Decarbonising Infrastructure
This report sets out a high-level assessment of the policy action required to decarbonise Australia’s infrastructure sector, across its asset classes. It covers energy, transport, and asset management during construction, operation and waste.
CHAPTER 2
Emissions from the movement of people and goods have been rising, but transformation is around the corner
Despite improvements in vehicle efficiency over recent decades, Australia’s transport emissions have risen by 48.8 per cent against 1990 levels.[33] But change is on the horizon, with the commercialisation of technologies that will underpin decarbonisation of public transport and light vehicles – of which the latter is consumer-led. Freight decarbonisation is on a slower trajectory, but there are clear steps governments and industry can take now to accelerate the change required.
In contrast to the gains made in energy, pre-pandemic transport emissions rose steadily from 9.7 per cent in 1990 to 19 per cent of Australia’s national total in 2019. There was a brief dip during 2020, but transport emissions have bounced back to make up 18.1 per cent of the national total last year.[34] Actual emissions are likely much higher as well, given emissions from international aviation and shipping are excluded from these totals.
This upward trend reflects some of the challenges we face as a nation – vast distances between cities, production regions and markets, as well as a growing population with changing needs. But emerging technologies will turn this trend on its head. This is particularly true for light vehicles, which are on the cusp of a major transformation. Uptake of hybrid- and battery-electric vehicles is growing rapidly as their prices fall relative to internal combustion engine vehicles. The trajectory towards a low- to zero-emission light vehicle fleet is now all but certain.
With zero-emission bus commitments and renewable energy-powered metro and train networks, the future of public transport is also clear. Most state and territory governments have set strong directives for change. These have been driven through procurement and contractual arrangements, and supported by a range of private sector operators and technology providers.
But much more could be done through policy reform to accelerate the transition to net zero emissions mobility. The uptake of electric vehicles (EVs) remains slower than in other parts of the world.
Our petrol and diesel vehicles remain among the dirtiest in the OECD, due to the absence of vehicle emissions standards and our use of poor-quality fuel. The country’s EV charging infrastructure is also incomplete, and energy network upgrades will be required to enable the delivery of charging hubs and zero-emission bus depots.
Inadequate planning has acted as another barrier to decarbonisation initiatives too. Poor town planning – particularly in the growth areas on the outskirts of major cities – has left many residents without adequate access to transport, increasing their reliance on private vehicles. But a more holistic approach to transport and land use planning, focused on creating liveable, accessible cities with a variety of zero-emission mobility solutions, will unlock the most effective long-term solutions.
In the absence of commercially-viable and scalable decarbonised technologies, reducing the emissions produced by moving goods is proving more difficult. Future modal choices will be driven by the need to save time and money in an industry that typically operates on slim margins. Major technological breakthroughs – akin to the shift from steam to diesel locomotives in the mid-twentieth century – may take years but will likely bring about rapid transformation when they arrive.
In the interim, there is a lot to do in the way of meaningful incremental freight reform. Better planned freight networks would alleviate last mile access and efficiency issues, encourage modal shift through intermodal facilities, and improve connections to existing infrastructure. Moving to outcome-based regulation would provide a clearer pathway for zero-emission technologies to be piloted and implemented in Australia. Enabling the electrification of local freight would also aid in reducing emissions in a rapidly expanding part of the market.
As with energy, stronger national leadership is required to coordinate and capitalise on the transition efforts already underway. The Federal Government, in partnership with states and territories, should work with industry to identify zero-emission solutions, support their development, and accelerate their implementation. These solutions will need to meet the needs of Australia’s freight networks while minimising the costs of this transition.
Zero-emission fuels
that fill the gaps
Uptake of zero-emission fuels would see the use of fossil fuels in combustion engines replaced by a range of possible alternatives.
Zero-emission fuels fall into three main categories:
- biofuels (bio-methane, bio-ethanol, bio-methanol)
- electricity derived fuels (ammonia, hydrogen, e-methanol), and
- synthetic carbon-based fuels (synthetic methanol and synthetic methane produced by combining green or blue hydrogen with carbon retrieved from the atmosphere).
Each fuel has its advantages and disadvantages. Just as a range of fossil fuels are currently used for different applications, a range of zero-emission fuels will be used based on the needs of the particular transport mode and journey.
