When I talk about “LCFVs” what am I really talking about and why should it matter to you? If you’re a first-gen biofuels, advanced biofuels or advanced alternative fuels producer, why should you care about fuel economy or electric vehicles? If you’re an electric vehicle producer or infrastructure company, why should you care about biofuels? If you’re a refiner, why should you care about air pollution, car bans or connected, autonomous driving? If you’re an automaker, why should you care about any of the above? Let me back up and explain, drawing from my November report to subscription members.
Despite a prolonged period of low crude oil prices, citizens and policymakers in many countries have never been more serious or committed to combating climate change in all sectors, including transport. We know this. Transport currently contributes 23% of energy-related greenhouse gas (GHG) emissions and 20% of energy use and is expected to double by 2030, according to IEA. Passenger transport accounts for nearly 60% of total transport energy demand, and 60% of this is in OECD member countries.
Decarbonizing transport is a major challenge with some strong advocates calling for a single solution (electrification). That’s something that needs to be watched by all the stakeholders noted above. In my view, the reality is that multiple strategies will be required to achieve decarbonization with the understanding that fossil fuel demand will remain in place for some time, especially in emerging economies.
GHG emissions are increasing, and so is transport-related air pollution. After all the oil and car industries have done to clean up fuels and vehicles over the last 20+ years, air pollution is actually worse than ever in some parts of the world as more and more people with growing incomes buy cars. The global car fleet is expected to double in the next 20-25 years, shown in the figure below. And with oil prices so low, people are driving more than ever in countries like China and the U.S.
Air pollution mitigation, except for in extreme cases (like China) has been completely overshadowed by the climate change movement, but the consequences are much more immediate and even alarming as the following chart shows.
These two main drivers, climate change and air pollution mitigation, is where low carbon fuel and vehicle (LCFV) initiatives come into play. These kinds of initiatives are targeted to reduce conventional fossil fuel demand and/or the demand for the internal combustion engine primarily in an effort to reduce GHGs and air pollution, but also as a tool toward economic development and energy diversification as well. These kinds of initiatives, which I have been covering both the public blog and for subscription members, are shown in the figure below.
Countries are now responding with initiatives requiring biofuels blending, electrification, other alternative fuels and tough fuel efficiency standards, among other measures. These measures are linked. The graphic below shows intended nationally determined contributions (INDCs) for transport countries have submitted as part of their Paris Agreement commitments, as well as a summary of other policy support and measures for renewable transport (e.g. biofuels, advanced biofuels), fuel economy/efficiency and electric vehicles (i.e. zero emission vehicles).
My experience is that industries tend to care, appropriately, about what’s happening in their own backyards. For example, if you’re a biofuels producer, you care about things like the Renewable Fuels Standard, Renewable Energy Directive and market share, among myriad other concerns. But what motivated me to start this site, and my consultancy, is that recognition that the stakeholders need to look beyond their backyards and at the bigger picture.
You can’t understand the full competitive landscape by only watching what’s happening in your own industry – you need to understand the full landscape to assess both opportunities and threats. And that’s totally overwhelming! Yet, the bigger picture is where we see the convergence of these trends that ultimately affect demand for the all the stakeholders’ products. The following graphic, showing the reduction in oil demand by 2040, makes this very clear.
Where are the strategic threats and opportunities in the evolving and emerging carbon-smart economy? And yes, Trump or no Trump, the march toward a global carbon-smart economy is going to continue (how it will evolve in the U.S. is yet to be determined). Helping out with the big picture by taking a holistic view, as well as identifying these strategic threats and opportunities for the stakeholders is what I’m trying to do here on both the public and subscription parts of the site.
