global standards for motor vehicles are the responsibility of the World Forum for Harmonization of Vehicle Regulations, a permanent working party (WP.29) under the United Nations Economic Commission for Europe (UNECE). The resulting rules are not only applicable in the EU but also in some 60 other countries. This reduces development costs, avoids duplication of administrative procedures, improves industry's competitiveness and increases the attractiveness of the EU market as an investment destination. Work on a new Global Technical Regulation on the safety of electric vehicles is under way and the European Commission is one of the key sponsors of this project. In addition, work in the UNECE framework is also ongoing on the environmental aspects of electrified light duty vehicles. This includes the development of a number of technical elements for inclusion in the Worldwide harmonized Light vehicles Test Procedure (WLTP), such as the determination of the electric driving range.

2.3 Efficiency of the transport system

Acknowledging that an integrated system approach is required to put the transport sector on a sustainable path, several initiatives have been designed to address the overall efficiency of the sector, support multimodal integration, and address negative externalities – including CO2 emissions.

CO2 emissions are one of the main negative externalities caused by transport along with air pollution, congestion, noise, accidents, etc. The 2011 White Paper on Transport set a roadmap for gradually internalising external costs in the sector to move towards full internalisation in all modes by 2020. In monetary terms, currently the most important measure having the effect of internalising external costs in transport is the taxation of fuel 39 , which represented around 1.4% of GDP in 2012 (about €188 billion). 40 Infrastructure charging, regulated through the "Eurovignette" Directive 41 , is another important measure in internalising transport externalities. According to the 2013 evaluation of EU road charging policies 42 , reducing air pollution has been achieved by Euro class-differentiation of network-wide tolls, more than through the use of vignette systems. However, the effect on decarbonisation has been limited so far, as tolls remain low compared to the overall costs of road transport and concern only a small portion of road traffic, and also because road transport is characterised by low price elasticity. However, according to a 2013 analysis by Ricardo-AEA improvement in the functioning of the Eurovignette and European Electronic Tolling System (EETS) system in the EU could lead to a decrease of 1.7% in CO2 emissions from the road sector in the EU.

Intelligent Transport Systems (ITS) can significantly contribute to a cleaner, safer and more efficient transport system. The ITS Action Plan 43 suggested a number of targeted measures with the goal to create the momentum necessary to speed up market penetration of ITS applications and services in Europe. A legal framework 44 was adopted to accelerate the deployment of ITS across Europe. The impact assessment for the Action Plan estimated that it could decrease fuel consumption and CO2 emissions by up to 4.1%, road congestion by 2.5% and accident costs by 7.2% compared to the baseline by 2020. 45 The 2013 mid-term evaluation showed that large scale deployment must still take place, and without it these impacts will remain limited. 46 Benefits are expected to be mainly generated from further implementation of the ITS Directive that entered into force in 2010. A number of measures adopted in this context put in place mechanisms to share real time road traffic data and travel data to reduce congestion and increase efficiency, as well as more sustainable behaviour through more accurate multimodal passengers travel information services. Better travel and traffic information would also result in modal shift from taxis to local public transport at airports and stations.

The Combined Transport Directive 47 establishes common rules for promoting combined transport 48 in an effort to curb the negative externalities of road transport, and thus contributing to reduced congestion and environmental pollution, road traffic safety, as well as better management of transport resources. According to its evaluation, it continues to be an effective tool to support modal shift. The shift from road to rail/road combined transport has saved in 2011 (compared to road only transport) 7.3 Mt of CO2, while the shift to inland waterways has saved 0.96 Mt of CO2. However, there are shortcomings in its transposition and implementation caused by somewhat ambiguous language, the diverging transposition and implementation at Member State level and outdated provisions. 49  

The Energy Efficiency Directive 50 contains several provisions of importance to energy demand reduction and management, as well as increased use of renewable electricity, including in the transport sector. A number of Member States have already envisaged actions in the transport sector (e.g. measures targeting the rail transport, promotion of modal shift and encouragement of use of public transport or cycling and walking; measures supporting the use of electric, hydrogen or more fuel-efficient cars, behaviour measures like driver training) in view of reaching their national energy efficiency targets by 2020. 51 The majority of Member States have, however, excluded transport from the application of Article 7 of the Directive which requires that energy distributors or retail energy sales companies achieve 1.5% energy savings per year through the implementation of energy efficiency measures.

Other existing EU policies and measures to meet a range of different objectives for the transport sector have important co-benefits in terms of CO2 emissions reduction. They include:

Regulations providing for the market access to the international road freight and passenger market 52 ; by optimizing transport operations they can lead to reduced fuel consumption and carbon emissions. According to research by the Dutch Institute for Transport Policy 53 , 54 , increased market access could lead to a reduction of empty trips by up to 1.9% vehicle-km and a decrease in the EU CO2 emissions of up to 1.6% (as percent of total road transport CO2 emissions).

Regulation for the establishment and organization of international Rail Freight Corridors 55 , aiming to boost rail freight in terms of volume, market share, quality and reliability; by shifting traffic from road to rail freight the Regulation was estimated to result in emissions reductions of 0.7 to 1.1 Mt CO2 by 2020 and contribute to reduction in air pollutants. 56  

The River Information Services (RIS) Directive 57 , establishing a framework for the deployment and use of harmonized RIS in the EU in order to support inland waterway transport and to facilitate interfaces with other transport modes. According to the evaluation of the RIS Directive 58 , implementation by 2011 has brought annual benefits in terms of fuel and CO2 emissions savings of 1 to 2%; due to differences in the pace of RIS implementation, the full benefits have not yet materialized.

Directive establishing the initial qualification and periodic training requirements for EU drivers of certain road vehicles for the carriage of goods or passengers 59 ; its environmental impacts come from fuel and corresponding emission savings as a result of eco-driving courses, estimated at 2 to 4% reduction in fuel use and CO2 emissions. 60  

Directive 2002/85/EC, requiring all heavy commercial vehicles to be equipped with speed limiters; the analysis showed that for the EU as a whole the introduction of speed limiters resulted in a reduction of the total CO2, NOX and PM emissions of heavy commercial vehicles of about 1% (between 0 and 2% as function of posted speed limit). 61

International cooperation is fundamental in the area of connected and automated driving. International cooperation with US and Japan on aspects related to security and harmonisation of standards is already taking place since 2009 and 2011, respectively. In addition, new rules for the approval of automated and connected vehicles as well as traffic rules are being developed in the framework of UNECE. Learning from collaboration with international partners represents a key asset for future progress; enhancing cooperation in the area of communications and spectrum, security and data protection is a must. Therefore, the C-ITS Platform recommended the Commission to enlarge cooperation on deployment practices at government level with countries like Canada, Australia, South Korea and others. 62

2.4 Cross-cutting initiatives

2.4.1 Transport research and innovation

The transition needed in the transport sector for its decarbonisation can only be achieved through extensive research and innovation. A major emphasis of the €6.4 billion transport research and innovation programme under Horizon 2020 63 is aimed at projects addressing energy use issues, both directly and indirectly. 64 In 2014, for example, 57% of budget expenditures from the Transport Challenge calls were related to climate action, representing a clear over-achievement against the overall target set for mainstreaming of climate action in Horizon 2020 by 35%.

In addition, a number of key programmes have been established for transport decarbonisation, including to support the development of light and heavy duty electric vehicles (contractual public-private partnership on European Green Vehicle Initiative) and fuel cells (Fuel Cells and Hydrogen Joint Undertaking), to promote low carbon and non-polluting transport for cities (Horizon 2020 funding for urban mobility and smart cities), to facilitate the market uptake of liquefied natural gas (LNG) for heavy duty vehicles (LNG Blue Corridors project 65 funded under the 7th Framework Programme ‘European Green car initiative’), to facilitate more efficient road use, rail innovation (Shift2Rail Joint Undertaking) and more efficient air transport (SESAR Joint Undertaking) and energy efficient aircrafts (Clean Sky 2 Joint Undertakings), with the JU's co-financed by the EU from Horizon 2020. These programmes are complemented by research and innovation activities related to key enabling technologies in the areas of new materials (e.g. lightweight materials, composites) and advanced manufacturing (e.g. additive manufacturing) contributing to development and production of new low-emission vehicles.

The SET-Plan promotes research and innovation efforts across Europe by supporting technologies with the greatest impact on the EU's transformation to a low-carbon energy system, including fuels and electricity supply to the transport sector, and a number of SET-Plan actions for research and innovation are of particular importance for promotion of electro-mobility and the use of renewable energy in transport.

2.4.2 EU financing and co-operation instruments

The Connecting Europe Facility (CEF) 66 and the European Structural and Investment Funds (ESIF) are the main EU funding instruments during 2014–2020 for development of infrastructure, providing €24.04 billion and €70 billion respectively for the transport sector.

The Trans-European Transport Network (TEN-T) policy implementation and CEF mobilize investment in Europe to boost jobs and growth, contribute to the development of a connected digital single market and to a resilient Energy Union, while supporting the decarbonisation of the transport sector. The CEF call 2014 allocated 92% of the total envelope of €13 billion of grant co-financing, to environmentally friendly modes, innovative technologies and investment on multimodality and ITS, and about 82% for rail and inland navigation investment alone. Financing is also key for the development of alternative fuels: €225 million in EU funding was allocated to projects related to alternative fuels under the CEF call 2014.

Substantial funding for the TEN-T network comes from the European Structural and Investment Funds (ESIF) and from the European Investment Bank (EIB). 67 Cohesion policy financial support is concentrated on cohesion countries and less-developed regions of the EU, where there are still significant needs for sizeable public investments into transport. It is expected that close to 20% of the overall cohesion policy envelope for 2014-2020 will go towards supporting transport investments, amounting to almost €70 billion. This includes an estimated €39 billion for supporting environmentally friendly modes, innovative technologies and investment on multimodality and ITS by Member States, of which €18.8 billion for rail. Sustainable urban mobility investments are supported with €12 billion, based on integrated urban strategies, of which €1.8 billion for walking & cycling. In addition, the transport sector will receive support, e.g. for research and innovation, technical development, and entrepreneurship, under the Smart Growth pillar of cohesion policy.

2.4.3 Support to cities and local communities

In December 2013, the European Commission adopted the Urban Mobility Package comprising of a Communication and Guidelines on Sustainable Urban Mobility Plans (SUMPs), and four Staff Working Documents on City Logistics, Access Regulation, Urban Road Safety and Urban Intelligent Transport Systems. 68 The actions/initiatives announced in the Urban Mobility Package are currently under implementation and cover various non-binding measures that would help and encourage cities in designing and implementing ambitious measures through SUMPs, in particular to increase the share of public transport, cycling and walking. Improving urban mobility has a high potential to reduce the CO2 emissions from transport, as cities account for 23% of transport CO2 emissions 69 , and especially high exceedances of air pollutants that are widespread over European urban areas. A study 70 estimated that the potential CO2 emissions reductions of 21 policy measures found in SUMPs ranges between 15 and 18 Mt of CO2 for 2030, equivalent to 7-8.8% emissions reduction compared to 2010 if all measures were implemented in the whole of the EU.

The Partnerships under the Urban Agenda for the EU will offer a framework for cities, Member States and other stakeholders to exchange experiences and best practices for the urban mobility dimension, will involve cities in the design of policies and the delivery on the ground by establishing a new working method based on a multilevel and cross sectoral multilevel approach.

Through initiatives such as the Covenant of Mayors, the European Innovation Partnership on Smart Cities and Communities, CIVITAS or Urban Innovative Actions, the Commission supports cooperation of public and private actors:

The European Innovation Partnership on Smart Cities and Communities, launched in 2012, is Europe's main initiative to foster the roll-out of innovative integrated smart city solutions at the intersection of transport, energy and ICT at large scale. So far, over 4,000 partners from public authorities, companies, research and other organisations have signed up to the joint market place.

The Covenant of Mayors was launched in 2008 by the European Commission as a bottom-up initiative to endorse and support the efforts deployed by local authorities in the implementation of sustainable energy policies; over 55% of around 3,500 signatories' Sustainable Energy Action Plans analysed in 2015 included measures on transport 71 , 72 , mainstreaming sustainable mobility into local authorities' strategic planning.

The CIVITAS Initiative, launched in 2002, supports cities in testing new technologies and innovative concepts for better and more sustainable urban transport and for incorporating them into integrated and sustainable local transport strategies. So far more than 800 urban mobility measures have been implemented in 60 cities. The CIVITAS Forum network has today more than 250 cities.

The Urban Innovative Actions (UIA) initiative has been created to test new approaches to address the challenges faced by urban authorities. The second call will be launched in autumn 2016 and one of the topics supported is sustainable urban mobility.

2.5 Action in international aviation and maritime

2.5.1 International developments

Aviation is one of the fastest-growing sources of GHG emissions. Direct emissions from aviation account for about 3% of the EU’s total GHG emissions and more than 2% of global GHG emissions. If the non-CO2 climate impacts of aviation are taken into account (e.g. contrails and cirrus cloud formation), the total climate impact of aviation is even larger. The large majority of these emissions come from international flights. The International Civil Aviation Organization (ICAO) projects that CO2 emissions could grow by 300-700% by 2050 in a business as usual scenario.

The EU has addressed aviation CO2 emissions through the EU ETS since 2012, while it is, at the same time, committed to develop a global measure to address international aviation emissions at ICAO. In the 38th General Assembly in 2013, ICAO member states agreed to work towards the achievement of the collective goal of keeping net CO2 emissions from international aviation at 2020 levels, and to develop a global market-based measure (GMBM) to be part of the ‘basket’ of measures to achieve this goal. In February 2016, ICAO's Committee on Aviation Environmental Protection (CAEP) agreed on a CO2 standard for aircraft, which should guide their development towards greater fuel efficiency. For large new aircraft the standard will apply as of 2020. Existing aircraft will have to apply the new standards by 2028 at the latest.

International maritime shipping is a large and growing source of GHG emissions and is not covered by the EU's emissions reduction target. International maritime transport accounts for about 2.1% of global GHG emissions and a further increase in the range of 50 to 250% by 2050 (1.1 to 3.4% per year) is projected in a business as usual scenario. 82 Significant reduction (25–75%) of these emissions is technically feasible even with today's technologies, and is to a large extent cost effective due to reduced fuel bills. 83

Due to the nature of shipping, international shipping emissions are best addressed at the global level and the EU is supportive of the IMO’s work in this area. In 2011 IMO adopted the Energy Efficiency Design Index (EEDI), which sets compulsory energy efficiency standards for new ships, and the Ship Energy Efficiency Management Plan (SEEMP), a management tool for ship owners. These measures are expected to substantially dampen expected further emissions growth albeit not reducing emissions from today's levels. 84 Therefore, further measures are needed to reduce emissions from international shipping. It is expected that this year the IMO will adopt a mandatory international data collection system allowing access to fuel consumption and GHG emissions from ships. Also, the IMO will discuss this year the possible revision of the EEDI requirements and a work plan for establishing a GHG emissions reduction target for international shipping, to contribute towards the objective of the Paris Climate Agreement.