Transition strategies to decarbonise the movement of people
Electrify the light vehicle fleet
The market has already signalled that the future of light vehicles is unquestionably electric – positive news for decarbonisation given that light vehicles represent 10 per cent of Australia’s total emissions.[35] To have the intended result, however, the electricity powering these vehicles must be generated from renewable zero-carbon sources, the pathway for which is outlined in Chapter 1 on energy.
EV uptake will result in a range of positive benefits for individual users and the community. In addition to reducing greenhouse gas emissions, EV uptake will reduce noxious tailpipe emissions from internal combustion engines. This will improve air quality, particularly in dense urban areas, and bring significant health benefits. The move to EVs will also reduce Australia’s reliance on imported fuels, improving fuel security and reducing exposure to oil price volatility.
Yet Australia’s transition is slower than other countries. In 2021, EVs made up two per cent of new vehicle sales,[36] being a major jump in its market share from previous years. But the global average for EV sales is much higher, at 4.6 per cent in 2020, and 10 per cent in the EU.[37] With only 20,095 EVs registered out of a total Australian passenger vehicle fleet of 14.9 million at the beginning of 2021[38] (and 2022 figures anticipated shortly), dramatic growth in EV sales is required to bring down light transport emissions.
Overcoming challenges to accelerating EV uptake
1. Making EVs more affordable
EVs are likely to become the main vehicle of choice once cost parity with petrol and diesel vehicles has been reached. But relying on natural replacement of the fleet will see only gradual change over the next decade, with the average age of the passenger vehicle fleet being 10.6 years[39], and the EV sticker price remaining higher than its fuel equivalents in the near term. While heavy taxes on petrol and diesel vehicles have been used overseas in the EU and elsewhere to reduce the cost gap between these technologies, this approach is unlikely to be politically viable in Australia.
A number of state and territory governments have recognised this challenge and are responding with different mechanisms – including feeding growth in the second-hand market in the medium-term by incentivising EVs for commercial fleets and purchasing EVs for government fleets.
Governments in Victoria, South Australia, New South Wales and Tasmania have also introduced or committed to introduce a distance-based road user charge on electric vehicles through a model proposed by Infrastructure Partnerships Australia.[40] Together with the subsidies to the sticker price and investments in charging networks announced alongside this reform, road user charges can catalyse rapid electrification of light vehicles. This can occur by providing prospective EV buyers with greater certainty about future costs of using their vehicles, while providing sustainable funding to maintain and upgrade the roads their EVs will rely on.
2. Improving integration with energy systems
As the EV fleet grows, the load requirement for electricity infrastructure in residential areas will too. The average Australian EV consumes around 2,220 kilowatt-hours of electricity each year,[41] which, if charged solely at home, would represent around a 41 per cent increase in demand for the average household.[42]
This is an entirely new source of demand that will be placed on distribution grids, potentially exacerbated by EVs being plugged in to charge during the evening when commuters return home. If left uncoordinated, rapid EV uptake could result in rising costs for energy users as well as declining reliability of local grids.
Looming over the challenge of integrating EV infrastructure with the electricity system is another related issue – how to successfully integrate distributed energy resources into the grid. There are many potential solutions for EV charging that would benefit not only the EV motorists plugging in, but other energy users too. Providing incentives or greater discounts for off-peak demand could help to spread demand. Developing bidirectional charging could reward users for enabling their vehicles to supply spare capacity to their home or the grid when it is needed. Network operators coordinating a neighbourhood network of public or home chargers, could then utilise connected EVs to both absorb demand when there is excess renewable supply, and draw energy during peak periods to reduce local grid demands.
3. Overcoming range anxiety
Range anxiety is often considered a barrier to EV uptake in Australia, with the country’s size often cited as a major challenge. The natural policy response would be to develop a network of destination and en-route chargers. However, the average Australian commute is just 16 kilometres,[43] and only 7.2 per cent of travel by Australian EVs is outside urban areas.[44] Additionally, there is evidence that supply of charging infrastructure is already strongly leading demand. In 2020, there were approximately 2,400 charging stations across Australia, making the ratio of chargers to vehicles 1:9.[45]
Data also shows most users charge at home. In Norway, 90 per cent of charging is done at home,[46] and in California this figure is 86 per cent.[47] For those who lack access to a garage or driveway, changes to planning regulations can ensure chargers are installed in new apartment and commercial buildings. On-street charging can help to address remaining access gaps for many motorists in dense urban areas.
