Net Zero Scenario & policy implications

"The window for achieving net-zero emissions in the road transport sector by 2050 is still open, but urgent action is needed and there is no room for complacency."

Electric Vehicle Outlook 2022, BloombergNEF

Some vehicle segments and geographies are almost on track for net zero under the Economic Transition Scenario (ETS); others are not.

To get on track for a net-zero global fleet by 2050, zero-emission vehicles need to represent 61% of global new passenger vehicle sales by 2030, 93% by 2035, and 100% by 2038.

In the Economic Transition Scenario, none of the analyzed countries achieves a full phase-out of combustion vehicle sales by 2038. Some get close – notably Germany, the UK, France and China – and some smaller auto markets are on track to easily achieve this.

Even though the costs of EVs and chargers are set to fall further in the decade ahead, emerging economies need financial support to help enable and accelerate the transition to electric mobility of all types.

Developed countries and multilateral institutions should include electric vehicle investments, incentives and charging infrastructure deployments in their international climate finance plans, making capital available to emerging economies with credible plans to develop this sector. Concessional finance has been a key enabler for the development of renewable power generation in emerging economies, and could play a similar role in the EV sector.

The fleet of passenger electric vehicles hits 469 million in 2035 in the Economic Transition Scenario but needs to jump to 612 million by the same date in the Net Zero Scenario. Much of the gap will have to be met in emerging economies.

"Urgent action is needed from policymakers in all countries on the heavy-truck segment, which is the furthest from achieving net zero. By 2040, zero-emission medium and heavy commercial vehicles are 95% of sales in our Net Zero Scenario, but just 35% in the ETS."

Electric Vehicle Outlook 2022, BloombergNEF

In addition to introducing tighter fuel economy or CO2 standards for trucks, governments may need to consider mandates for the electrification of fleets, including those of governments and transport operators. Governments should also consider zero-emissions zones in cites, and incentives to push freight into smaller trucks which can electrify faster than larger ones.

The ‘adoption gap’ between the scenarios is much smaller for two/three-wheelers (23 percentage points in 2035) and buses (13 percentage points in 2035).

Given the minor additional push needed to bend the curve on buses and 2/3-wheelers to net zero, policymakers should have high confidence that electrification targets in these segments can be met. Policy action for these segments can be an early win and should be taken without delay. Buses and 2/3 wheelers are the biggest near-term opportunity for electrification in emerging economies and can also create new jobs and local manufacturing investment.

"Across all segments, sales of new internal combustion vehicles need to be phased out by 2038 to stay on track for the Net Zero Scenario."

Electric Vehicle Outlook 2022, BloombergNEF

Even with that, some early retirements and conversions of older vehicles will be needed in the 2040s. This will require a surge in EV and battery production which peaks in 2040 that could be challenging for the industry to deliver.

Direct electrification via batteries is still the most economically attractive and efficient approach to decarbonizing road transport and should be pursued wherever possible. Hydrogen fuel cell vehicles can help fill the small gaps left by electrification in some heavy vehicles, in regions or duty cycles where batteries struggle.

In the Net Zero Scenario, hydrogen fuel cell vehicles are 10% of medium and heavy commercial trucks on the road in 2050, some 15% of municipal buses, and 2% of the passenger vehicle fleet. The balance is fully electric vehicles.

Electric vehicles represent a $9 trillion market opportunity between today and 2030, and $53 trillion between today and 2050, in the Economic Transition Scenario. This increases to $82 trillion between today and 2050 in the Net Zero Scenario. Countries should be carefully considering how they can create economic value-add and domestic jobs from this growth.

EVs are already a remarkable success story and are needed to bring transport emissions under control. But using them alone is not the most efficient way to reach Net Zero. This year’s Outlook includes a ‘reduced demand scenario’, looking at how governments can combat further car dependency. Even a modest 10% reduction in kilometers travelled by car globally in 2050 yields major benefits and makes the journey to net zero much easier.

The reduced demand scenario involves modal shifts, primarily to active transport (cycling and walking) and public transport. In it, the global car fleet drops by 200 million cars in 2050. This is the equivalent of the combined car fleets of the UK, Germany, France and Italy today.

The reduced demand scenario also reduces CO2 emissions by 2.25Gt cumulatively to 2050, and cuts annual battery demand by 433GWh in 2050, reducing strain on supply chains. Governments should prioritize investments in these areas, many of which also have concurrent health benefits. An ‘all of the above’ approach is needed to stay on track for net zero.