Road freight global pathways report

Freight transport is responsible for a high percentage of vehicle emissions. Substantial reductions will require a greater focus on medium- and heavy-duty trucks.

The decarbonization of transportation has made great strides in many parts of the world, thanks to zero-emission (ZE) cars, buses, light commercial vehicles, and various forms of micromobility. Progress has been slower, however, for medium- and heavy-duty trucks (MDTs and HDTs). Road freight now accounts for 53 percent of CO2 emissions within global trade-related transport, and this share is expected to rise to 56 percent by 2050 if current trends continue.

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While many recent technological advances have put a low-carbon-truck future within reach, success will require greater collaboration along the entire value chain. The World Economic Forum’s (WEF’s) Road Freight Zero (RFZ) initiative, established in September 2020, is designed to help industry leaders jointly develop solutions. The target audience includes stakeholders on both the demand and supply sides, including manufacturers; consumer-goods giants; logistics majors; fleet operators; energy, tech, and infrastructure firms; innovators; finance companies; academic institutions; and civil-society groups.

Our report, Road Freight Zero: Pathways to faster adoption of zero-emission trucks, is a joint publication by WEF and McKinsey that describes how the RFZ initiative can help countries reach their emissions goals. This report draws on a large body of modeling, research, and direct RFZ-partner engagement, including multiple workshops with more than 40 companies, a dedicated survey to assess barriers and solution pathways, numerous deep-structured interviews with RFZ partners to analyze specific archetypes of ZE truck adoption, and quantitative use-case modeling.

After providing an overview of the road-freight market, this report discusses barriers that may prevent progress toward ZE emissions, as well as potential solutions for overcoming obstacles. Although this report focuses on the European trucking sector, many of the solutions could be applied globally.

The growing toll of road-freight emissions

Road freight currently generates 15 percent of European CO2 emissions. About 70 percent of those emissions come from MDTs and HDTs—the hardest-to-abate segments. But this may not be the case for much longer since the transition to ZE technologies has already begun. Recent research by the McKinsey Center for Future Mobility suggests that by 2025, 4 percent of all MDT and HDT sales in Europe will be ZE vehicles. That share could grow to 37 percent by 2030, representing about 150,000 vehicles, provided that the rollout is supported by 140,000 public and destination charging points and 1,500 compatible hydrogen-fueling stations.

The current growth trajectory for ZE trucks, while promising, would not be sufficient to limit global warming to 1.5°C above preindustrial levels—the amount agreed upon in the 2015 Paris Accord. To reach that target, there would need to be even more investment in both ZE trucks and infrastructure than currently projected. For instance, additional investments of €25 billion to €30 billion are needed by 2030 for a faster rollout of higher capital-expenditure ZE trucks. Supporting a much larger ZE fleet in a 1.5°C pathway could also require €50 billion to €60 billion in additional infrastructure investments (above current projections) by 2030. That equates to approximately 1,000 to 1,500 additional hydrogen-fueling stations and 150,000 to 200,000 additional charging points for trucks.

Underlying technologies

Two main technologies currently vie for acceptance: battery-electric vehicles (BEVs) and hydrogen-fuel-cell electric vehicles (FCEVs) (Exhibit 1). Both feature electric powertrains with batteries and electric motors, but they use different energy-storage systems. While a broad offering of BEV trucks will become available before 2025, most OEMs are also investing in FCEV technology, with large-scale market entries planned post-2025. Hence, the future market will most likely include a mix of both BEV and FCEV powertrain technologies. The backers of both BEV and FCEV technologies assume that future tipping points, including regulatory policy changes, will close the gap for the total cost of ownership (TCO) between these technologies and the alternatives (diesel vehicles or other ZE truck solutions).

Different technologies can enable zero-emission trucks.
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The importance of partners along the value chain and alternative fuels

Although our report focuses on road freight with zero on-road emissions, full decarbonization depends on the entire value chain. For example, BEV trucks run on electricity from the grid, but the carbon intensity of national electrical grids varies by country. In the EU, about 60 percent of electricity comes from carbon-free sources, so renewable-energy supplies need to expand in sync with BEV truck demand. Currently, a mix of blue (low-carbon) and early pilots of green (renewable) hydrogen are available commercially. To achieve the full decarbonization impact for FCEV trucks, the hydrogen must come solely from green sources.