Governments should be careful not to invest in charging infrastructure where no market failure exists, or take on technology risks they are not well-placed to manage. Growing demand will be met with a growing commercial supply of chargers.
Identifying the appropriate locations for charging infrastructure requires complex analysis and longterm forecasts of user behaviour and commercial factors, which governments are not best-placed to undertake. A range of existing market players – service station owners, shopping centres, and tourism operators – are well-placed to deploy charging infrastructure on their sites in line with demand without additional government assistance.
4. Protecting against dumping of inefficient vehicles
Australia is the only OECD nation without light vehicle emissions standards. So long as there are no standards in place, mobility transport will remain exposed to the risk that any influx of high-emitting, low-cost internal combustion vehicles will undermine the uptake of EVs over the medium-term. With looming bans on petrol and diesel vehicle sales in other global regions, Australia’s market is at risk of becoming a future dumping ground for inefficient vehicles
The policy solution is simple – the Federal Government should legislate a light vehicle emissions standard and tie its level of implementation over time to standards in the EU or the US.
Case study 5: NSW EV fleet incentive [48]
In November 2021, the NSW Government announced the EV Fleets Incentive to help drive the uptake of battery-electric and fuel cell EVs. The initiative includes a funding pool of $105 million, which will be used to bridge the cost to businesses of transitioning their vehicle fleets to EVs. The initiative targets corporate and government vehicle fleets as they account for half of new vehicle sales in Australia and often have high fuel and maintenance costs.
It is hoped the incentive scheme will drive demand for EVs, which in turn will increase supply of new and used EVs.
The incentive functions like a Contract for Difference system. Businesses looking to procure vehicle fleets submit a bid to the NSW Government detailing two key figures:
- the difference in total cost of ownership (TCO) between the EVs the business is looking to procure and the vehicles that would have otherwise been purchased or leased, and
- the amount of emissions saved (CO2 equivalent) if the business were to procure EVs.
The total cost of ownership figure is then converted into a request for funding per vehicle and bids are then ranked based on $/tonnes of CO2 equivalent saved. The initiative also considers whether businesses intend to use renewable energy to charge their EVs.
The initiative is designed to hold multiple funding rounds until 2024. Businesses must buy at least 10 vehicles at a time.
Eliminate public transport emissions
Historically, buses and trains have been among the heaviest emitting transport vehicles. But recent public transport transformation has been rapid, with zero-emission technologies becoming commercially-viable, reliable and energy efficient over recent years across almost all modes. The question for governments and transport operators of how to decarbonise public transport has moved to how quickly it can be achieved. And elimination – not just reduction – of emissions from public transport operations has become an achievable goal.
Technology has been a major driver of change. For buses, advances in battery-electric and hydrogen fuel cell vehicles have provided options and flexibility for fleet operators to progressively shift routes and depot infrastructure to renewable energy-powered technologies. For trains and light rail, energy efficiency improvements have been made with advances in control systems and route optimisation, while installation of renewable energy generation across networks has enabled decarbonisation of energy sources.
Simple policy levers used to decarbonise fleets have also found great success. Train networks – even those as large as Sydney Trains – have moved to 100 per cent renewable energy by purchasing renewable energy certificates or signing power purchase agreements with renewable suppliers. Governments have set ambitious targets for the transition of bus fleets, then put this out to market through fleet and service contract procurements, with scope for innovation in how manufacturers and service providers deliver on governments’ objectives. There are numerous targets and commitments across states and territories but the NSW Government leads other jurisdictions in this regard. It has committed to transitioning its fleet of 8,000 buses to zero-emission vehicles by 2030,[49] and driven positive change through its ongoing bus service contract procurements.
Despite the positive outlook, a number of challenges will need to be resolved through this transition:
- For buses, battery capacity, geography and infrastructure may limit running of zero-emission vehicles on some routes, while upgrades to electricity distribution networks are likely to be required to handle the demand loads at depots.
- For trains and light rail, further improvements in energy efficiency and installation of distributed energy resources across networks can reduce their substantial call on grid capacity, while renewable energy agreements should be structured to ensure they support development of new renewable capacity.
- Further advances are required to reduce the embedded carbon in the manufacturing of zero-emission vehicles, including through lower-carbon materials and methods.