2.5.2 EU level action in international aviation and maritime

Aviation in the  EU ETS . Since the start of 2012, emissions from all flights from, to and within the European Economic Area (EEA) - the 28 EU Member States, plus Iceland, Liechtenstein and Norway - have been included in the EU Emissions Trading System (EU ETS). 85 These emissions form part of the EU's internal 20% and 40% greenhouse gas (GHG) emission reduction targets for 2020 and 2030 respectively. In view of the implementation by 2020 of an international agreement applying a single global market-based measure to international aviation emissions, the EU ETS’s application has been restricted to intra-EEA flights until 2016. 86 , 87  

The EU ETS is being implemented in its current intra-EEA scope in a satisfactory manner. Verified CO2 emissions from ETS aviation activities between airports amounted to 56.9 million tonnes of CO2 in 2015. Taking into account an annual allocation close to 39 million allowances, it can be concluded that the EU ETS contributes to more than 17 million tonnes of emission reductions annually, partly within the sector (i.e. by airlines reducing their emissions to avoid paying for additional units) or in other sectors (by airlines purchasing units from other sectors, which would accordingly have to reduce their emissions). Compliance rates are very high. Aircraft operators, including from third countries, representing more than 99% of the emissions covered by the EU ETS adequately report emissions and surrender the corresponding allowances.

Monitoring, reporting and verification (MRV) of shipping emissions. The European Commission adopted in 2013 a staged strategy for progressively including GHG emissions from maritime transport in the EU's policy for reducing its overall GHG emissions. 88 As a first step, the European Union adopted in 2015 a Regulation establishing an EU-wide system for the monitoring, reporting and verification of CO2 emissions and other relevant information from EU-related maritime transport activities (MRV Regulation). 89 Robust MRV is the basis for designing and implementing any measure reducing GHG emissions of ships and facilitates results-based monitoring of progress. It contributes to the removal of market barriers to cost-effective mitigation measures by providing comparable and reliable information on energy efficiency.

This MRV system will be applied from 2018 covering all voyages from and to EU ports by ships covered by the technical scope of the MRV Regulation and regardless of their flag. Annual data of emissions and ships' efficiency will be verified by independent verifiers before they are submitted to the Commission and subsequently published. MRV alone is expected to reduce emissions by 2% compared to business as usual. 90 As highlighted in the 2013 strategy, a mandatory international scheme to collect data regarding the fuel consumption and energy efficiency of the shipping sector would be preferable; the Commission will review the MRV Regulation after the expected adoption of the global scheme by IMO in 2016 for which technical rules still need to be developed and for which reporting is expected to start in 2019.

2.6 Taxation

The Energy Taxation Directive 91 (ETD) stipulates minimum rates for excise duties for unleaded petrol of €359 per 1000 litres and €330 per 1000 litres for diesel (gasoil) used in transport. Excise duty rates differ between Member States. For petrol, they range from just over the minimum to €766 per 1000 litres in the Netherlands. For diesel actual rates are generally lower and closer to the minimum, the highest rate reaching €674 in the United Kingdom.

In 2011, the European Commission proposed a revision of the Energy Taxation Directive 92 , which distinguished a CO2-related component and an energy-related component in the excise duty. Applying this principle would have implied a minimum rate on diesel of €390 if the minimum rate on petrol would have been €359 per 1000 litres.

The analysis accompanying the Commission proposal showed that CO2-based taxation drives consumption away from fossil energy sources. As far as the motor fuel market is concerned, detailed modelling confirmed that removing the price advantage for diesel both in the EU minima and in national rates would have a rebalancing effect on the supply and demand on the fuel market.

Currently all EU Member States, except the UK, tax diesel at lower rates than petrol per litre. Taking into account that the energy and carbon content of a litre of diesel is higher than of a litre of petrol, all countries analysed tax petrol higher than diesel per unit of energy or carbon emissions.

From decarbonisation of transport perspective, the lower tax rate on diesel fuel is not justified, given the relative environmental costs associated with the use of diesel and petrol. Diesel has higher emissions of carbon and of harmful air pollutants, notably particulate matter and NOx, per litre of fuel used. Hence, from a decarbonisation of transport perspective, the level of tax needed to reflect these environmental costs should be higher for a litre of diesel than for a litre of petrol.

A proposal on passenger car taxation aimed to improve the functioning of the internal market by removing existing tax obstacles to the transfer of passenger cars from one Member State to another.  93 It also aimed to promote sustainability by restructuring the tax base of both registration taxes and annual circulation taxes, as well as by including elements directly related to carbon dioxide emissions of passenger cars. It would not have harmonized tax rates or obliged Member States to introduce new taxes, but only included an EU structure on car taxes.

The negotiations showed that the proposed abolition of the registration tax was too ambitious, as it represents a non-negligible source of revenues for the Member States. However, the incorporation of an adequate environmental element (e.g. CO2, air pollutants) in the registration and circulation taxes could be a possible option for unanimous support, as 24 Member States have already introduced such element (i.e. CO2 emissions, exhaust emissions, Euro standards, fuel consumption) into their national tax systems.

The European Commission has decided to withdraw 94 the proposal to revise the Energy Taxation Directive as well as the proposal for a Directive on passenger car related taxes. In the case of the Energy Taxation Directive, the draft compromise text was de facto void of all constituting elements of the original Commission proposal. There was no agreement in the Council even on the draft compromise text. For the directive on passenger car related taxes, no agreement was reached in the Council.

Favourable tax treatment of company cars creates significant losses of revenues but also significant social and environmental costs such as increased contributions to climate change, local air pollution, traffic congestion and road accidents. Advantageous company car taxation schemes tend to affect the choice of mode and driving habits. They also risk counteracting the incentives provided by energy and vehicle taxes (registration and circulation taxes) to reduce fuel consumption. 95 A recent OECD Study 96 and OECD Brief 97 show that under-taxing company cars encourages company car owners to drive up to three times as much as people with private cars, with all consequences this may have for environment. A number of Member States subsidise the private use of company cars, in most cases by not differentiating between the use of a company car for business and private purposes. Concretely, eleven Member States have been identified as having poor performance in the design of their company cars taxation. 98 Moreover, a small number of Member States 99 allow partial deduction of the VAT charged on the purchase of company cars intended for private use by employees.

3. Developments under current trends and policies

3.1 Identifying the GHG emissions gap for transport

Building on the 2008 Climate and Energy package and in line with the cost-effective pathway described in the 2050 roadmaps 100 , in 2014 the European Council endorsed a binding EU target of an at least 40% domestic reduction in GHG emissions by 2030 compared to 1990. This target will be delivered collectively by the EU in the most cost-effective manner possible, with the reductions in the ETS and non-ETS sectors amounting to 43% and 30% by 2030 respectively compared to 2005. An EU target of at least 27% was agreed for the share of renewable energy consumed in the EU in 2030; this target is binding at EU level. An indicative target at the EU level of at least 27% was agreed for improving energy efficiency in 2030 compared to projections of future energy consumption based on a 2007 baseline. This will be reviewed by 2020, having in mind an EU level of 30%.

The reduction effort for the non-ETS sectors (transport, buildings, agriculture and waste management) is distributed between Member States through the Effort Sharing Regulation for the period 2021 to 2030. Transport needs to contribute to the 2030 targets and, in particular, to the 30% emissions reduction effort set for the non-ETS sectors.

The Commission has undertaken analysis exploring the impact of current trends, including the implementation of policies that were adopted at EU and Member State level by December 2014, in the so-called ‘EU Reference scenario 2016’. 101 The projection shows that the declining trend in transport emissions is expected to continue, leading to 12% lower emissions in 2030 than in 2005.

Building on the EU Reference scenario 2016, two additional central scenarios (so-called ‘EUCO27’ and ‘EUCO30’) have been developed to reach all the 2030 targets agreed by the October 2014 European Council (see section 4) and the 2050 decarbonisation objectives, continuing and intensifying the current policy mix. The difference between the two scenarios lies in the level of ambition to be achieved for the energy efficiency goal (27% or 30% primary energy savings in 2030 compared to the 2007 baseline). These polices have been modelled in a stylised manner (see section 4). 102 The central scenarios show emissions reductions of: 18-19% for transport, 38-43% for residential and tertiary (mainly buildings), 35-37% for industry and 29%-35% for non-CO2 sectors (mainly agriculture and waste) by 2030 relative to 2005. For transport, the emissions reductions are in line with the 2011 White Paper which established a goal of 20% by 2030 relative to 2008 levels (equivalent to 19% emissions reduction compared to 2005).

No sectoral target has been established for the transport sector. However, comparing developments under current trends and adopted policies (i.e. the EU Reference scenario 2016, achieving 12% emissions reduction in transport) with the central scenarios (18-19%), shows that additional policies could be needed, especially post-2020, in order to close the gap of 6-7 percentage points and provide a cost-effective transport contribution to the 2030 Climate and Energy policy framework (taking into account all targets agreed for 2030 and existing policy mix). Action would be needed on three key levers: low- and zero-emission vehicles, low emission alternative energy for transport, and efficiency of the transport system. However, if lower emissions reductions than currently set out in the two scenarios reflecting the EU’s 2030 targets (EUCO27 and EUCO30) were to take place in other non-ETS sectors (e.g. buildings, agriculture, small industry and waste), even higher emissions cuts will be required in the transport sector to reach the 30% emissions reduction effort set for the non-ETS sectors.

The expected gap shows that current transport policies need to be reinforced to ensure the achievement of the EU’s 2030 targets. The European Council recognised the need to reduce GHG emissions from transport and risks related to fossil fuel dependency, and therefore invited the Commission to further examine instruments and measures for a comprehensive and technology neutral approach for the promotion of emissions reduction and energy efficiency in transport, for electric transportation and for renewable energy sources in transport also after 2020. The European Council also recalled that a Member State can opt to include the transport sector within the framework of the ETS.

While reducing its energy use and GHG emissions, transport also needs to continue to meet society's needs, and reduce its other negative impacts. The analysis in section 4 shows that curbing GHG emissions from transport reduces the EU's dependence on fossil fuels and brings clear co-benefits leading to reductions of costs related to air pollution, accidents, congestion and noise pollution. While not demonstrated by modelling, it is clear that such developments result in more liveable cities, improve quality of life and contribute to maintaining the competiveness of EU industry.

The remaining part of section 3 provides more detail on the key assumptions and main results of the Reference scenario 2016. The two scenarios additionally developed to reach all the 2030 targets agreed by the October 2014 European Council (EUCO27 and EUCO30) are described further in section 4.

3.2 Key assumptions of the Reference Scenario

The Reference scenario is a projection, not a forecast; it has been developed building on a modelling framework including PRIMES (i.e. PRIMES-TREMOVE model for transport), GEM-E3, GAINS and other related models, and benefited from the comments of Member States experts. 103 The projections build on a set of assumptions related to population growth, macroeconomic and oil price developments, technology improvements, and policies described below. 104

Demographic change is transforming the EU with inevitable consequences for the transport sector. In the Reference scenario, the population projections draw on the EUROPOP2013 (EUROpean POPulation Projections 2013) from Eurostat, which is also the basis for the 2015 Ageing Report. 105 The key drivers for demographic change are: higher life expectancy, convergence in the fertility rates across Member States in the long term, and inward migration. The EU28 population is expected to grow by around 0.2% per year during 2010-2030 (0.1% for 2010-2050), to 516 million in 2030 (522 million by 2050). Elderly people, aged 65 or more, would account for 24% of the total population by 2030 (28% by 2050) as opposed to 18% today.

GDP projections mirror the joint work of DG ECFIN and the Economic Policy Committee, presented in the 2015 Ageing Report. The average EU GDP growth rate is projected to remain relatively low in the short to medium term at 1.2% per year for 2010-2020, down from 1.9% per year during 1995-2010. In the medium to long term the higher expected growth rates (1.4% per year for 2020-2030 and 1.5% per year for 2030-2050) are taking account of the catching up potential of countries with relatively low GDP per capita, assuming convergence to a total factor productivity growth rate of 1%.

Oil prices have fallen by more than 60 percent since mid-2014, to an average of around 40 $/barrel for Brent crude oil in the first four months of 2016. 106 The collapse of oil price has been driven by low demand and sustained oversupply, due in particular to tight oil from North America and to the decision of the Organization of Petroleum Exporting Countries (OPEC) countries not to cut their output to rebalance the market. The Reference scenario assumes a gradual adjustment process with reduced investments in upstream productive capacities by non-OPEC countries. Quota discipline is assumed to gradually improve among OPEC members. Thus, oil price is projected to reach 87 $/barrel in 2020 (in year 2013-prices). Beyond 2020, as a result of persistent demand growth in non-OECD countries driven by economic activity and the increased ownership of passenger cars, oil price would rise to 113 $/barrel by 2030 and 130 $/barrel by 2050. 107 , 108

In terms of technological developments, battery costs for electric vehicles and plug-in hybrids are assumed to go down to 320-360 $/kWh by 2030 and 270-295 $/kWh by 2050 109 ; further improvements in the efficiency of both spark ignition gasoline and compression ignition diesel are assumed to take place. In addition, the market share of internal combustion engine (ICE) electric hybrids is expected to increase due to their lower fuel consumption compared to conventional ICE vehicles.

The key policies included in the Reference scenario 2016 that are relevant for transport decarbonisation are:

–The Renewable Energy Directive (Directive 2009/28/EC) and Fuel Quality Directive ( Directive 2009/30/EC ) including ILUC amendment (Directive 2015/1513/EU): achievement of the renewables legally binding transport target for 2020, taking into account the cap on the amount of food or feed based biofuels (7%).

–The EU Emissions Trading System (Directive 2003/87/EC and its amendments) is fully reflected in the modelling, including the linear reduction factor of 1.74% for stationary installations and the recently adopted Market Stability Reserve.

–The Effort Sharing Decision (Decision No 406/2009/EC) including achievement of the legally binding 2020 targets for non-ETS emissions at aggregated EU level.