In addition to BEV and FCEV, the industry can help reduce net carbon emissions using alternative fuels. While options such as liquid natural gas (LNG) or compressed natural gas (CNG) allow for moderate carbon savings, synthetic fuels and newer biofuels, such as bio-LNG, bio-CNG and hydrotreated vegetable oil (HVO) biodiesel, are becoming viable lower-carbon options. As these alternative powertrains use internal combustion engines, they can play a relevant role as bridging solutions, although they all generate tailpipe emissions and thus are less attractive to regulators.

Barriers to zero-emissions trucking and the path forward

Through a formal survey and deep-dive interviews of Road Freight Zero partners, we uncovered many potential challenges to ZE truck adoption from 2021 through 2030. These are the two most important barriers:

  • A lack of charging/refueling infrastructure. ZE trucks will require new charging or hydrogen-refueling stations. For some use cases, charging and refueling operations can take place in depots using infrastructure built specifically for the user. But to increase route flexibility and to serve the full set of use cases, stakeholders need to build public on-the-go infrastructure, which typically requires high investment, strong business cases, and effective execution.
  • The need for new financing models for trucks and infrastructure. Finance companies must adapt the depreciation and operating cost curve models of traditional trucks to suit ZE-truck technology. For instance, vehicle depreciation related to TCO depends on the purchase price, residual value, and duration of ownership. High capital expenditures and uncertain residuals result in higher depreciation and high truck costs for ZE vehicles, and financing models should take this into account.

Based on our survey of WEF partners, discussions with industry partners, and a review of the latest published reports, the RFZ initiative has identified three groups of solutions to overcome barriers and accelerate road-freight decarbonization. First, new policies could improve TCO for ZE-truck owners while simultaneously reducing risk for infrastructure providers. These policies might include the following:

  • purchase subsidies for ZE trucks
  • carbon taxes or credits on vehicle emissions
  • road-toll exemptions for ZE trucks or penalties for diesel trucks
  • increased taxes or driving bans and fines in city centers (assuming appropriate ZE-truck alternatives are available)
  • grants that cover up to 75 percent of infrastructure purchase and installation costs
  • tax reductions on electricity rates for companies that provide commercial EV charging

The industry would also benefit from innovative financing, especially at the beginning and end of the ownership period. Possible solutions might involve dynamic pay-per-mile leasing schemes, which reduce the risk for fleet operators by partially basing payment on usage, or battery-as-a-service offerings, which end customers could purchase on a monthly subscription basis.

Finally, the path to ZE trucking will be smoother if industry consortia collaborate on a coordinated rollout of market-ready ZE vehicles and corresponding infrastructure. Some pilots are already occurring in Europe, and they could serve as models for larger deployment as TCO improves.

In addition to overcoming barriers, the trucking industry may accelerate the adoption of ZE trucks by focusing on the correct use cases. Based on a detailed database and a TCO tool, the RFZ team estimates that two use cases will be most important over the near-to-medium term and also have the greatest decarbonization impact in Europe. The first relies on depot distribution via MDTs and involves 11 short-haul routes around regional hubs. The trucks would return to the same depots each day with high route predictability, reducing demand uncertainty for both infrastructure and trucks. Exhibit 2 provides more information on activity patterns and operations for these routes. With this use case, the upfront capital-expenditure investment for the trucks themselves will be lower than that for long-haul trucks because their lower payload and range requirements allow the use of smaller batteries. The second important use case focuses on long-haul routes along nine high-traffic corridors in Europe using HDTs.

Short-haul deliveries using zero-emission trucks involve various activities and operations.
We strive to provide individuals with disabilities equal access to our website. If you would like information about this content we will be happy to work with you. Please email us at: McKinsey_Website_Accessibility@mckinsey.com

For more information, download the full report on which this article is based, Road Freight Zero: Pathways to faster adoption of zero-emission trucks (PDF10.9 MB).

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