- For hydrogen buses and ferries, availability of commercially-viable fuels may restrict uptake in the near to medium-term. The hydrogen powering these vehicles will need to be green, meaning these vehicles will not be viable without an abundant supply of cheap renewable energy to create the hydrogen fuel.
Taking a smarter approach to transport planning
Decarbonising the transport sector will require a holistic lens that considers more than just how our vehicles are powered. How our mobility choices are influenced, and what incentives and options are required to shift user behaviour, are key considerations in our transition to reduce emissions. Moving people closer to jobs, education and services – or vice versa – reduces demands on transport networks and gives people back their most precious commodity: time.
But this is easier said than done. With over 86 per cent of the Australian population living in urban areas,[50] and many suburbs already laid out over vast areas, retrofitting solutions to improve transport connectivity often comes at great cost. Transport access is often worst in low-density outer suburbs of major cities, where a lack of public transport means more cars and more congestion, which compounds disadvantage.[51] Planning concepts like ’30 minute cities’ have proven easy to propose but tough to implement.
Alongside private vehicle transport, public transport also plays an important part of Australia’s mobility mix, and will play a key part in reducing mobility transport emissions too. The COVID-19 pandemic saw a sharp decline in travel overall, followed by a return to private vehicles for many commuters. At the same time, public transport patronage, which has grown markedly over recent years in line with improvements in service quality, has fallen. This is likely to be a transient phenomenon, as user behaviours revert to the long term trend in the coming years – further encouraged by the delivery of metro networks and other substantive public transport investments in major cities.
Moving to a more efficient, lower-emission transport system also requires a focus on making mobility transport modes easier, simpler and safer to use:
- Walking and cycling – active transport modes spiked in popularity during the pandemic in urban areas. These are travel habits that can be locked in and further incentivised by improving access and safety on footpaths and bike paths.
- Mobility as a Service – the integration of transport modes, including on-demand services, and payment platforms can provide seamless connections for users while enabling network operators to use the most effective and efficient means of getting customers where they need to go.
- Access to transport data – moving to digital payment platforms, alongside a range of technologies for monitoring vehicle passenger movements, has enabled transport providers to put more information in the hands of users to choose the most efficient trip.
- Spreading transport peaks – using pricing to encourage off-peak transport trips or staggering school and work start times can help to spread peaks in transport demand. While these measures will not reduce emissions in their own right, they can help to better utilise road networks and public transport capacity.
Case Study 6: Creating seamless zero-emission public transport journeys
Transport for NSW (TfNSW) has implemented a range of technologies and transport network planning strategies to make public transport easier to use and more attractive for customers. An example is the introduction of the B-Line bus services from the Northern Beaches to Sydney CBD, which opened in November 2017.
When launching this new mass transit link, TfNSW also planned for first- and last-mile transport to get customers from their homes to a major transport hub (and back again) without having to use private vehicles. In partnership with transport operator, Keolis Downer, TfNSW launched the Keoride On Demand bus service on the Northern Beaches to bring customers to and from key B-Line bus transport hubs. A 2020 survey of passengers showed 42 per cent of respondents would get rid of their car to use the Keoride On Demand service.[52] Keolis Downer reports that the service has also achieved 98 per cent customer satisfaction since the start of the service in 2017.[53]
To make end to end public transport journeys even more seamless, TfNSW created a an online platform called Transport Connect (previously Opal Connect) to be used on On Demand bus services such as Keoride. Transport Connect provides travel credits to passengers making multi-modal journeys, so that passengers don’t have to pay full price for each leg of their public transport journey. Customers can earn up to $2 On Demand travel credit (or $1 for child/concession) every time they transfer between participating On Demand services to or from another mode on the Opal network, if they transfer within 60 minutes. On Demand travel credit are added to the customer’s Transport Connect account balance to be used for future On Demand bookings.
The next step for TfNSW is to transition its fleet of over 8,000 buses to zero-emission buses. TfNSW expects to have nearly 200 battery-electric buses by the end of 2022, with 76 of these buses already in service. TfNSW is also supporting the development of depot infrastructure such as charging points and hydrogen storage.
Similarly, TfNSW added zero-emission buses to the tender criteria for recent bus region contracts in Sydney. Keolis Downer was awarded an eight-year contract to run bus services on Sydney’s Lower North Shore, including the Keoride On Demand bus service. Keolis Downer has ordered over 100 new zero-emission buses to replace older diesel buses as they are retired from the fleet.[54] Selected depots will also be converted to allow the implementation of the necessary infrastructure to re-charge the electric buses.
