The key headline from a leadership roundtable moderated by Bain & Company and hosted by Environmental Defense Fund (EDF) is that extensive and radical change will be essential to secure decarbonization of the transport sector and to achieve net zero.
The roundtable was held during ADIPEC, the annual global energy conference and exhibition, during which global leaders and industry experts convened in Abu Dhabi to discuss issues at the heart of the energy sector, and help shape a more secure, affordable and sustainable energy future.
“Achieving net z
ero is impossible without further policy and incentive reforms to the fuels market’,” Peter Parry, Chairman of Bain & Company’s Global Energy and Natural Resources Practice, told participants at the roundtable. “Transition will depend as much on business models, partnerships, and market structure as the performance of clean transport technology.”
The transport sector accounts for almost 40% of global carbon dioxide emissions, according to the International Energy Agency (IEA).
With an increasing number of independent markets and localized decarbonization strategies, achieving net zero has become almost impossible without bridging gaps between industries, the roundtable’s participants heard.
The roundtable discussed how the decarbonization industry is moving slowly as each stakeholder in manufacturing, energy and infrastructure waits for others to make bold investments first. Participants also reflected on how the transport industry’s strategic plans can span decades, as opposed to years, which can create barriers that keep the system in a fossil fuel-based model.
The roundtable aimed to address the environmental challenges facing the transportation sector by discussing how technology, policy, and business models impact successful partnerships.
Key takeaways included:
Novel partnerships will be crucial in decarbonizing transport. Successful transport decarbonization will require broad and unprecedented cross-sector partnerships that challenge previous ways of thinking. These collaborations will lay the foundation for new ways of engaging governments, suppliers, customers, and competitors to create scalable, system-wide solutions.
Ambitious thinking can unlock new forms of value. Economies of scale are an important factor to consider for transport decarbonization. Once low-carbon facilities are available, there may be a surprising level of non-conventional offtake demand. This can supplement primary revenue streams and improve the scale economics of decarbonization assets.
A carefully crafted policy is critical. Government entities have the potential to promote clean transportation with consistent, solution-agnostic, technology-neutral policy. Financial incentives, such as tax breaks, and non-financial incentives, such as skilled immigration, can be powerful tools to encourage long-term investment into energy assets. Policy decisions should not incentivize low carbon transport in a way that competes with incentives for fossil fuels. At their best, policies champion entrepreneurial thinking and experimentation, allowing the private sector to independently develop innovative business models.
Successful partnerships focus on common interests and mutual benefits. While industry players agree on the value of clean transportation pathways, they maintain their own interests and agendas, limiting the success of cross-sector partnerships. Given the current consensus on the need for low carbon initiatives, it’s critical for stakeholders to proactively approach alignment opportunities.
Trust, transparency, and common terminology can lead to system-wide thinking. Collaboration across industries is preceded by open conversation, mutual trust, shared experience, and targeted risk-reward evaluation.