–Implementation of the Energy Efficiency Directive (Directive 2001/27/EU).

–CO2 standards for cars and vans regulations ( Regulation (EC) No 443/2009 , amended by Regulation (EU) No 333/2014 and Regulation (EU) No 510/2011, amended by Regulation (EU) No 253/2014); CO2 standards for cars are assumed to be 95gCO2/km as of 2021 and for vans 147gCO2/km as of 2020 in line with current legislation. Standards are assumed constant after 2020/2021.

–The Directive on the deployment of alternative fuels infrastructure ( Directive 2009/30/EC ).

–The Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) for maritime transport. 110

–Relevant national policies for instance on fuel and vehicle taxation.

3.3 Reference Scenario main results

EU transport activity is expected to continue growing under current trends and adopted policies, albeit at a slower pace than in the past. Freight transport activity for inland modes is projected to increase by 35% between 2010 and 2030 (1.5% per year) and 58% for 2010-2050 (1.2% per year). Passenger traffic growth would be slightly lower than for freight at 22% by 2030 (1% per year) and 40% by 2050 (0.9% per year). The annual growth rates by mode, for passenger and freight transport, are provided in Figure 1 . 111

Road transport would maintain its dominant role within the EU. The share of road transport in inland freight is expected to remain relatively stable by 2030 at 71% and only slightly decrease to 70% by 2050. For passenger transport, road modal share is projected to decrease by 4 percentage points by 2030 and by additional 3 percentage points by 2050. Passenger cars would still contribute 70% of passenger traffic by 2030 and about two thirds by 2050, despite growing at lower pace relative to other modes due to slowdown in car ownership increase which is close to saturation levels in many EU15 Member States.

Figure 1: Passenger and freight transport projections (average growth rate per year)

Source: EU Reference scenario 2016, PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: For aviation, domestic and international intra-EU activity is reported, to maintain the comparability with reported statistics.

Rail transport activity is projected to grow significantly faster than for road, driven in particular by the effective implementation of the TEN-T guidelines, supported by the CEF funding, leading to the completion of the TEN-T core network by 2030 and of the comprehensive network by 2050. Passenger rail activity goes up by 39% between 2010 and 2030 (76% for 2010-2050), increasing its modal share by 1 percentage point by 2030 and an additional percentage point by 2050. Rail freight activity grows by 47% by 2030 and 84% during 2010-2050, resulting in similar increases in modal share as for passenger rail.

Domestic and international intra-EU air transport would grow significantly (by 59% by 2030 and 118% by 2050) and increase its share in overall transport demand (by 3 percentage points by 2030 and by additional 2 percentage points by 2050). Overall, aviation activity including international extra-EU flights is projected to go up by 61% by 2030 and 125% by 2050, saturating European skies and airports.

Transport activity of freight inland navigation 112 also benefits from the completion of the TEN-T core and comprehensive network and the recovery in the economic activity and would grow by 22% by 2030 (1% per year) and by 39% during 2010-2050 (0.8% per year).

International maritime transport activity is projected to continue growing strongly with rising demand for oil, coal, steel and other primary resources – which would be more distantly sourced – increasing by 37% by 2030 and by 71% during 2010-2050.

Transport accounts today for about one third of final energy consumption. In the context of growing activity, energy use in transport is projected to decrease by 5% between 2010 and 2030 and to slightly increase post-2030, resulting in levels of energy demand by 2050 similar to those observed in 2010 (see Figure 2 ). These developments are mainly driven by the implementation of the Regulations setting emission performance standards for new passenger cars and vans. LDVs are currently responsible for around 60% of total energy demand in transport but this share is projected to significantly decline over time, to 53% by 2030 and 51% by 2050. Heavy goods vehicles and aviation are projected to increase their share in final energy demand from 2010 onwards, continuing the historic trend from 1995. Energy demand by heavy goods vehicles would grow by 15% between 2010 and 2030 (24% for 2010-2050).

Bunker fuels for air and maritime transport are projected to increase significantly: by 17% by 2030 (33% for 2010-2050) and 24% by 2030 (42% for 2010-2050), respectively.

Figure 2: Evolution of total final energy consumption and GHG emissions between 1995 and 2050

Source: EU Reference scenario 2016, PRIMES model (ICCS-E3MLab)

Electricity use in transport is expected to increase steadily as a result of further rail electrification and the uptake of alternative powertrains in road transport; its share increases from 1% currently to 2% in 2030 and 4% in 2050. Battery electric and plug-in hybrid electric vehicles are expected to see faster growth beyond 2020, in particular in the segment of LDVs, driven by EU and national policies offering various incentives. The share of battery electric and plug-in hybrid electric vehicles in the total stock of LDVs would reach about 5% by 2030 and 12% by 2050. The uptake of hydrogen would be facilitated by the increased availability of refuelling infrastructure, but its use would remain limited in lack of policies adopted beyond the end of 2014. Fuel cells would represent about 2% of the light duty vehicle stock by 2050.

LNG becomes a candidate energy carrier for road freight and waterborne transport, especially in the medium to long term, driven by the implementation of the Directive on the deployment of alternative fuels infrastructure and the revised TEN-T guidelines which represent important drivers for the higher penetration of alternative fuels in the transport mix. In the Reference scenario, the share of LNG is projected to go up to 3% by 2030 (8% by 2050) for road freight and 4% by 2030 (7% by 2050) for inland navigation. LNG would provide about 4% of maritime bunker fuels by 2030 and 10% by 2050 – especially in the segment of short sea shipping.

Biofuels uptake is driven by the legally binding target of 10% renewable energy in transport (Renewables Directive), as amended by the ILUC Directive, and by the requirement for fuel suppliers to reduce the GHG intensity of road transport fuel by 6% (Fuel Quality Directive). Beyond 2020, biofuel levels in EU28 remain relatively stable at around 6%. Renewable energy in transport would represent about 11% in 2020, increasing to 14% by 2030 (21% by 2050). 113

In the Reference scenario, oil products would still represent about 90% of the EU transport sector needs in 2030 and 86% in 2050, despite the renewables policies and the deployment of alternative fuels infrastructure which support some substitution effects towards biofuels, electricity, hydrogen and natural gas (see Figure 3 ).

Figure 3: Evolution of final energy use in transport by type of fuel

Source: EU Reference scenario 2016, PRIMES-TREMOVE transport model (ICCS-E3MLab)

The declining trend in transport emissions is expected to continue, leading to 12% lower emissions by 2030 compared to 2005, and 11% by 2050. 114 However, relative to 1990 levels, emissions would still be 13% higher by 2030 and 15% by 2050, owing to the fast rise in the transport emissions during the 1990s. The share of transport in total GHG emissions would continue increasing, going up from 23% currently (excluding international maritime) to 25% in 2030 and 32% in 2050, following a relatively lower decline of emissions from transport compared to power generation and other sectors (see Figure 2 ). Aviation would contribute an increasing share of transport emissions over time, increasing from 14% today to about 18% in 2030 and 20% in 2050. Maritime bunker fuel emissions are also projected to grow strongly, increasing by 22% during 2010-2030 (38% for 2010-2050).

The overall trend in transport emissions is determined by three broad components: transport activity levels (expressed in passenger or tonne-kilometres), the energy intensity of transport (defined as energy consumption per passenger or tonne-kilometre) and the carbon intensity of the energy used (given by the CO2 emissions divided by energy consumption). Following this approach, it has been evaluated how much the projected transport emissions will increase/decrease (in percentage terms or Mt of CO2) between 2005 and 2030 due to transport activity growth, improvements in energy intensity and carbon intensity (see Figure 4 ). 115 , 116

Overall, CO2 emissions from passenger transport decrease by 16% (127 Mt of CO2) between 2005 and 2030 in the Reference scenario. The 16% decrease in CO2 emissions from passenger transport is due to transport activity growth (+24%, equivalent to 198 Mt of CO2), improvements in energy intensity (-35%, equivalent to 281 Mt of CO2) and in carbon intensity (-5%, equivalent to 44 Mt of CO2). The trend for the three components and their contribution to emissions is different by transport mode. Efficiency gains play a decisive role in reducing emissions in road transport, while in aviation they would not offset the activity growth leading to higher fuel use and emissions. The use of less CO2 intensive fuels contributes to a reduction of emissions for road and rail passenger transport with no effect on aviation by 2030.

For freight transport, the 2% (5 Mt of CO2) decrease in CO2 emissions between 2005 and 2030 is the result of transport activity growth (+27%, equivalent to 73 Mt of CO2), improvements in energy intensity (-21%, equivalent to 56 Mt of CO2) and in carbon intensity (-8%, equivalent to 22 Mt of CO2). The efficiency gains and the uptake of alternative fuels for road freight transport are just sufficient to offset the effects of activity growth. The electrification in rail has positive effects on emissions, despite the growth in traffic volumes. For inland navigation, efficiency gains and to some lower extent the uptake of LNG has significant positive effects on emissions reduction.

Figure 4: Decomposition of CO2 emissions in the Reference scenario (2005-2030)

Source: EC elaboration based on the EU Reference scenario 2016, PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: The figures report the changes in CO2 emissions due to the three broad components (transport activity levels, energy intensity of transport and carbon intensity of the energy used) in two ways: in levels and in relative terms compared to 2005. The size of each column bar, read on the left axis, represents the change in terms of CO2 emissions compared to 2005, expressed in Mt of CO2. The percentage changes reported above the column bars represent relative changes in these emissions compared to their respective 2005 levels. Provided that CO2 levels for 2005 corresponding to each transport mode are not comparable in size, the percentage changes reported in the figures are not directly comparable. The figures above include only tank to wheel emissions.

NOx emissions would drop by about 56% by 2030 (63% by 2050). The decline in particulate matter (PM2.5) would be less pronounced by 2030 at 51% (64% by 2050). Overall, external costs related to air pollutants would decrease by about 56% by 2030 (65% by 2050). 117  

Congestion costs are projected to increase by about 24% by 2030 and 42% by 2050, relative to 2010. Congestion on the inter-urban network would be the result of growing freight transport activity along specific corridors, in particular where these corridors cross urban areas with heavy local traffic. Noise related external costs of transport would continue to increase, by about 18% during 2010-2030 (26% for 2010-2050), driven by the rise in traffic. Thanks to policies in place, external costs of accidents are projected to go down by about 47% by 2030 (-44% for 2010-2050) – but still remain high at €100 billion in 2050. Overall, external costs 118 are projected to decrease by about 10% by 2030 and to increase post-2030; by 2050 they stabilise around levels observed in 2010.

4. Pathways towards low-emission mobility

In line with scientific findings reported by the International Panel on Climate Change (IPCC) in its fourth Assessment Report, the European Council stated in 2009 that the EU's objective, in the context of necessary reductions by developed countries as a group, is to reduce GHG emissions by 80-95% in 2050 compared to 1990. Such a reduction would be in line with the international objective to limit climate change to below two degrees.

The 2011 Transport White Paper 119 concluded that, while deeper cuts can be achieved in other sectors of the economy, a reduction of at least 60% of GHGs by 2050 with respect to 1990 is required from the transport sector, including aviation. For maritime transport, the 2011 White Paper established the objective to reduce CO2 emission from maritime bunker fuels by 40% (50% if feasible) by 2050 compared to 2005 levels. 120 In the White Paper, electrification was considered a strong driver for reductions of GHG emissions in the road transport sector to 2050. In the scenarios modelled, electrification was shown to significantly replace fossil fuels in new passenger cars and vans (collectively light duty vehicles (LDVs)). However, low emission alternative fuels (including advanced renewable fuels and sustainable biofuels) would remain necessary for aviation, heavy duty vehicles and shipping. Thus, the White Paper set the goal of halving the use of conventionally-fuelled cars in urban transport by 2030, phasing them out in cities by 2050 and achieving essentially CO2-free city logistics in major urban centres by 2030. For aviation, the objective is for the share of low-carbon sustainable fuels to reach 40% by 2050.

Section 3 showed that under current trends and adopted policies, the declining trend in emissions from transport is expected to continue until 2030 (12% reduction for 2005-2030) but greater efforts may be needed after 2020 to deliver the 2030 Climate and Energy policy framework, and reach the White Paper's 60% GHG goal for 2050. This section first identifies measures that could contribute to low-emission mobility and then sets out several stylised pathways/scenarios.

The modelling framework used for assessing these pathways/scenarios is described in Annex IV. The central model used for the analysis of the transport system is the PRIMES-TREMOVE Transport Model, developed and maintained by E3MLab/ICCS of National Technical University of Athens, complemented where relevant by other models (e.g. PRIMES energy system model, PRIMES biomass model).

4.1 Policy measures

The most important transport policies for low-emission mobility are briefly discussed below, according to three main pillars: moving towards zero-emission vehicles; low emission alternative energy for transport; efficiency of the transport system. 121 They are supported by other cross-cutting initiatives in the area of research and innovation, financing, and also by initiatives covering the urban dimension.

4.1.1 Moving towards zero-emission vehicles

Strong action on vehicle efficiency, accompanied by appropriate policies to support innovation, the deployment of recharging/refuelling infrastructure and alternative fuels and powertrains, are a prerequisite for the decarbonisation of the transport system. As acknowledged by the 2011 White Paper, this provides a very effective way of reducing costs and advancing the introduction of new technologies. Consequently, the stylised scenarios explore the impacts of potential future policies acting on this driver.

Tightening CO2 emission standards for passenger cars and light commercial vehicles beyond 2020 would be needed so that road transport contributes to the agreed 2030 climate targets and the longer term decarbonisation objectives. The effectiveness of the legislation is dependent on the establishment of CO2 values during type approval tests. As stated in section 2, it has become clear that there are weaknesses in the type-approval procedures underpinning the CO2 emission standards. They are being addressed by the Worldwide harmonized Light vehicles Test Procedure (WLTP) that is in the process of being put in place at EU level, as explained in the box below.

Further work is being carried out to ensure the continued relevance and accuracy of the EU's vehicle emissions testing regime. This includes further work on the WLTP (Phases 2 and 3), which should cover the remainder of emission-related light duty vehicle testing, such as evaporative emissions. In addition, the Commission introduced a Real Driving Emissions (RDE) procedure to measure the NOx emissions of light duty diesel vehicles in real driving conditions. This new procedure utilises portable emissions measurement systems (PEMS) and may be further developed and refined. In parallel, in order to accelerate the positive effects on urban air pollution hotspots of the introduction of RDE tests, a voluntary mechanism to identify vehicles with significantly lower air quality related pollutant emissions, including NOx, may also be explored. In addition to providing consumers with more accurate information on cars' NOx emissions, such a mechanism would also support manufacturers who already supply cleaner vehicles.