Read More
Recommendations to decarbonise Australia’s mobility fleet
What needs to change
Change barrier
Actions required
What needs to change
Australia’s light vehicle transition is slower than other countries, despite availability of low- to zero-emission vehicle technology in the market.
Change barrier
Actions required
Policy Readiness
Regulatory Readiness
The Federal Government should explore the economic benefits and costs of policy or regulatory interventions – beyond those already announced by state and territory governments – to expedite the uptake of new low- or zero-emission light vehicles. This includes introducing national standards on vehicle emissions, bringing Australia into line with other countries, while also working with commercial providers to address gaps in urban and regional charging networks.
What needs to change
Left unchecked, rapid uptake of EVs could place local electricity systems under strain.
Change barrier
Actions required
Regulatory Readiness
State and territory governments should work with distribution network providers to identify potential shortcomings in infrastructure, regulations and planning to cater to increased demand from EV uptake.
Commercial Readiness
All governments should continue to support trials and pilots of distributed energy technologies and pricing arrangements to optimise integration of EVs within local grids.
What needs to change
The majority of public transport buses are diesel-powered and emission-intensive. Many heavy passenger rail services draw large volumes of electricity from the grid, much of which remains non-renewable.
Change barrier
Actions required
Policy Readiness
State and territory governments should – if they have not already – commit to transition their bus fleets to zero emissions and set a target for full transition.
Commercial Readiness
Bus operators should work with energy distribution companies to ensure adequate, reliable supply of electricity to zero-emission bus depots.
Commercial Readiness
Passenger train and metro operators should sign Power Purchase Agreements to support uptake of renewable electricity generation and certify their services as zero-emissions.
What needs to change
Transport and land use planning in many parts of the country remains highly disconnected and fails to efficiently connect people to services and jobs, or encourage users to take the most efficient mode of transport.
Change barrier
Actions required
Policy Readiness
State and territory governments should look to build on the positives to emerge during the COVID-19 pandemic, including growth in the popularity of walking and cycling and implementing measures to encourage peak spreading, while continuing to enhance transport users’ experience to encourage efficient, lower-emission trips.
Regulatory Readiness
State and territory governments should work closely with local governments to address gaps in transport provisions and ensure the provision of new housing supply is coordinated with adequate transport capacity, particularly in outer urban areas, to ensure residents have access to alternatives to private vehicles.
Transition strategies to decarbonise the movement of goods
Compared to the outlook on light vehicles, the pathway to decarbonising freight in Australia is less clear. The vehicle-powered technologies needed to enable change are further away from commercial viability. Coupled with this, the scale of investment required to decarbonise freight networks is likely to be greater. Freight transport cannot be electrified in the same way as light vehicles, with long distances and heavy loads requiring a solution beyond the existing, commercially available, capabilities of battery-electric technology.
Despite this, decarbonisation is imminent in the industry. Once the economics fall into place, market dynamics are likely to bring about rapid transformation to zero-emission freight networks.
Decarbonising freight transport requires medium-term and long-term goals, based on the availability of low- and zero-emission technologies as they come to market. In the medium-term, there will likely be a role for technologies enabling low-emission freight in order to decrease Australia’s greenhouse gas emissions while zero-emission technologies are not feasible. In the long-term however, the goal must be to move freight within Australia and overseas using zero-emission technologies.
- prioritising freight network planning and regulatory reforms to pave the way for decarbonisation
- capitalising on potential improvements through the electrification of local freight, and
- supporting the commercialisation of zero-emission fuels and technologies to drive the transformation of Australia’s freight networks.
Enable efficiency improvements through long-term freight network planning
Freight decisions are based on two key factors: efficiency and cost. Australia’s competitiveness and cost of living depend on goods moving where they are needed as cheaply and efficiently as possible. This means that rapid decarbonisation of freight only becomes commercially and economically viable when low- or zero-emission solutions become cost-competitive. Despite the technological challenges of decarbonising freight vehicles, emissions reductions are also possible through measures to improve the efficiency of freight networks.
