COP27 EV dream may need to go through the gears

In all the headlines emanating from Egypt during COP27, one has slipped under the radar that may have a profound impact for the global risk market.

During the event the USA, Ukraine, Ireland, Aruba, Belgium, Croatia, Curaçao, Dominican Republic, Liechtenstein, and Lithuania announced they would join the world’s “most ambitious agreement” to address climate emissions from transport.

All have become signatories to the Global Memorandum of Understanding on Zero-Emission Medium- and Heavy-Duty Vehicles. What the MoU does is commit those who have signed up to it to deliver 100% new zero-emission medium- and heavy-duty vehicle (MHDV) sales by 2040 at the latest, with an interim goal of at least 30% new sales by 2030. It brings the number of countries signed up to the MoU to 26, which includes the UK.

“We have to work together across oceans and borders to meet our clean energy goals,” said US Secretary of Energy Jennifer Granholm. “This global partnership will leverage the billions of dollars in clean transportation investments provided by President Biden’s Agenda to drive technological innovation, lower vehicle costs, and reduce transportation emissions.”

“The United States sends a powerful message today to the international community that it will work strategically and collaboratively to transition the commercial vehicle sector to zero-emissions. Today’s action will advance zero-emission vehicle manufacturing, boost our economy, and create good paying jobs while reducing greenhouse gas emissions,” said John Boesel, CEO of CALSTART. The Global MOU is co-led by the nation of the Netherlands and CALSTART’s Global Commercial Vehicle Drive to Zero (Drive to ZeroTM) program and campaign.

Talk of billions of dollars in investment and the vision of all buses and trucks on the US roads becoming electric vehicles is an enticing one and the capabilities are already there with currently more than 800 models of zero-emission MHDVs on the market globally.

The aim is ambitious as US motor manufactures will need to scale up their EV production to levels which had not been envisaged three years ago. They say if the demand is there it is achievable but there are one or two barriers to which those behind the MoU and the dream of an all EV future by 2040 need to be aware.

The US logistics sector is not awash with capital and the costs of MHDVs at present are seen by all but the biggest of companies as prohibitive so the take up of EVs may well be lower than the Biden administration may hope.

The second is the fact that with the volatility in US politics the Democrats cannot be confident they will win a resounding victory in the next presidential elections, so a Republican incumbent may have a different view of the expediency of signing up to the MoU. This month saw the  Republicans take the slimiest of control of the House of Representatives and can now spoil any efforts to deliver new legislation.

But the bottom line is that the MoU remains non-binding and as we all know talk is cheap.

Jon Guy, Editor

Emerging Risks