With a view to accelerating the technological shift needed to achieve an ambitious long-term reduction in road transport emissions, zero- and low-emission vehicles may need to be deployed and gain significant market share by 2030. Options to incentivise them may also need to be considered, so to give a clear policy signal to industry to make the next step and to reinforce investment in alternative powertrain technology. 123  

As a complementary demand-side measure, it needs to be considered how car labelling can be improved to better support consumers in their choice of more fuel-efficient and low emitting cars.

Regarding powertrain technology, accelerating the development and deployment of more efficient hybrid powertrains to reduce the fuel consumption of light duty vehicles without creating negative effects in terms of air pollutant emissions, also needs to be considered.

With respect to heavy duty vehicles, the development of the VECTO simulation tool and the implementation of the certification procedure using the VECTO output, briefly described in section 2, will support the envisaged Commission legislative proposal which would require fuel consumption and CO2 emissions from new HDVs to be reported and monitored. This is expected to close the existing "knowledge gap" on HDV emissions that prevents more ambitious actions to reduce them. This could contribute to a more transparent and competitive market and the adoption of the most energy-efficient technologies. Setting up an accurate and reliable monitoring and reporting system could provide fuel consumption and CO2 emissions data from new vehicles to underpin possible future legislation. In the meantime, preparatory work towards possible EU CO2 standards for HDVs has already started.

Public procurement has the potential to act as a catalyst for industrial and business innovation, and green growth. Adjusting the scope and methodology of vehicle procurement rules and guidance to emphasise CO2 and pollutant emissions could provide effective incentives for the procurement of cleaner vehicles. It would lead to increased demand i.e. a bigger domestic market that would result in falling prices for consumers due to economies of scale and would contribute to the worldwide competitiveness of the European industry. Cohesion policy could also support replacement and renewal of rolling stock and vehicles, primarily for collective transport modes (e.g. urban bus fleet, trams).

4.1.2 Switching towards low emission alternative energy for transport

Stronger integration of transport with the energy system and progressive change of the transport fuel mix is essential for low-transport mobility; consequently, the stylised scenarios explore the impacts of potential future policies acting on this driver. The Energy Union strategy 124 acknowledged the need for: fostering the market uptake of alternatively fuelled vehicles/vessels and the deployment of related recharging/refuelling infrastructure; promoting electrification, especially of road and rail transport - making the EU a leader in electro-mobility technologies, as well as the importance of integration within urban mobility policies and the electricity grid.

ICT is also needed to support integration of transport with the energy system. To reap the potentials of digitalisation, setting the right standards, ensure interoperability and enable data exchange while at the same time addressing privacy and cyber-security issues, would be necessary.

Modelling shows that transport will need to contribute appropriately to achieving the targets within the 2030 Climate and Energy policy framework (see section 3). In addition to the requirement for an at least 40% domestic reduction in GHG emissions by 2030 compared to 1990, transport will need to contribute to the mandatory EU wide target of at least 27% renewable energy in 2030. Taking into account the constraints linked to food-based biofuels, innovation and support for the introduction of advanced renewable fuels into the EU market may be necessary.

The development of European Standards is an important element in the creation and expansion of the European market for biofuels. Standardisation work is ongoing within the European Committee of Standardisation (CEN) on E10+ petrol blend, high ethanol blend (E85), biomethane and recently work started on algal biofuels. CEN recently approved a standard for paraffinic diesel fuel and blends and B20-30 for use in captive fleets. Research work is ongoing on E20-25 and on using gasoline in diesel engines under the auspices of CEN.

Action to implement existing policies would also need to be taken. This includes the European Alternative Fuels Strategy, which adresses not only decarbonisation and air quality objectives but also security of energy supply and the competiveness of EU industry; it covers all modes of transport and aims at establishing a long-term policy framework to guide technological development and investments in the deployment of alternative fuels, and give confidence to consumers. Specific measures to implement the four priority fields of EU action of the strategy: 1) addressing the technological development, including advanced biofuels production; 2) addressing alternative fuels infrastructure and its integration to the energy system; 3) developing common technical specifications; 4) addressing consumer awareness, acceptance and market uptake, are presented in more detail in Annex III. 125 For example, a methodology of price comparison of electricity and other conventional and alternative fuels may be developed by the European Commission, and a platform could promote the use of this methodology in Members States. 126 The Commission set up an Alternative Fuels Observatory (EAFO) as the reference website for user information. In 2015, the Commission gave a mandate (M533) to CEN and European Committee for Electrotechnical Standardisation (CENELEC) to adopt European standards for alternative fuels infrastructure as set out in the Directive on the deployment of alternative fuels infrastructure. 127 In addition, the Project Committee on fuel labelling CEN/TC 441 has started its work on fuel labelling for all fuels and its final adoption is expected by the end of this year. Work on the well to wheel analysis is undertaken by JRC in cooperation with EUCAR and CONCAWE. 128

The promotion of alternative fuels could also be pursued in urban areas, inter alia by integrating alternative fuels in Sustainable Urban Mobility Plans, using: access regulations (including planned and future air quality low emission zones) - as a mean of promoting alternatively fuelled vehicles in urban centres, developing a CO2 emissions and air pollutants methodology and targets to assess the deployment of alternative fuels in public transport within urban areas, support to cities through Horizon 2020 and Connecting Europe Facility.

The efficient integration of electric vehicles into the electricity system is a major challenge for grid stability and can only be managed successfully if charging can be shifted to times of low electricity demand and/or high supply. The electricity market design initiative (MDI) aims at enabling and rewarding consumers to manage their consumption (demand response) and hence – among others – allow for smart charging. This requires access to relevant technologies (smart meters) as well as competitive retail markets. The initiative may also reduce barriers to the self-generation and consumption of renewable electricity. This would facilitate consumers' ability to use electricity generated from their own solar panels for charging vehicles. Within the MDI also new provisions for storage may be envisaged, that aim at incentivising the use of batteries (including electric vehicles batteries) in the electricity system.

In the longer term, refuelling infrastructure for hydrogen and renewable fuels of non-biological origin (e.g. methane, methanol and ethanol) could provide an additional source of flexibility to the electricity grid. The refuelling stations would be able to store the energy in form of gas or liquids and absorb excess variable renewables generation, while providing refuelling capacity without adding load to the electricity grid during periods of low renewables generation. These fuels could also be used to generate electricity at times of peak pricing.

Measures for further rollout of recharging infrastructure, to support the electrification of transport would also be needed. Consideration may need to be given to facilitating the installation of additional vehicle charging infrastructure when constructing new buildings, as part of the review of the Energy Performance of Building Directive. In addition, facilitating access to existing sockets in private and public buildings is an extremely effective action at zero additional cost that could also be encouraged. Furthermore, it is crucial that these recharging points are interoperable, i.e. that users are able to find, charge and pay without barriers wherever in the EU.

4.1.3 Efficiency of the transport system

An integration of all transport modes is needed within the vision of a more efficient, sustainable, competitive, accessible, user- and citizen-friendly transport system. 129 A proper and acceptable policy mix to create an optimal and sustainable multimodal transport system is a prerequisite. Integration of ICT systems across different transport modes would foster seamless door-to-door mobility, integrated logistics and value added services using data from transport. Consequently, the stylised scenarios explore the impacts of potential future policies acting on this driver.

Providing correct price signals and reducing disparities in road charging policies across the EU is needed, and would contribute to the further internalisation of local externalities and elimination of discriminatory practices in the internal market. Differentiation of infrastructure charges for heavy goods vehicles according to CO2 emissions could additionally contribute to a faster uptake of more energy-efficient vehicles. The improvement in the functioning of the Eurovignette and Electronic Tolling System (EETS) system in the EU would have positive impacts on CO2 and air pollutant emissions from the road transport sector, achieved through better organisation of transport and reduced congestion.

Intelligent Transport Systems (ITS) make transport more efficient and safe and have important co-benefits such as reducing energy use and environmental impacts, reducing congestion, enhancing mobility, increasing service reliability, and supporting economic development. A Master plan for the deployment of cooperative ITS (involving communication between vehicles, between vehicles and infrastructure and/or infrastructure-to-infrastructure) is necessary to ensure coordinated investments, create the necessary economies of scale and ensure EU-wide interoperability and continuity of services. A recent cost-benefit analysis 130 shows that this can have significant impact on fuel consumption (and associated CO2 and pollutant emissions), time saved in transport and safety. Setting technical and functional specifications on multimodal travel information services would provide enabling conditions for developing such services across the EU. These services could help travellers reduce their carbon footprint through optimised travel (choices) and support a shift to sustainable modes of transport.

Considering the expected increase in freight transport volumes in the years to come and the relatively low modal share of non-road modes at present, there is a need to handle any increase in road freight transport volumes by using energy efficient means of transport and by optimising their operation. Internal market reforms for road haulage, buses and coaches, and hired vehicles would increase efficiency of road transport and reduce fuel consumption. In addition, the adopted internal market reforms for other modes have significant potential for reducing greenhouse gas emissions, in particular by promoting the efficiency and competitiveness of greenhouse gas efficient modes, such as rail, inland waterways and maritime transport (4th railway package 131 , Ports Service Regulation 132 , NAIADES II programme 133 ), or by improvement in flight efficiency (Single European Sky 2+ 134 ).

The EU’s Trans-European Transport Network (TEN-T) policy aims at the development of multimodal core-network corridors, promoting modal shift and sustainable infrastructure and equipment. The second generation of corridor work plans, currently in preparation under the supervision of each European Coordinator, would include the most complex elements of the corridor activity such as measuring the impact on climate change and the promotion of sustainability for instance in urban areas and nodes (e.g. ports). Shifting to sustainable modes like rail transport could also be supported by improving the attractiveness of rail freight corridors. Further simplification of administrative procedures through the use of digital technologies, in particular through the development of an EU maritime single window, the Digital Single Railway Area and the Digital Inland Waterway Area, could also increase the demand for short sea shipping and other sustainable transport modes. In addition, revising the rules for combined transport and improving implementation and enforcement would support shifting long distance road transport to rail, inland waterways or short sea shipping, thus reducing road congestion and greenhouse gas emissions.

Cohesion policy is uniquely suited to catalyse relevant activities in EU regions, while making sure that such action is embedded into the broader context of an integrated development strategy and in line with EU policy objectives. To ensure that transport investments are part of an overarching strategy for the balanced development of a multimodal, seamless door-to-door transport system, the existence of a comprehensive national and regional transport plan is a formal prerequisite for receiving cohesion policy support in the 2014-2020. These transport plans complement and reinforce the strategic framework provided by the TEN-T guidelines and the core network corridor work plans.

4.1.4 Transport fuels in the EU ETS

In its conclusions on the 2030 Climate and Energy Framework, the European Council recalled the possibility for a Member State to include its transport sector in the EU ETS, under current legislation, and on a voluntary basis. The Impact Assessment for the 2030 Climate and Energy Framework 135 discusses ETS scope expansion in section 7.8. Annex II summarises how road fuel inclusion would work technically, as well as the likely impacts of such inclusion. It would contribute towards reducing emissions in the road transport sector, but to a limited degree, and only once carbon prices were to rise significantly above the current level. Furthermore, impact on environmental integrity in the short term, and the potential implications for carbon price in the longer term, need to be carefully considered. The existing option of voluntary inclusion by individual Member States provides Member States (Article 24 of ETS Directive) who so wish with the flexibility they need to achieve ambitious non ETS targets.

4.1.5 Cross-cutting initiatives

Research, innovation (R&I) and competitiveness are paramount to accelerate the EU energy transition, to address the climate challenge and to reap its benefits in terms of jobs and growth that the Energy union can bring. There is now a need to determine how the transport system could adapt to the decarbonisation challenge while ensuring that increasing mobility needs are met.

Without a comprehensive strategy for research, innovation and competitiveness which brings together supply, demand and regulatory aspects, the EU risks losing its comparative advantage in low carbon solutions as early mover towards decarbonisation, both in terms of supply and innovation and deployment taking place in Europe.

A Communication on the Energy Union's research, innovation and competitiveness strategy, envisaged for November 2016, would provide further details, including on a strategic transport research and innovation agenda (STRIA) and its links with the SET-Plan, especially regarding electro-mobility and alternative fuels. STRIA foresees an integrated approach to Energy Union research, innovation and competitiveness that would focus on the following core priority areas: 1) connectivity and automation of transport; 2) electrification in all modes (e.g. hybrid lorries, hybrid planes, electrical ferries); 3) alternative fuels; 4) vehicle design and manufacturing; 5) transport infrastructure; 6) networks and traffic management systems; 7) smart transport and mobility services.

An important contribution to the reduction of aviation's environmental impacts may come from current research and development actions for innovative “green” technologies, including the development and market deployment of advanced biofuels and hybridisation. EU programmes have mainly covered the modernisation of air traffic management and the reduction of the impact on the environment (Clean Sky). The Single European Sky ATM Research project will contribute to fuel savings and a potential reduction of 50 million tonnes of CO2 emissions. 136

The wider application of grant funding from CEF, the European Structural and Investment Funds (ESIF) and other EU mechanisms pursuing decarbonisation objectives to privately financed projects ("blending") would help bolster the transport pipeline in more challenging and more sustainable modes of transport and is an effective way to maximise the impact of public resources.

Cross-funding schemes (e.g. the use of road charges, for instance, for the funding of rail projects), the setting of user funds (e.g. future revenues from infrastructure, like ports, airports and toll highways could contribute to such a fund) and revenues from the Eurovignette or the Emission Trading Scheme (e.g. under the so called Innovation and Modernisation Funds) deploying the user/polluter pays principle, may be considered as financing models that complement, in some cases, the available funding for infrastructure. Financial instruments that mitigate risk for private investors, such as demand risks related with the uncertainty on clean vehicles market penetration and risk associated with underlying green assets, are also essential to speed up the transition to low carbon technologies and are being developed in particular under the CEF and the ESIF. The inclusion of sustainable transport within the scope of the green bonds (e.g. the Climate Awareness Bonds, currently issued by the EIB), could be also considered, ensuring that investments supported under this new category respect stringent criteria on environment integrity.