Dominating past policy efforts to improve freight network efficiency has been a focus on shifting freight from roads to rail and sea. These modes are typically much less energy and emissions-intensive on a per-tonne kilometre basis. However, modal shift has been hard to come by. While goods moved by rail have grown exponentially in Australia, this has been driven by growth in bulk commodities. For non-bulk, containerised freight, roads still dominate, carrying four times the tonne-kilometres of rail and sea – much the same as in the early 1980s – as shown in Figure 2.[55]
Shifting freight from road to rail is an important aspiration, but is challenging in practice. While rail can provide efficiency gains over long distances, many types of typically short-distance freight – including materials and components for construction sites – can only be carried by road due to their start or end point. This phenomenon is not exclusive to Australia. The International Transport Forum found modal share of road freight has increased over the past four decades in 44 out of 51 countries studied.[56]
Despite these challenges, incremental improvements in the emissions intensity of freight are possible by taking a smarter approach to network planning. This includes:
- Identifying gaps and deficiencies in nationally significant freight corridors and locations.
- Resolving planning and investment issues to provide efficient connections to Inland Rail in line with its completion.
- Supporting the development of new hubs and intermodal terminals to provide opportunities for freight operators to move goods to more efficient modes where possible.
- Addressing last mile and urban encroachment issues – including reserving strategic corridors and lands around key transport hubs – to enable long-term efficiency gains as Australia’s freight task grows over the coming decades.
The National Freight and Supply Chain Strategy provides a good starting point, but the reality is Australia has no plan for decarbonising freight. A national plan should focus on locking in measures to improve efficiency in the short-term. This plan should also pave the way for the technologies that will more rapidly decarbonise freight when they become available. This includes taking an outcome-based approach to regulation where possible and providing simple avenues to unlock carve-outs for new technology pilots and trials. With the lack of first mover advantage in the shift to low- or zero-emission freight solutions, time limited government grants or subsidies could help accelerate change and make Australia a world-leader in this field.
Figure 2: Share of Australia’s total non-bulk domestic freight task by mode
Source: Infrastructure Partnerships Australia analysis of BITRE 2021[57]
Case Study 7: Long-term integrated freight planning at Moorebank
The Moorebank Logistics Park in south-west Sydney provides an example of how emissions can be reduced across the freight value chain with effective long-term planning to shift containerised freight distribution to and from Port Botany from emissions-intensive trucks to rail networks.
The initial project and business case were developed by the Australian Government enterprise, the National Intermodal Corporation, then Moorebank Intermodal Company, from 2010. Sydney Intermodal Terminal Alliance (a wholly-owned subsidiary of Qube Holdings) was then appointed to develop and operate the project in 2015.[58]
The Moorebank Logistics Park will remove the need for 3,000 truck journeys each day and reduce emissions by 110,000 tonnes of CO2-e annually. The Park will supply a minimum of 12 megawatts of solar generation capacity. The PV installed onsite will feed into an embedded power network, the network will enable business within the site to access renewable energy onsite. As part of this, the project also includes a 40,000 square metre warehouse with three megawatts of rooftop solar capacity.[59]
Moorebank Logistics Park also includes a range of innovative technology solutions to reduce embedded and operational emissions:
- Automation at the site will include automated stacking cranes, rail mounted gantry cranes, a fleet of low-emission hybrid auto-shuttles and computer software to handle all containerised freight on the site. Using automation in operations reduces energy use and emissions, enhances safety, minimises environmental impacts and improves productivity.
- The project design has incorporated features to help reduce urban heat island effect through features including landscaping, green space, lighter coloured building façade, large awnings and bioretention structures such as rain gardens.
- An online sustainability performance tool has been implemented to measure and monitor electricity use and fuel consumption.
The project is the first clean energy transport infrastructure project to have received financing from the Clean Energy Finance Corporation (CEFC), with the CEFC providing a $150 million loan. Arcadis advised Qube and the CEFC on a range of emissions reduction strategies across the project, including site operations and avoidance of embodied carbon in construction materials.
Capitalise on the potential for electrification of local freight
The local freight sector has grown exponentially in recent years, super-charged by the explosion in home shopping during the COVID-19 pandemic. From 2014 to 2019, e-commerce sales ratios nearly tripled globally.[60] In 2020, online purchases in Australia grew by 57 per cent, while 1.4 million Australians made an online purchase for the first time.[61] This growth has resulted in a sharp rise in the greenhouse gas emissions from local freight, as well as exhaust and noise pollution in urban areas.
