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The future of the EU transport sector (2021-2024) – four trends

For the EU’s transport sector, the last several months were exceptionally challenging with passenger and freight transport being severely disrupted. Although the recovery of the sector is of vital importance for Europe’s economy, it also provides a momentum for the industry to act on the ambition of decarbonization and reaching climate neutrality by 2050. The upcoming EU Strategy for Sustainable and Smart Mobility (“EUSSSM”), scheduled to be published by the European Commission on 9 December, should pave the way towards sustainable recovery and provide clarity on the instruments to get there. The EUSSSM is the sequel to the 2011 White Paper on transport and will set out the broader policy priorities for the transport sector for the period of 2021-2024, including timelines for legislative and non-legislative proposals. A stakeholder consultation was closed on 23 September, attracting more than 600 stakeholder contributions. Based on our latest intelligence and the contributions of our clients to the consultation, Dr2 Consultants presents four emerging trends that will shape the future of the EU transport sector.

1. Prioritizing alternative fuels across all modes of transport

Alternative fuels are a key priority for the Commission to cut emissions and create jobs. The EU’s executive arm aims to accelerate the production of low-emission fuels and the deployment of sustainable vehicles and vessels. Following the publication of the Hydrogen Strategy this summer, the EUSSSM is expected to outline the broader uptake of green hydrogen in the transport sector. Although electrification seems to be the most viable option on the short term, hydrogen is dubbed as the energy source for the future of the EU transport sector.

In addition, the EUSSSM is expected to propose a range of policy instruments to decarbonize the EU transport sector and cut back CO2 emissions. A silver bullet to decarbonizing the transport sector is lacking, hence a mix of alternative fuels is required. The details of the fuel mix for the future will be worked out in both FuelEU proposals (FuelEU Maritime and ReFuelEU Aviation), that will aim to set out a pathway for low-emission fuels to be used in the maritime and aviation sectors. In parallel, the Commission is working on the revision of the Alternative Fuels Infrastructure Directive (AFID), which will accelerate the development of the necessary infrastructure across Member States to stimulate the uptake of low emission fuels for all transport modes. The AFID is expected to be upgraded to a Regulation to ensure that Member States act upon the ambitions.

How can the EUSSSM and related initiatives stimulate the uptake of alternative fuels in the maritime sector? According to the Port of Rotterdam, the FuelEU initiative and the AFID revision should be handled in an integrated manner to ensure that demand and supply requirements remain aligned. At the same time, a goal-based approach is a prerequisite for success. According to the Port, there is no one-size-fits all approach: the legislative framework should be accompanied by a clear roadmap (to be developed by the Member States together with all stakeholders in the value chain) encompassing the range of fuels available for each segment, while meeting general criteria of sustainability, carbon intensity and affordability.

2. Safeguarding competition in the aviation sector

European airlines have been intensively exploring potential pathways towards reducing their carbon footprints (offsets or market-based measures). To limit the climate impact of air travel, it is essential that a basket of measures is applied simultaneously to allow European aviation to fully contribute to the climate effort while long-term solutions are implemented to reduce emissions. These measures include, i.e. greener aircraft technologies, more efficient operations and infrastructure, the development of and appropriate support for sustainable aviation fuels (SAFs) and smart economic instruments.

The sustainable growth of aviation, which produces socio-economic benefits and contributes to achieving European environmental targets, remains one of the industry’s most important objectives. There is an urgency to make bold political decisions that will help European aviation meet these objectives for the benefit of passengers and businesses that rely on sustainable air connectivity. The EU should however refrain from imposing unilateral measures at EU level that would hamper European airlines’ ability to compete at global level.

3. A modal-neutral approach, facilitating sustainable transport

In recent months, Member States such as Austria and France have both announced that they would significantly cut short-haul flights if an alternative transport mode is available. Simultaneously, railway undertakings experience an increasing market demand for international rail passenger transport. According to the Dutch Railways (Nederlandse Spoorwegen – NS), the principal Dutch rail passenger operator, the EUSSSM should embrace the modal shift and stimulate the uptake of climate-friendly alternatives such as rail. In order to promote the development of an international passenger service market, the NS is of the view that the EU should strive towards the creation of a European high-speed network that is interoperable, linking European capitals and major cities and connecting urban nodes and airports.

The EUSSSM is expected to have a modal-neutral approach, but it will focus on facilitating the market demands and stimulating sustainable modes of transport. The Commission is expected to address issues related to establishing a level playing field between the modes of transport (i.e. fuel taxation, infrastructure charges), improving intermodal ticketing services and increasing the customer experience through digital solutions such as the Mobility as a Service (MaaS) concept.

4. Green funding to enhance the resilience of the EU transport industry

In order to stimulate the resilience of the European transport industry and to realize the ambitions that will be set out in the EUSSSM, investments are necessary. Following the landmark approval of the new EU budget and the Next Generation Recovery Fund by the European Council in July, the co-legislators are expected to conclude the budget negotiations by the end of this year. With a combined firepower of more than €1,800 trillion, EU Member States will have various funding instruments at their disposal to finance the recovery of the transport sector.

Member States are currently drawing up the national recovery plans in order to receive funds from the Recovery Fund. The draft plans should be shared with the Commission by late October. Project that have a cross-border impact, clear link to sustainability objectives and which can be executed in the next five years will get priority. According to the Commission, 30% of all funding through the Recovery Fund and in the new EU budget will be spent on sustainable projects.

Next steps

The EUSSSM is expected to be published on 9 December. In case you would like more information on the anticipated impact of the strategy on your organization or would like to know more about the future of the EU transport sector, do not hesitate to get in touch with us.

Visit our Transport Sector webpage.