Transforming transportation

European transportation is the only sector where carbon emissions have actually risen over the past three decades . Electrifying road transportation has therefore become an urgent priority
Relative to other parts of the world, Europe has established itself as an important hub of electric vehicle (EV) production and expanding charging point infrastructure, but this progress is in jeopardy
Securing safe and diversified commodity supply chains is required. The growth in European EV production will necessitate an estimated 18 times more lithium and five times more cobalt by 2030 . Europe also needs to build its lithium-ion battery productive capacity
The installation rate of EV charging point infrastructure needs to increase nine-fold by 2030. Failing to invest will put at risk the target of increasing EV passenger car numbers over tenfold to 42.8 million by the end of the decade
To support the growing numbers of EV requires investment in renewable energy production capacity and power grids
The European EV market has become an attractive destination for new entrants particularly from Asia who are taking market share from EU auto makers. U.S. play-ers are making strong in-roads into rolling out EV charging point infrastructure
The lack of venture capital may also be a factor stifling innovation in the sector. Where home grown technologies are being developed, the lack of local funding risks these technologies being exported to more dominant market players in Asia or the U.S.
Initiatives to crowd-in private sector capital are therefore urgently required. While capital flows into charging infrastructure have begun to ramp up, they are not near-ly large or widespread enough to meet required roll-out levels
Infrastructure investors are likely frontrunners to finance the charging infrastruc-ture network, but most investment opportunities do not provide suitable risk/return profiles for the asset class. Subsidy support should not only address installation, but also operation, given the EV market has yet to fully develop

Introduction

Following our December 2022 report^[1], a framework for European transformation, this paper is the first in a series of reports exploring the transformational journey required across the European transport, energy and building sectors and the actions required to mobilise the necessary capital to finance this transition.

As outlined at the end of last year, a transformation of the European economy is urgently required given a more hostile geopolitical environment, in recognition that past growth drivers are now moving in reverse and to meet the continent’s ambitious climate and environmental goals.

In this paper, we begin with an examination of the European transportation sector where decarbonisation has largely been absent to date^[2]. Section two assesses the European transportation sector and the growth in electric vehicles (EV) and charging point infrastructure across the continent. The third section examines the risks and opportunities facing the sector, which include the need to build safe and diversified supply chains and supporting the domestic industrial base to build the necessary infrastructure where possible and desirable.

Policymakers will also need to keep a watchful eye on foreign entrants who are moving aggressively into the sector and, ideally, coordinate appropriate responses with geopolitical allies, notably the United States to mitigate longer-term economic and security risks. We conclude by proposing certain financing models that might help to crowd-in private sector investment.

We will show that there is no room for complacency. This is not so much because Europe necessarily urgently needs to hold on to its status as the world’s second largest producer of passenger cars. In itself, surrendering this edge to foreign competitors most notably in the United States or friendly Asian allies would not necessarily be detrimental to European prosperity. Rather, our argument, is that Europe already has plenty of strength to build on and appropriate policy actions could accelerate the electrification of transport infrastructure globally, if Europe serves as an example. Urgent action is also required to meet the European Union emission reduction targets which includes cutting new passenger vehicle emissions by 55% by 2030 and for all new cars sold to be emissions free by 2035^[3].