At the TEN-T Days in Rotterdam (20-22 June 2016), an investor's conference has been organised that enabled to gather private investors, project promoters, the EIB and the Commission to stimulate private investments in transport. Dedicated meetings have been organised to liaise promoters of projects in the field of transport and investors – including the EIB. This exercise is part of an effort from the European Institutions to boost investments in transport through more efficient sources of financial support than grants. Projects which could be financed by private investors and/or the EIB – also thanks to the opportunities offered by the EFSI – are researched, identified and preliminarily discussed. An investment platform may be setup later this year, with a focus on sustainable transport, which would offer EFSI instruments for support to investments in, for instance, alternative fuels for buses.

Improving urban mobility has a high potential to reduce the CO2 emissions from transport and high exceedances of air pollutants that are widespread over European urban areas. Sustainable Urban Mobility Plans (SUMPs) help dealing with the complexity of urban mobility which could stimulate a shift towards cleaner and more sustainable transport modes such as public transport, cycling and walking. Effectiveness of such action also depends on specificities of the urban context and requires partnerships between EU institutions, national, regional and municipal authorities (for instance initiatives such as CIVITAS, the Covenant of Mayors, and the Smart Cities & Communities European Innovation Partnership). Synergies may be found e.g. by making SUMPs a pre-condition for receiving EU funding/increasing the co-financing rate and/or combining guidelines on urban access regulation schemes with a common definition of ultra-low emission vehicles, covering both conventional pollutants and CO2 emissions.

New societal developments and behaviour changes have large potential for improving mobility and contributing to decarbonisation, but also represent important question marks for the transport system and existing policy. Integrating the sharing economy and automated and connected vehicles in the existing transport institutional and technical set-up, and making full use of digitalisation, mobility as a service and the potential of active modes, would need to be part of the transport agenda.

4.2 Description of the pathways/scenarios

As indicated in the Impact Assessment accompanying the 2011 White Paper, the policy instruments identified according to the three main pillars: moving towards zero-emission vehicles, low emission alternative energy for transport and efficiency of the transport system are not mutually exclusive; the existence of multiple market failures and strong synergies among policies require the adoption of a combination of individual instruments that complement each other and create a comprehensive policy mix. None of these instruments alone would be capable of tackling in a satisfactory way the decarbonisation objective and only a well-designed policy mix can also maximise the co-benefits of decarbonisation (e.g. reduced congestion which improves productivity and creates more liveable cities). A holistic approach that comprises all elements considered so far is therefore needed. 137

The modelling exercise undertaken broadly covers the initiatives identified according to the three main pillars (sections 4.1.1-4.1.3), supported by cross-cutting initiatives (section 4.1.5). It provides stylised quantitative assessment of the effectiveness and efficiency of possible initiatives in the policy areas described above, giving illustrative evidence on their relative importance in terms of decarbonisation goal and other co-benefits, on the way they interact and on the intensity of the intervention that is necessary. The Commission has modelled the impact of the possible policy measures assuming a stylised specification – indicated in Annex IV – that does not necessarily correspond to what would actually be proposed at a later stage. As already explained, the precise specification of each policy measure will be done following a more specific analysis and an individual Impact Assessment. In addition, section 4.1.4 and Annex II summarises how road fuel inclusion into EU ETS would work technically, as well as the likely impacts of such inclusion.

The pathways/scenarios for the decarbonisation of transport were identified using a two-step approach. First, two central scenarios have been developed for the overall economy to reach, in addition to the 2020 targets, all the 2030 targets agreed by the October 2014 European Council and the 2050 decarbonisation objectives. The difference between the two central scenarios lies in the level of ambition to be achieved for the energy efficiency goal (27% or 30% primary energy savings in 2030 compared to the 2007 baseline). In order to ensure the consistency of the Commission's initiatives and accompanying analyses, the same central scenarios have been used in impact assessments accompanying proposals for the Effort Sharing Regulation for the period 2021 to 2030 and the revision of the Energy Efficiency Directive.

For transport, they include a cost-effective policy mix that would be needed under the three pillars discussed in sections 4.1.1-4.1.3 (i.e. low- and zero-emission vehicles; low emission alternative energy for transport; efficiency of the transport system) for achieving the 40% reduction in GHG emissions for the overall economy by 2030 and the 30% reduction of non-ETS emissions relative to 2005, while respecting the current policy mix.

In the second step, several more ambitious pathways/scenarios have been considered building on the central scenario reaching 30% energy efficiency. Consequently, all pathways/scenarios envisage action under the three pillars of sections 4.1.1-4.1.3 and have in common a certain number of initiatives. What differentiates them is the intensity of intervention that, depending on the pathway/scenario, is higher in one of the three fields (e.g. low- and zero-emission vehicles; low emission alternative energy for transport; efficiency of the transport system). The pathways/scenarios are also supported by cross-cutting initiatives. A short description of the pathways/scenarios is provided below, complemented by a more detailed description - including their underlining assumptions - in Annex IV.

4.2.1 Central scenarios

The central scenarios (so-called “EUCO27” and “EUCO30”) start from the EU Reference scenario 2016, the difference between them being the level of ambition assumed for the 2030 energy efficiency target (27% or 30% 138 ), and the corresponding measures to achieve it. 139 Coordination policies are assumed which enable long term decarbonisation of the economy.

For transport, the European Council scenario with a 27% energy efficiency target for 2030 (EUCO27) considers in the area of low- and zero-emission vehicles: more stringent CO2 standards for cars and light commercial vehicles post-2020 (i.e. reaching 75 gCO2/km for cars and 120 gCO2/km for light commercial vehicles in 2030) and measures leading to improvements in the fuel efficiency of new conventional and hybrid heavy goods vehicles (i.e. 1.5% per year by 2030). The levels of the CO2 standards for light duty vehicles in this scenario and all other scenarios discussed below are defined in terms of current test-cycle. 140 Additionally, under the second pillar identified in section 4.1.2 it assumes the development of infrastructure for alternative powertrains and promotion of alternative fuels for all relevant transport modes, notably renewable fuels that are needed to meet the overall 27% renewables target. In the area of efficiency of the transport system, it covers adopted internal market reforms that have significant potential for reducing greenhouse gas emissions, in particular by promoting the efficiency and competitiveness of greenhouse gas efficient modes, such as rail and waterborne transport (4th railway package, NAIADES II package, ports package), and measures providing correct price signals and gradually reducing disparities in road charging policies on the inter-urban network across the EU (see Table 1 and Annex IV for a more detailed description).

The 30% energy efficiency central scenario (EUCO30) features all transport measures included in the EUCO27 scenario but considers more stringent CO2 standards for cars and light commercial vehicles post-2020 (i.e. reaching 70 gCO2/km for cars and 110 gCO2/km for light commercial vehicles in 2030). For improving the efficiency of the transport system, it additionally includes a differentiation of infrastructure charges for heavy goods vehicles according to CO2 emissions that could contribute to a faster uptake of more energy-efficient vehicles, plus the deployment of Collaborative Intelligent Transport Systems and eco-driving.

The central scenarios provide the required contribution from transport to achieve the 40% reduction in GHG emissions for the overall economy by 2030 and the 30% reduction of non-ETS emissions relative to 2005. Action would be needed on all three key areas: low- and zero-emission vehicles, low emission alternative energy for transport, and efficiency of the transport system to deliver these emission reductions.

4.2.2 More ambitious pathways/scenarios for low-emission mobility

Five more ambitious pathways in terms of emissions reduction have been established. They all have as a starting point the 30% energy efficiency central scenario (EUCO30), meaning that they include a common set of policy measures acting on the three pillars identified in sections 4.1.1-4.1.3. In addition, each of these pathways assumes additional action in a specific field (see Table 1 and Annex IV for a more detailed description).

The first pathway/scenario (so-called “VEH”) depicts ambitious vehicle efficiency standards, acting in the low- and zero-emission vehicles area. It assumes very stringent CO2 standards for cars and light commercial vehicles (i.e. reaching 64 gCO2/km for cars and 106 gCO2/km for light commercial vehicles in 2030) as set out by the Commission in its statements during the trialogue discussions for the 2020 targets. 141 It further assumes measures supporting faster improvements in the fuel efficiency of new conventional and hybrid heavy goods vehicles (i.e. 1.6% per year by 2030). These measures are complemented by promotion of public procurement that provides effective incentives to purchase cleaner vehicles. Because of strong focus on vehicle efficiency standards, this pathway also requires large scale deployment of recharging/refuelling infrastructure to support the development of electro-mobility.

The second pathway/scenario is further broken down into two variants, 'A' and 'B', both of which illustrate action on advanced renewable fuels 142  (so-called “BIO-A” and “BIO-B”) and focus on the second pillar (i.e. switching towards low emission alternative energy for transport), supported by cross-cutting initiatives in the area of R&I. The BIO-A scenario includes specific measures (e.g. incorporation/blending obligations on fuel suppliers) for a broader uptake of advanced renewable fuels (including biomethane and biokerosene as well as renewable fuels of non-organic origin), while no additional support applies to food-based biofuels. The share of food-based biofuels in liquid and gaseous fuels is very gradually reduced during 2020-2030 and phased out by 2050. In scenario BIO-B the total level of biofuels is kept equal to that in the 30% energy efficiency central scenario (EUCO30), while reducing the contribution that food-based biofuels make to the overall share in liquid and gaseous fuels to 0% in 2030 and beyond. The BIO-B scenario, also includes specific measures (e.g. incorporation/blending obligations on the fuel suppliers) for the uptake of advanced renewable fuels (including biomethane and biokerosene as well as renewable fuels of non-organic origin).

The third pathway/scenario assume advanced research and innovation in electro-mobility (so-called “TECH”), focusing on the second pillar (i.e. switching towards low emission alternative energy for transport). The TECH scenario is designed to show the effect of policies that emphasise the rapid deployment of new powertrains, mainly supported by cross-cutting initiatives in the area of advanced research and innovation in electro-mobility.

The fourth and fifth pathways/scenarios focus on improving the efficiency of the transport system supported by cross-cutting initiatives to be undertaken by Member States for improving urban mobility, and measures in the field of taxation. The so-called “MOBI” scenario includes a more ambitious pathway than EUCO30 scenario for providing correct price signals and internalising local externalities on the inter-urban network, plus ambitious deployment of Collaborative Intelligent Transport Systems and measures promoting efficiency improvements and multimodality (e.g. review of the Combined Transport Directive, review of the Rail Freight Corridors Regulation, review of market access rules for road transport). In addition, is assumes soft measures supporting urban policies that curb pollutant emissions. The MOBI-TAX scenario covers all measures included in the MOBI scenario, plus an alignment of the EU minimum tax rates of petrol and gas oil used as motor fuels for removing the price advantage for diesel.

Table 1: Summary of pathways/scenarios for low-emission mobility

4.3 Analysis of impacts of the pathways/scenarios

4.3.1 Moderation of energy demand

The impacts of the decarbonisation pathways/scenarios are analysed in terms of energy efficiency (i.e. achievements in energy savings and improvements in energy intensity) and effects on the fuel mix. The effects of higher penetration of electric vehicles on power generation system are also briefly discussed.

Increasing energy efficiency

Energy demand in transport declines in all decarbonisation pathway/scenarios relative to the Reference scenario (REF2016), resulting in total savings of 16 to 29 Mtoe in 2030 (82 to 86 Mtoe in 2050). It has to be stressed that these savings are achieved despite the growth in transport activity in all scenarios and throughout the projection period. More than 80% of these savings originate from passenger transport, due to higher potential for improvements in energy efficiency and electrification in this segment, and policies promoting multimodality and the competitiveness of more sustainable transport modes (see Table 2 ).

EUCO27 and EUCO30 scenarios show energy savings in passenger transport of 14 to 17 Mtoe in 2030 relative to REF2016. Higher savings in EUCO30 are driven by more stringent CO2 standards for light duty vehicles (LDVs) post-2020, complemented by the deployment of Collaborative Intelligent Transport Systems (C-ITS) and enforcement of eco-driving. The highest savings are projected in VEH scenario (about 25 Mtoe) due to the most stringent vehicle efficiency standards (i.e. 64gCO2/km for cars and 97gCO2/km for vans in 2030) among scenarios, supported by public procurement that provides incentives to purchase cleaner and more fuel efficient vehicles. A large part of the benefit is attained after 2030 as the renewal of the fleet takes place only gradually over time.

Table 2: Energy savings of passenger and freight transport relative to Reference scenario 2016 (in Mtoe)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: * For REF2016 energy demand for 2030 and 2050 is provided in Mtoe.

For freight transport, EUCO27 and EUCO30 would lead to about 2 to 3 Mtoe energy savings in 2030. Slightly higher savings in EUCO30 are driven by the modulation of infrastructure charges for heavy goods vehicles according to CO2 emissions, deployment of C-ITS and eco-driving. MOBI, VEH and MOBI-TAX scenarios result in higher savings (4 to 5 Mtoe), achieved however through different policy instruments. In VEH, measures leading to faster improvements in fuel efficiency of new conventional and hybrid heavy goods vehicles result in additional savings of almost 2 Mtoe in 2030 relative to EUCO30.

For both passenger and freight transport, MOBI scenario achieves additional savings to EUCO30 of about 2 Mtoe thanks to full internalisation of local externalities, more intensive measures promoting transport system efficiency improvements and multimodality 143 , ambitious deployment of C-ITS and support for multimodal travel information. The alignment of the EU minimum tax rates of petrol and gas oil in MOBI-TAX, in addition to all measures assumed in MOBI, yields further energy savings in freight and passenger transport of about 2 Mtoe relative to MOBI scenario in 2030; for freight this is particularly effective because fuel costs including taxation represent almost 30% of the total road freight costs and their minimisation is among the main objectives of heavy goods vehicles manufacturers and fleet operators.

EUCO27 and EUCO30 scenarios are projected to result in significant improvements in energy intensity of passenger transport by 2030, of 34-35% compared to 2010, while VEH would deliver almost 37% reduction (see Table 3 ). The rather limited difference between VEH and EUCO30 by 2030 (2 percentage points), despite very stringent vehicle efficiency standards assumed in VEH, can be explained by the fact that standards apply only to new vehicles and by the renewal of the fleet which takes place only gradually over time. A large part of the benefit is attained after 2030.

Table 3: Change in energy intensity of passenger and freight transport for 2010-2030 and 2010-2050 (in %)

 Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

For freight transport, the highest improvements in energy intensity by 2030 are also expected in VEH scenario (about 21%) but large improvements relative to the REF2016 are already achieved in EUCO27 and EUCO30 (around 19-20%). A graphical illustration of energy savings of passenger and freight transport relative to REF2016 and of changes in energy intensity of passenger and freight transport is provided in Figure 5 .

Figure 5: Energy savings relative to Reference scenario 2016, in Mtoe (left side) and change in energy intensity for 2010-2030 and 2010-2050, in % (right side)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Impact on the fuel mix

Alternative fuels and energy carriers are projected to gain an increasing share in the energy used in transport in all decarbonisation pathways/scenarios, providing about 15-17% of energy demand by 2030 (see Figure 6 ). Alternative fuels are defined in line with the Directive 2014/94/EU. 144 BIO-A shows the highest share of alternative fuels by 2030, due to strong incentives for the uptake of advanced renewable fuels, followed by VEH where very stringent CO2 standards for light duty vehicles supported by large scale deployment of recharging/refuelling infrastructure and incentives for public procurement that lead to faster development of electro-mobility play an important role. The TECH scenario shows a rather similar share to VEH, thanks to advanced research and innovation in electro-mobility (battery electric and fuel cell electric vehicles) that reduce the costs of these alternative powertrains and enable faster deployment. BIO-B results in a somewhat lower share of alternative fuels than BIO-A (around 16%), because of the complete phase out of food-based biofuels by 2030 assumed in this scenario. However, due to very strong incentives, it results in a higher share of advanced renewable fuels than BIO-A. Overall, the penetration of alternative fuels in the energy mix by 2030 is moderate due to the fact that additional measures relative to REF2016 are only assumed post-2020 and also because the renewal of the vehicle stock takes time.

The share of diesel use in transport goes down by 1 to 3 percentage points by 2030 relative to REF2016, while the share of gasoline by around 2 percentage points. The lowest share of diesel is visible in VEH scenario, due to very stringent vehicle efficiency standards, and also in MOBI-TAX which assumes higher taxation of diesel compared to the current levels. Jet fuels slightly increase their share (by about one percentage point), as air transport activity continues to grow strongly by 2030. In addition, no alternative fuel options are available in the short to medium term except for the BIO-A and BIO-B scenarios where strong incentives lead to uptake of biokerosene; thus these scenarios show the lowest increase in fossil jet fuels (0.3 percentage points) relative to REF2016.

By 2050, similar levels of alternative fuels (around 59-61% by 2050) are achieved in all pathways/scenarios due to the large scale electrification of the light duty vehicle fleet and the large scale deployment of advanced renewables fuels necessary for decarbonisation; this is accompanied by significant decline in the use of diesel, gasoline and jet fuels (see Figure 51 , in Annex IV). The scale of electrification of the fleet is similar in all pathways/scenarios because the same CO2 standards for LDVs are assumed in the long term (i.e. 25gCO2/km for cars and 60gCO2/km for vans in 2050).

Figure 6: Final energy demand in transport by fuel in 2030 (in % of total)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Focusing on alternative fuels and energy carriers, electricity demand is projected to show the highest increase in 2030 relative to REF2016, gaining 0.9-2 percentage points in terms of energy use in transport (see Figu re 7 ). VEH shows the largest uptake of electricity in 2030 (4.5% of energy demand in transport), followed by TECH (about 4%). However, significant increase relative to REF2016 is already achieved in EUCO27 and EUCO30 (0.9-1.2 percentage points increase in its share) due to stringent vehicle efficiency standards supported by the deployment of recharging infrastructure. Electricity would provide 3.2% of energy use in road transport in VEH and 2.6% in TECH scenario, and about 70% of energy use in rail in all decarbonisation pathways/scenarios by 2030. Hydrogen also shows an increasing share by 2030 relative to REF2016, gaining 0.2-0.5 percentage points in energy use in transport. The highest uptake takes place in TECH scenario where it provides about 0.5% of energy demand by 2030.

Figure 7: Alternative fuels and energy carriers in transport in 2030 (in % of total energy demand)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Natural gas, in particular liquefied natural gas (LNG), would gain 0.8-1.3 additional percentage points in terms of share in energy demand by 2030, relative to REF2016. LNG is projected to provide about 6-8% of fuels used in heavy goods vehicles and about 4% of fuels used in inland navigation. This is due to the internalisation of local externalities that push for the use of less polluting fuels and to the NAIADES II package for inland navigation, supported by the availability of refuelling infrastructure, present in all pathways/scenarios. Measures promoting urban policies that curb pollutant emissions provide an additional incentive in MOBI and MOBI-TAX scenarios. Natural gas shows the highest increase in MOBI-TAX due to the rise in the diesel tax rates relative to current levels and the lowest increase in the BIO-A and BIO-B scenarios where the more prominent share of liquid and gaseous biofuels (including biomethane) leaves smaller space for other alternative fuels. Uptake of LNG would also take place in international shipping, especially in the short sea shipping segment, providing about 9% of overall bunker fuels by 2030. Compressed natural gas in public road transport slightly increases its share and would represent about 2-3% of energy use by 2030. Liquefied petroleum gas is projected to maintain a rather stable share (2.2-2.3% of energy demand), only 0.1-0.2 percentage points higher than in REF2016 across all scenarios by 2030.

Overall, the highest share of alternative fuels in transport energy demand by 2030 originates from liquid biofuels. Their share increases only slightly from about 6% in REF2016 to 6.2% in EUCO27 and EUCO30 scenarios in which the 27% renewables target is met in 2030. In the BIO-A scenario this share increases to 7.2% due to strong support for advanced renewable fuels while no additional support is provided for food-based biofuels. In the BIO-B scenario the share of liquid biofuels is similar to REF2016 because of the complete phase out of food-based biofuels by 2030. However, due to strong incentives for advanced renewable fuels, the share of these fuels is higher than in BIO-A. Other decarbonisation scenarios/pathways show similar share as EUCO30.

Gaseous biofuels (i.e. biomethane used in road freight, shipping) show somewhat higher share in energy demand by 2030 (about 0.2%) in all decarbonisation pathways/scenarios, except for BIO-A and BIO-B scenarios where they achieve a 0.6% share due to strong support for their uptake. Gaseous biofuels start from a very low base in the Reference scenario.

In terms of share in liquid and gaseous transport fuels, liquid and gaseous biofuels combined represent about 6.2% in REF2016 and 6.6% in EUCO27 and EUCO30 scenarios. However, the absolute amounts remain stable at around 21 Mtoe, the increased share in the EUCO scenarios reflecting the energy efficiency developments in transport. In the BIO-A scenario liquid and gaseous biofuels provide around 8% (25 Mtoe) of total liquid and gaseous transport fuels in 2030, while in BIO-B they remain close to their level in the EUCO scenarios at 21 Mtoe (6.9% of total liquid and gaseous transport fuels). Other decarbonisation scenarios/pathways show similar shares as EUCO30 also when expressed in terms of total liquid and gaseous transport fuels.

In the long term, to meet the very ambitious decarbonisation objectives by 2050, electricity and advanced renewable fuels (mostly advanced biofuels) gain significant market shares while the use of natural gas and liquefied petroleum gas goes down; hydrogen also grows significantly beyond post-2030 albeit maintaining a limited share (see Figure 52 , in Annex IV). The share of biofuels in liquid and gaseous transport fuels reaches around 46% in all scenarios by 2050 (36-37% of total transport energy demand) - reflecting the crucial role of biofuels in transport decarbonisation – especially in modes that cannot be electrified.

Impact on the power generation system

The share of electricity in road transport energy demand increases in all decarbonisation pathways/ scenarios, to 2-3% by 2030 and 18-19% by 2050 (see Figure 8 ). Overall, developments in electro-mobility and further electrification of rail transport result in additional electricity demand of 3-6 Mtoe in 2030 and 29-30 Mtoe in 2050 relative to REF2016.

The additional electricity demand from transport in the decarbonisation pathways/scenarios is counterbalanced by a reduction of demand in sectors where energy efficiency has untapped potential (e.g. electricity consumption of appliances). 145 In EUCO27 and EUCO30 scenarios, for which the entire energy system has been modelled, the total electricity demand is decreasing in 2030 perspective, compared to REF2016. Consequently, the possible negative impacts from a strong increase of electricity demand do not manifest themselves. For example, in EUCO30, where higher energy efficiency improvements take place in other demand sectors and policies affect the power generation sector (i.e. renewables policies and the EU ETS), electricity price would be roughly the same as in the Reference scenario by 2030, despite somewhat higher electricity demand in transport.

Smart charging of car batteries helps smoothing the load curve which in turn lowers prices of electricity. A study by Eurelectric confirms that the current power generation system could cope with the resulting increase in electricity demand of large-scale electrification of transport provided that smart charging systems are widely applied. On the other hand, uncoordinated recharging concentrated in evening hours and in certain residential areas could cause considerable demand hikes, cost problems and even a strain for the power system. 146

Figure 8: Share of electricity in road transport energy demand (in %) and total electricity demand in transport (in Mtoe)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

In order to accommodate high penetration of electric vehicles, the power sector needs to undergo considerable transformation and look into new business models. 147 Transport electrification is the first challenge but transformation toward smart systems will also be required to accommodate more broadly conceived demand side response.

4.3.2 Energy security

By 2030, total oil products used in transport 148 are projected to decrease by 26 to 41 Mtoe in 2030 (7-11%) relative to REF2016, thanks to policies supporting the energy efficiency improvements, the uptake of alternative fuels and the efficiency of the transport system. This is equivalent to a reduction of 51 to 67 Mtoe (13-17%) compared to 2010 levels (see Tab le 4 ).

EUCO27 and EUCO30 show about 26 to 31 Mtoe decrease in the use of oil products relative to REF2016 (51 to 56 Mtoe of 2010 levels), while the highest reduction would be achieved in the VEH, MOBI-TAX and BIO-A scenarios by 2030 (see Figure 9 ). In VEH and MOBI-TAX energy savings and electro-mobility play a significant role in reducing the oil dependency in transport; in BIO-A the uptake of advanced renewable fuels is also an important contributing factor.

Oil dependency 149 in the decarbonisation pathways/scenarios is expected to decrease by 3-4 percentage points relative to REF2016 or 8-9 percentage points compared to 2010 levels. However, transport sector will remain heavily dependent on oil by 2030: oil products would still represent 86-87% of the EU transport sector needs (see Table 4 ) – compared to 94% today – despite the significant reductions achieved in absolute levels. This shows that the uptake of alternative fuels and energy carriers takes time, in particular due to the gradual replacement of the vehicle stock. Nevertheless, to certain extent this also shows the limits of this indicator in reflecting properly the energy savings achieved thanks to energy efficiency improvements.

Table 4: Oil products used in transport

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab). Note: * For REF2016 the total oil products (including bunker fuels) in Mtoe and the oil dependency in transport are reported for 2030 and 2050. In 2010, around 390 Mtoe oil products were used in transport (including bunker fuels) which represented about 95% of transport sector energy needs.

In the long term, significant reductions in oil products used in transport (194 to 200 Mtoe in 2050 relative to REF2016) and oil dependency are projected in all decarbonisation pathways/scenarios. By 2050, oil products would represent about 49-51% of the EU transport sector needs.

Decrease of oil use in transport is of key importance for the reduction of the fossil fuel import bill and reinforcing security of supply.

Figure 9: Oil products used in transport (difference to REF2016, in Mtoe) and oil dependency (in %)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

4.3.3 Decarbonisation

The contribution of pathways/scenarios to achieving low-emission mobility is assessed in terms of tank to wheel CO2 emissions. Additionally, the impacts on well to wheel CO2 emissions are provided. The role of transport activity, energy intensity and CO2 intensity in the tank to wheel CO2 emissions reductions is shown through a decomposition analysis.

CO2 emissions (tank to wheel)

As explained in section 4.2.1, the central scenarios (EUCO27 and EUCO30) have been developed to reach all the 2030 targets agreed by the October 2014 European Council, while also achieving 2020 GHG and renewables targets. These scenarios show cost-effective emissions reductions of: 18-19% for transport, 38-43% for residential and tertiary (mainly buildings), 35-37% for industry and 29-35% for non-CO2 sectors (mainly agriculture and waste) by 2030 relative to 2005. 150 For transport, this outcome is in line with the 2011 White Paper which established a milestone of 20% emissions reduction by 2030 relative to 2008 levels, equivalent to 19% emissions reduction on 2005 levels, and with the 2050 decarbonisation objectives.

In EUCO27 and EUCO30 the highest emissions reductions are projected in passenger road transport (about 10-12% in 2030 and 74% in 2050 compared to the Reference scenario), driven by more stringent CO2 standards for light duty vehicles (see Table 5 ). This is equivalent to emissions cuts of about 30-32% by 2030 (around 81% by 2050) relative to 2005 (see Table 25 , in Annex IV). CO2 emissions from road freight are also expected to go down (about 3-4% in 2030 relative to REF2016; 3-4% for 2005-2030), thanks to measures improving fuel efficiency of new conventional and hybrid heavy goods vehicles, higher uptake of LNG, plus road pricing and modulation of infrastructure charges according to CO2 emissions that lead to faster renewal of the fleet. Extensive hybridisation of the vehicle fleet and uptake of advanced renewable fuels, complemented by deployment of C-ITS and eco-driving, result in 51-52% emissions cuts in road freight by 2050 relative to 2005, despite growing transport activity (47-48% for 2005-2050).

Table 5: CO2 emissions reduction by mode relative to the EU Reference scenario 2016 in 2030 and 2050 (in %)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: * CO2 emissions levels in REF2016 for 2030 and 2050 are reported in million tonnes.

Air transport emissions would decrease by about 1% relative to REF2016 in 2030, thanks to higher ETS prices in EUCO27 (42 €/tCO2) and shifts towards rail in both EUCO27 and EUCO30, supported by specific measures (i.e. 4th railway package). 151 However, relative to 2005, emissions are still expected to go up (14-15% by 2030) due to high growth (79-80%) in total air traffic (domestic, international intra-EU and extra-EU). By 2050, emissions are projected to decrease by 34-35% relative to 2005 driven by strong efficiency improvements and the uptake of advanced renewable fuels triggered by higher ETS prices. Yet, emissions reductions achieved in aviation would be the lowest among the inland modes due to strong increase in activity.

Rail and inland navigation show some low rise in emissions by 2030 compared to the Reference scenario because adopted internal market reforms increase their competitiveness and shift traffic away from road (i.e. transport activity of rail and inland navigation increases relative to REF2016). However, they are still expected to display the highest emissions reductions among modes over time (about 33% decrease for 2005-2030 for passenger rail, 18% for freight rail and 23% for freight inland navigation). In addition, they contribute a low share of transport emissions (below 3% of total emissions excluding maritime bunkers in 2030). Strong emissions reductions in these modes are expected to take place by 2050 compared to 2005 (80% for passenger rail, 76% for freight rail and 50% for inland navigation), facilitated by further electrification of rail and the uptake of LNG and advanced renewable fuels in inland navigation.

The more ambitious pathways/scenarios are expected to deliver some 9-11% emissions reductions in 2030 relative to REF2016 (see Table 5 ); this is equivalent to 20-22% cuts compared to 2005 level (see Table 6 , and Table 25 in Annex IV). The highest reduction would be achieved in VEH (about 11% relative to REF2016), driven by the most stringent CO2 emissions standards for light duty vehicles among scenarios and measures improving the fuel efficiency of new conventional and hybrid heavy goods vehicles, supported by incentives for public procurement. The BIO-A scenario shows around 10% decrease relative to REF2016 (about 21% for 2005-2030) due to strong incentives for the uptake of advanced renewable fuels while no additional support is provided to food-based biofuels. BIO-B results in somewhat lower emissions reductions (about 9% decrease relative to REF2016; 20% for 2005-2030) because the overall share of biofuels is lower in this scenario relative to BIO-A (i.e. due to the complete phase out of food-based biofuels by 2030). It should be noted, however, that the modelling assigns tank to wheel emissions of zero to all biofuels. Well to wheel CO2 emissions are discussed in a following section. MOBI and MOBI-TAX scenarios also show higher emissions reductions (about 9% relative to REF2016) than EUCO30, thanks to full internalisation of local externalities on the inter-urban network, more intensive policies promoting efficiency improvements in the transport system and multimodality (e.g. review of the Combined Transport Directive, review of the Rail Freight Corridors Regulation, review of market access rules for road transport) and alignment of the EU minimum tax rates of petrol and gas oil (in MOBI-TAX). TECH scenario achieves rather similar emissions reductions to MOBI, mostly as an effect of faster electrification of light duty vehicles fleet supported by advanced research and innovation in electro-mobility, which lowers the costs of alternative powertrains. Emissions from passenger and freight road transport in the more ambitious pathways/scenarios go down by 32-37% and 4-7% by 2030 relative to 2005, respectively (80-82% emission reductions for passenger road transport and 52-53% for road freight for 2005-2050).

Table 6: CO2 emissions reduction by mode for 2005-2030 and 2005-2050 relative to the Reference scenario 2016 (percentage points difference in growth rates)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: * For REF2016 emissions growth rates for 2005-2030 and 2005-2050 are reported.

Decomposition analysis of CO2 emissions

As explained in section 3.3, the overall trend in transport emissions is determined by three broad components: transport activity levels, the energy intensity of transport and the carbon intensity of the energy used. Following a decomposition analysis, it can be shown how much the projected transport emissions are expected to decrease in each pathway/scenario (in percentage terms or Mt of CO2) between 2005 and 2030 due to each component (see Figure 10 to Figure 13 ). 152

Overall, CO2 emissions from passenger transport decrease by 22-27% (178-217 Mt of CO2) between 2005 and 2030 in the decarbonisation pathways/scenarios. The decrease in CO2 emissions is to a large extent due to improvements in energy intensity (-38% to -41%, equivalent to 308-331 Mt of CO2), while carbon intensity (-7% to -9%, equivalent to 55-68 Mt of CO2) play a more limited role by 2030 when compared to REF2016 (see Figure 10 and Figure 11 ). Transport activity works in opposite direction, i.e. towards increasing emissions, but its impact is more limited in size in all decarbonisation pathways/scenarios (+22% to +23% for 2005-2030, equivalent to 176-186 Mt of CO2) compared to the REF2016 (+25%, equivalent to 198 Mt of CO2). Decreases in energy intensity originate both from the uptake of more fuel efficient powertrains and improvements in the transport system efficiency brought about the higher operational efficiency of transport modes and multimodality. Among scenarios, VEH and TECH show the highest contribution to emissions reductions coming from improvements in the energy intensity, thanks to the penetration of more efficient powertrains and electrification of the passenger cars fleet. In VEH and BIO-A, the higher electrification of the passenger car fleet and the strong uptake of advanced renewable fuels, respectively, result in the largest contribution to emissions reductions from improvements in the CO2 intensity among scenarios. BIO-B results in somewhat lower contribution to emissions reductions from improvements in the CO2 intensity, despite the very strong uptake of advanced renewable fuels, due to the lower overall share of biofuels in the fuel mix compared to BIO-A triggered by the complete phase out of food-based biofuels by 2030. 153 In MOBI and MOBI-TAX, internalisation measures and intensive policies promoting efficiency improvements in the transport system and multimodality have an impact on emissions reductions both through lower transport activity and energy intensity improvements relative to REF2016.

Higher reductions in CO2 emissions from freight transport are achieved in all decarbonisation pathways/scenarios relative to REF2016 (see Figure 12 and  Figure 13 ). However, their contribution to the overall emissions reductions is more limited than that of passenger transport, both in relative terms and in levels (about 5-8% reduction in emissions for 2005-2030, equivalent to 13-22 Mt of CO2). Improvements in energy intensity provide the highest contribution to emissions reductions (-22% to -24% for 2005-2030, equivalent to 58-65 Mt of CO2) while carbon intensity improvements are more limited by 2030 (-9% to -11% for 2005-2030, equivalent to 24-30 Mt of CO2). Transport activity works in opposite direction, i.e. towards increasing emissions, but its impact is more limited in size in all decarbonisation pathways/scenarios (+23% to +26% for 2005-2030, equivalent to 62-69 Mt of CO2) compared to the Reference scenario (+27%, equivalent to 73 Mt of CO2).  

Figure 10: Decomposition of CO2 emissions for passenger transport for 2005-2030 (% change)

Source: EC calculations based on PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: The figures report the changes in CO2 emissions due to the three broad components (transport activity levels, energy intensity of transport and carbon intensity of the energy used) in relative terms compared to 2005.

Figure 11: Decomposition of CO2 emissions for passenger transport for 2005-2030 (in Mt of CO2)

Source: EC calculations based on PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: The figures report the changes in CO2 emissions, in Mt of CO2, due to the three broad components (transport activity levels, energy intensity of transport and carbon intensity of the energy used) in relative terms compared to 2005.

Figure 12: Decomposition of CO2 emissions for freight transport for 2005-2030 (% change)

Source: EC calculations based on PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: The figures report the changes in CO2 emissions due to the three broad components (transport activity levels, energy intensity of transport and carbon intensity of the energy used) in relative terms compared to 2005.

Figure 13: Decomposition of CO2 emissions for freight transport for 2005-2030 (in Mt of CO2)

Source: EC calculations based on PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: The figures report the changes in CO2 emissions, in Mt of CO2, due to the three broad components (transport activity levels, energy intensity of transport and carbon intensity of the energy used) in relative terms compared to 2005.

VEH, BIO-A, MOBI and MOBI-TAX scenarios result in rather similar emissions reductions by 2030 but the drivers are different. While VEH scenario achieves the highest contribution to emissions reduction through improvements in energy intensity, in BIO-A the strong uptake of advanced renewable fuels has a larger impact on CO2 intensity, and in MOBI and MOBI-TAX internalisation measures, efficiency improvements in the transport system and higher taxation of diesel (in MOBI-TAX) have a dampening role on the transport activity. Nevertheless, energy intensity improvements also contribute additional emissions reductions in BIO-A, MOBI and MOBI-TAX (-22% for 2005-2030, equivalent to 59 Mt of CO2) relative to REF2016 (-21%, equivalent to 56 Mt of CO2). Similar to passenger transport, BIO-B results in somewhat lower contribution to emissions reductions, despite the very strong uptake of advanced renewable fuels, due to the lower overall share of biofuels in the fuel mix compared to BIO-A. 154  

Overall, efficiency gains play a decisive role in further reducing emissions in road transport relative to REF2016. As expected, the highest reduction in emissions due to improvements in energy intensity is achieved in VEH for both passenger and road transport. However, the differences to the energy intensity contribution to emissions cuts in MOBI and MOBI-TAX is not very large. This is because measures intelligently managing transport demand and improving the efficiency of the system also result in energy intensity improvements. The use of less CO2 intensive fuels contributes to further reduction of emissions for road and rail passenger transport relative to REF2016 and only in the BIO-A and BIO-B scenarios to emissions reduction in aviation by 2030. The detailed results by transport mode are provided in Annex IV (see Table 27 - Table 28 ).

Well to wheel CO2 emissions

Only EU emissions for the domestic production are covered by the quantified well to wheel emissions. Worldwide upstream emissions related to the sourcing of fossil fuels are not reflected in this modelling exercise. For biofuels, well to wheel CO2 emission factors reflect the energy use in the production process. Indirect land-use change (ILUC) emissions are not quantified.

On well to wheel basis, CO2 emissions go down by 17-20% during 2005-2030 (63-64% for 2005-2050) as the power generation sector continues its gradual decarbonisation pathway by 2050 (see Figure 14 ). Higher emissions reductions are achieved in road transport (21-25% by 2030 and 68-70% by 2050). The well to wheel emissions go down slightly less than tank to wheel emissions, which is attributed to a lower reduction rate of the carbon footprint of upstream technologies producing fuels for transport (e.g. biofuels, electricity, hydrogen, oil products). The power generation mix plays an important role here as the large scale electrification of transport needs to be accompanied by the decarbonisation of power generation. VEH scenario shows the highest reduction in the well to wheel emissions both in road transport and overall transport sector (about 25% and 20% respectively), but already 21-22% reductions in road transport emissions (17-18% in total transport emissions) are achieved in EUCO27 and EUCO30.

As explained, ILUC emissions are not quantified. Taking into account the effects of indirect land-use change over the life-cycle of biofuels may show that worldwide CO2 emissions are, in fact, lower if a higher share of advanced biofuels is used.

Figure 14: Evolution of well to wheel CO2 emissions for 2005-2030 and 2005-2050 (in %)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

4.3.4 Other environmental impacts

Transport related activities have significant impacts on air pollution and noise levels. The co-benefits of decarbonisation pathways/scenarios on the environment are illustrated below in terms of air pollution and external costs of air and noise pollution.

Impact on air pollution

NOx emissions would drop in the decarbonisation pathways/scenarios by similar percentages: 57-58% by 2030 (76% by 2050) relative to 2010, although through different channels. While in VEH the 58% reduction in NOx is mainly driven by the higher substitution of internal combustion engines for electric vehicles, in MOBI-TAX the higher taxation of diesel than current levels and policies intelligently managing transport demand, supported by cross-cutting initiatives in the urban area that aim to curb pollutant emissions, have similar impact on NOx emissions; this is despite lower CO2 emissions cuts achieved in MOBI-TAX relative to VEH scenario (see Figure 15 ). Regarding cross-cutting initiatives in the urban area, the intensity of measures is assumed to be low in the decarbonisation pathways/scenarios due to the limited EU competences in this field. However, Member States could consider ambitious reforms that lead to higher reductions in NOx emissions.

The higher use of LNG in lorries and shipping in all decarbonisation pathways/scenarios relative to REF2016 also contribute to lower NOx emissions. This is due to the internalisation of local externalities that push for the use of less polluting fuels and to the NAIADES II package for inland navigation, supported by the availability of refuelling infrastructure, present in all pathways/scenarios. Measures promoting urban policies that curb pollutant emissions and the higher diesel taxation provide an additional incentive for the uptake of LNG in MOBI and MOBI-TAX scenarios.

Figure 15: Evolution of NOx and PM2.5 emissions for 2010-2030 and 2010-2050 (growth rates, in %)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

The decline in particulate matter (PM2.5) would be less pronounced by 2030 at 53-56% but PM2.5 emissions would go down by around 81-82% by 2050 (see Figure 15 ). Highest emissions reductions are achieved in VEH scenario by 2030 (about 56%), due to the higher electrification of the vehicle fleet, while BIO-A, BIO-B, TECH, MOBI and MOBI-TAX show somewhat more limited impact (around 53-54% decrease by 2030). EUCO27 and EUCO30 scenarios are projected to achieve significant impacts by 2030 in terms of both NOx emissions (57% reduction) and PM2.5 emissions (53% decrease).

External costs of air and noise pollution

Overall, external costs related to air pollutants would by 2030 decrease in the decarbonisation pathways/scenarios by about 57-59% compared to 2010 due to reduced fuel consumption and increased use of alternative fuels and energy carriers in transport. The Reference scenario achieves already significant reduction (about 56%). However, they would still represent an important cost for the society (roughly €25-27 billion). 155 By 2030, highest reductions in air pollutants costs are projected in the MOBI-TAX and VEH scenarios (see Figure 16 ). Similar reductions would be achieved in all decarbonisation pathways/scenarios (around 79%) by 2050. Reductions in air pollution are driven by policy measures limiting fossil fuels consumption but there are also second-order effects from the decrease in the transport activity relative to REF2016, due to higher costs of transport equipment (in VEH), fuels (in BIO-A and BIO-B) and measures managing transport demand (in MOBI and MOBI-TAX).

As highlighted in section 3.3, the increase in traffic would lead to further increase of noise related external costs by 2030 and 2050 in the Reference scenario (18% and 25% respectively). Transport measures for decarbonising the sector are expected to result in 5-11 percentage points decrease in 2030 (around 45 percentage points decrease in 2050) in noise-related external costs relative to REF2016. This is mainly thanks to the gradual substitution of internal combustion engines for electric vehicles in the VEH and TECH scenarios and due to a more limited increase in traffic in the MOBI and MOBI-TAX scenarios relative to REF2016. However, external costs of noise would still be 7-13% higher by 2030 relative to 2010 and would only significantly decline in the long term (about 20% reduction for 2010-2050).

Figure 16: External costs of air pollution and noise for 2010-2030 and 2010-2050

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

4.3.5 Research, innovation and competitiveness

All decarbonisation pathways/scenarios support the penetration of new technologies related to internal combustion engines (ICE) and alternative powertrains through specific incentives, leading to further technology learning as technologies are deployed. The intensity of incentives is however different between pathways/scenarios.

Car manufacturers are assumed to comply with more stringent CO2 standards for light duty vehicles (LDVs) post-2020 in all decarbonisation pathways/scenarios, by marketing vehicles equipped with hybrid systems (that complement ICE) and electrically chargeable systems (i.e. battery electric, plug-in hybrid and fuel cell vehicles), which are becoming more appealing to consumers thanks to lower costs. The CO2 standards improve the predictability by the market actors and provide legal certainty about the technologies that comply with the policy objectives. This legal certainty enables strong effort by the manufacturers to improve the cost performance of advanced powertrains. In addition, the availability of recharging/refuelling infrastructure, facilitated by the implementation of the Directive 2014/94/EU, provides certainty to consumers towards new technologies.

As explained in sections 4.2.1 and 4.2.2, the least stringent CO2 standards for LDVs are assumed in EUCO27 and the most stringent ones in VEH scenario by 2030, with other decarbonisation pathways/scenarios having identical standards to EUCO30 and falling within this range. In addition, promotion of public procurement provides additional incentives for purchasing cleaner vehicles in VEH scenario. By 2030, electrically chargeable vehicles would represent 18% of the LDV vehicle stock in VEH scenario (i.e. about 17% battery electric and plug-in hybrid and 1% fuel cell vehicles), while EUCO27 and EUCO30 scenarios would be leading to shares in the range of 11-13% (i.e. around 10-12% battery electric and plug-in hybrid and 1% fuel cell vehicles).

In the TECH scenario, more intensive R&D investments along stringent CO2 standards (as stringent as in EUCO30) result in lower prices of alternative powertrains and consequently stronger market uptake (i.e. 15% share of electrically chargeable vehicles in the LDV vehicle stock) by 2030. Hybrid (petrol and diesel) non-rechargeable vehicles would provide a considerable share of the vehicle stock in all scenarios (around 21%).

Figure 17: Light duty vehicles by type of powertrain in 2030 and 2050 (in %)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: The category “Hybrid” covers both diesel and gasoline hybrids; similarly, plug-in hybrids cover both diesel and gasoline plug-in hybrids.

By 2050, electrically chargeable vehicles are expected to represent about 68-72% of the LDV vehicle stock (i.e. around 63-64% battery electric and plug-in hybrid and 5-8% fuel cell vehicles). Their much higher share relative to 2030 can be explained by more stringent CO2 standards for light duty vehicles assumed over time in all decarbonisation pathways/scenarios, declining technology costs and the gradual renewal of the vehicle stock.

The share of ICE diesel vehicles goes down by 2-8 percentage points relative to REF2016 in 2030 and that of ICE gasoline vehicles by up to 5-6 percentage points, while the share of ICE gaseous vehicles (i.e. LPG and CNG) remains relatively stable compared to REF2016 levels. The most significant decreases in the shares of ICE diesel vehicles are driven by the uptake of alternative powertrains in the VEH scenario and by cross-cutting incentives that curb pollutant emissions in the urban area in the MOBI and MOBI-TAX scenarios (see Figure 17 ). By 2050, ICE diesel, gasoline and gaseous vehicles loose significant market shares in all decarbonisation pathways/scenarios.

Transport activity of ICE diesel and gasoline cars in urban transport activity 156 is projected to go down significantly, from about 76% in 2005 to 33-40% by 2030 and around 6-7% by 2050, in line with the 2011 White Paper goal of halving the use of ‘conventionally-fuelled’ cars in urban transport by 2030 and phase them out in cities by 2050.

Advanced renewable fuels as a share of liquid and gaseous transport fuels would provide around 1.9% in REF2016 and all other decarbonisation pathways/scenarios in 2030 except for the BIO-A and BIO-B scenarios, where by design, they would achieve about 4% and 6.9% share respectively due to dedicated support measures. 157 In absolute terms, advanced renewable fuels would provide around 12 Mtoe in BIO-A scenario, 21 Mtoe in BIO-B scenario and 6 Mtoe in all other scenarios/pathways. Their share in liquid and gaseous fuels would increase significantly by 2050 when they are projected to represent about 45-46% in the BIO-A and BIO-B scenarios, and 39-40% in all other decarbonisation pathways/scenarios. By comparison, the Reference scenario, which does not achieve the long-term decarbonisation objectives, shows only around a 2% share for advanced renewable fuels by 2050.

Seen from a different angle, the share of advanced renewable biofuels in total consumption of biofuels moderately increases by 2030 to around 30% in all pathways/scenarios, except for BIO-A and BIO-B scenarios. In BIO-A, the strong support for their uptake results in about half of total consumption of biofuels being provided by advanced renewable fuels. In BIO-B all consumption is from advanced renewable fuels. In all pathways/scenarios, advanced renewable fuels penetrate the transport fuels market in significant quantities after 2030. By 2050, advanced renewable fuels would represent over 85% of total consumption of biofuels in all decarbonisation pathways/scenarios, except for the BIO-A scenario where their share would go up to 99% and BIO-B where they represent 100%.

By design, through the implementation of specific incentives, both BIO-A and BIO-B scenarios achieve 0.6% share of biomethane (about 1.8-1.9 Mtoe) and 0.7% share of biokerosene (around 2.1 Mtoe) in all liquid and gaseous transport fuels by 2030. It is clear that without such a design, the overall demand of advanced renewable fuels would be fulfilled by fuels with lower cost (i.e. lingo-cellulosic ethanol and fungible biodiesel).

Figure 18: Liquid and gaseous biofuels in 2030 and 2050 (in % of total liquid fuels and in Mtoe)

Source: PRIMES-TREMOVE and PRIMES Biomass supply model (ICCS-E3MLab)

Note: 'Advanced renewable fuels' is used to cover fuels produced from feedstocks listed in Annex IX Part A and Annex IX Part B of the ILUC Directive.

The additional demand of advanced renewable fuels in the BIO-A and BIO-B scenarios is mainly covered by domestic production. The need to meet the additional demand for Annex IX (of the ILUC Directive) sourced feedstock implies higher investments in bio-refineries producing these types of biofuels and thus an increase in the investment expenditures as additional capacities have to be established in Europe.

The unit capital cost of such bio-refineries is higher than that of conventional ones. However, increased production of advanced renewable fuels drives a reduction in the unit capital costs of these installations over time, as a result of learning effects. In BIO-A scenario, additional yearly capacity of advanced production processes of 4 Mtoe for 2021-2030 and 44.8 Mtoe for 2021-2050 is required compared to REF2016, while in BIO-B 7.3 Mtoe for 2021-2030 and 49.5 Mtoe for 2021-2050. In EUCO30 and all other decarbonisation pathways/scenarios, no significant capacity increase takes place for 2021-2030 relative to REF2016 but additional yearly capacity of advanced production processes of 31.6 Mtoe would be needed for 2021-2050 relative to the Reference scenario.

The additional capacities to be established would lead to an average annual increase in capital costs of €0.8 billion for 2021-2030 (€8.2 billion for 2021-2050) compared to the Reference scenario in BIO-A scenario and €1.4 billion for 2021-2030 (€9.1 billion for 2021-2050) in BIO-B scenario. EUCO30 and all other decarbonisation pathways/scenarios result in lower average annual increases in capital costs of €0.1 billion for 2021-2030 (€6 billion for 2021-2050) relative to REF2016, due to the lower uptake of advanced renewable fuels in these scenarios.

4.3.6 Impacts on transport as a business

The impacts of the decarbonisation pathways/scenarios on the transport sector itself are analysed in terms of level of activity, modal shift and unit costs per user.

Transport activity

Passenger transport activity is expected to continue growing in all decarbonisation pathways/scenarios relative to 2010 (about 20-22% by 2030 and 38-39% by 2050). However, active policies in place for stimulating change in the transport system would put a brake on the expansion of passenger transport activity in the decarbonisation pathways/scenarios relative to the Reference scenario, activity going down by 0.2-1.4% in 2030 (see Table 7 ). MOBI and MOBI-TAX scenarios show the highest decrease in the passenger transport activity (0.9% and 1.4% by 2030, respectively) compared to REF2016, due to their strong focus on policies intelligently managing transport demand and taxation, supported by cross-cutting initiatives in the urban area. Advanced research and innovation in electro-mobility enables the decarbonisation of passenger transport with lower impact on transport activity in the TECH scenario (0.2% reduction in 2030 relative to REF2016), due to the uptake of electric propulsion vehicles at lower costs and limited impact on the unit cost of passenger transport.

Similarly, freight transport activity shows significant growth over time in all decarbonisation pathways/scenarios (around 33-35% for 2010-2030 and 56-57% for 2010-2050), driven by sustained economic activity growth. MOBI and MOBI-TAX scenarios display the highest decrease relative to REF2016 (0.9% and 1.6% in 2030, respectively) due to intensive measures optimising the efficiency of the transport system and leading to reductions in road freight activity. The impact is highest in MOBI-TAX, because fuel costs including taxation represent almost 30% of the total road freight costs.

Table 7: Change in passenger and freight transport activity relative to EU Reference scenario 2016

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: * For aviation, domestic and international intra-EU activity is reported to maintain the comparison with reported statistics; ** Transport activity levels in REF2016 are reported in billion passenger-kilometres for passenger transport and tonne-kilometres for freight transport.

Modal shift

The market shares of passenger and freight road transport decrease in all decarbonisation pathways/scenarios relative to REF2016 (0.6-0.9 percentage points in 2030 for passenger road transport and 0.9-1.8 percentage points for road freight), driven by measures internalising external costs but also by policies improving the competitiveness of rail and inland navigation (see Table 8 ).

Table 8: Change in the modal shares relative to the EU Reference scenario 2016 (in percentage points)

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: * For aviation, domestic and international intra-EU activity is reported to maintain the comparison with reported statistics; ** Modal shares in REF2016 for 2030 and 2050.

Passenger rail increases its modal share by 0.6-0.8 percentage points in 2030 relative to REF2016, and freight rail by 0.4-0.9 percentage points; freight inland navigation modal share goes up by 0.5-0.9 percentage points in 2030. The highest modal shift towards rail and inland navigation takes place in MOBI and MOBI-TAX. High-speed rail gains further shares, reaching 2.7-2.8% of passenger transport activity by 2030 and 3.6% by 2050 in MOBI and MOBI-TAX; it is projected to undertake 108 billion more passenger kilometres in 2030 and 218 billion more in 2050 relative to 2010.

Air transport modal share in the decarbonisation pathways/scenarios remains similar to REF2016 by 2030; post-2030 its modal share slightly decreases relative to REF2016, due to higher ETS prices which lead to lower growth in air transport activity.

Unit costs per user

The unit costs per passenger transported would increase in all decarbonisation pathway/scenarios (see Table 9 ), despite the decline in the fuel costs per km travelled driven by improvements in vehicle and transport system efficiency. 158 , 159 EUCO27 and EUCO30 show moderate costs increases by 2030, of about 1.1-1.2% relative to the Reference scenario. MOBI and MOBI-TAX show the highest increases by 2030 (2.1% and 2.8%, respectively) due to a more ambitious pathway for internalising local externalities than in EUCO30, capital costs (i.e. transport equipment costs) related to public transport and the alignment of the EU minimum tax rates of petrol and gas oil (in MOBI-TAX). The cost increase in VEH scenario by 2030 (1.6%) is driven to large extent by the equipment costs for the electric propulsion vehicles while in BIO-A (1.3%) and BIO-B (1.5%) by the fuel costs related to the higher uptake of advanced biofuels. The increase in unit cost per passenger transported is higher in BIO-B relative to BIO-A due to the higher share of advanced renewable fuels in this scenario (6.9% in BIO-B versus 4% in BIO-A in total liquid and gaseous transport fuels in 2030). TECH scenario shows the lowest increase in unit costs per passenger transported, similar to EUCO27, due to lower increases in capital costs (i.e. transport equipment costs) as an effect of policies that enable the rapid deployment of new powertrains supported by advanced research and innovation in electro-mobility. By 2050, all decarbonisation pathways/ scenarios show relatively similar impacts on unit costs per passenger transported (3.7 to 4% increase relative to REF2016), except for TECH scenario which results in lower costs increases (around 2.6%).

Table 9: Unit cost of transport relative to Reference scenario 2016

Source: PRIMES-TREMOVE transport model (ICCS-E3MLab)

Note: * Unit costs for passenger transport are expressed in euro per passenger-kilometres and for freight in euro per tonne-kilometres. Costs are expressed in 2013 prices. For REF2016 the levels of unit costs are provided for 2030 and 2050 for passenger and freight.

For freight transport, the drop in unit fuel costs outweighs the increase in unit capital costs and variable non-fuel costs (i.e. road charges) in most pathways/scenarios by 2030. As already explained, fuel costs play a more important role in total costs for freight, relative to passenger transport. The highest increases in unit cost for freight transport 160 take place in the MOBI and MOBI-TAX scenarios (1.8% and 3.1% by 2030, respectively), similar to passenger transport. In BIO-A scenario the strong uptake of advanced renewable fuels results in about 0.3% increase relative to REF2016, while in BIO-B, where the share of advanced renewable fuels is even higher, in about 0.5% increase. By 2050, unit cost for freight goes up by about 1.6-2.2% relative to REF2016, only MOBI-TAX scenario showing higher increases (2.8% relative to REF2016).

4.3.7 Economic impacts

The economic impacts of the decarbonisation pathways/scenarios are assessed in terms of transport system costs, investments and transfer payments to the public budget. The scenarios are not directly comparable since they achieve different cumulative GHG emissions reductions in 2050. The net average costs per tonne of CO2 are hence shown, to provide a comparison between decarbonisation pathways/scenarios from this perspective. In addition, a qualitative assessment is provided for impacts on competitiveness.

Transport system costs

When assessing transport system costs for the decarbonisation pathways/scenarios, it needs to be taken into account that costs of already adopted policies as well as developments largely unrelated to policy (e.g. renewal of ageing vehicle stock, growing international fossil fuel prices, growing transport activity) are already covered in the Reference scenario 2016.

System costs are presented from the perspective of the transport sector, i.e. the costs for providing mobility services. 161 They include:

capital costs related to transport equipment;

fuel costs (including fuel-related taxes like excise duties and value added taxes);

fixed operation costs (e.g. maintenance costs);

variable non-fuel operation costs (e.g. charges, registration taxes and other ownership taxes);

external costs (of congestion, air pollution, noise and accidents);

infrastructure costs for alternative fuels (i.e. for the recharging/refuelling of electric propulsion vehicles including fuel cell vehicles, for the refuelling of LNG lorries and bunkering of LNG vessels).

Transport system costs include transfer payments to the budget (i.e. excise duties, value added taxes, registration taxes and other ownership taxes, charges, payments for CO2 allowances in aviation under the EU Emission Trading Scheme, etc.), which are additional costs for the user although considered as a transfer from the point of view of society.