Despite this growth, local freight is likely to prove easier to decarbonise than long-haul freight. Urban freight and last mile deliveries are typically carried out in smaller vehicles to which battery-electric technology is better suited. This solution effectively aligns their potential decarbonisation pathway more closely with light vehicles and means zero-emission local freight is on a nearby horizon.
Local freight operators have already started to enact change. Australia Post operates the nation’s largest fleet of electric vehicles, with 3,500 electric delivery vehicles and bikes and 20 electric trucks.[62]However, this represents only 23 per cent of the total Australia Post last mile delivery fleet,[63] leaving substantial latent capacity for further decarbonisation to the rest of the fleet. Continued improvements in battery capacities, fast-charging technology, and model availability over the coming years will likely make zero-emission local freight vehicles the commercially superior choice for many freight operators – and underpin a rapid fleet transition.
Governments can support and accelerate this transition through nips and tucks to regulatory measures. At the local level, quieter electric vehicles are less likely to disturb residents in local areas, so could be allowed to make deliveries outside of regular hours. At the state and territory level, electric vehicles could be given special access to designated low-emission zones in urban areas. This would remove emissions and noise pollution from dense commercial and residential zones, while enhancing the logistics value of zero-emission vehicles to freight operators.
Case Study 8: Multi-sector decarbonisation in the ‘Green Fuels for Denmark’ project
The Green Fuels for Denmark project seeks to bring together the supply and demand sides of zero-emission fuels by forming a partnership across the full energy and transport value chain. The project aims to produce zero-emission fuels derived from renewable electricity, with production scaling up over three phases until 2030. The end goal is to have electrolyser capacity of 1.3 GW coupled with offshore wind, carbon capture and usage and chemical synthesis for fuel production.
Green hydrogen will be produced for use in hydrogen fuel cell powered trucks and buses, with e-methanol produced for the maritime sector and e-kerosene produced for aviation. At full scale the project expects to supply 30 per cent of total fuel consumption at Copenhagen Airport. This combined with renewable fuels supplied to maritime and road transport operators is expected to reduce annual CO2 emissions by 850,000 tonnes.[64]
The partnership includes Ørsted (renewable energy), Copenhagen Airports, SAS (aviation), A. P. Moller- Mærsk (shipping), DFDS (passenger ferries and shipping), DSV Panalpina (road, air, and sea freight). The project is also supported by government bodies such as the City of Copenhagen and the Capital Region of Denmark, as well as renewable fuel technology providers.
Support advances in zero-emission fuels
The commercial realities of long-haul freight are tight margins and large overheads. For truck, train and most shipping operators looking to renew their fleet – even those committed to decarbonisation – diesel-powered vehicles and ships remain the only option for the vast majority of freight applications. Considering freight vehicles and ships are typically owned and maintained for decades to deliver a return on investment, the natural replacement for assets purchased today may be sometime around 2050.
Change is likely to happen slowly while zero-emission options remain more expensive, then very rapidly once the costs stack up. This has occurred before, with the transition from steam to diesel locomotives a clear example. As Figure 3 shows, ‘dieselification’ of the US railroads occurred during a brief window, when the superior efficiency of diesel locomotives displaced steam trains’ dominance following World War II. Diesel locomotives took a decade to reach 10 per cent market share, before reaching 90 per cent in the following twelve years.[65]
A similar trajectory for the transition to zero-emission freight technologies over the coming years is plausible. As the costs of these technologies fall, there will be greater focus on the operation and maintenance costs of freight assets. The same tight margins that have hindered investment in costlier, more sustainable technologies are likely to underpin rapid transformation when lower-emission fleets become cost effective.
There are a range of emerging technologies with the potential to dramatically reduce emissions from freight vehicles. Some of these, such as biofuels, could be introduced with relative ease once commercially-viable. Others, like hydrogen powered long-haul shipping and aviation, may require more work. This will likely include transforming existing supporting infrastructure, restructuring supply chains, and substantial investment in new vehicles. Many of these technologies are both competing and complementary, and it is likely that the answer to decarbonising freight will require a diverse set of technologies to enable change.
Figure 3: Technological change on the US railways, 1935 to 1960
Source: Ayres, R.A. et al, 2002. Exergy, Power and Work in the US Economy, 1900-1998
Decarbonising ports and shipping
The shipping industry will play a key role in the future of the Australian economy, with 99 per cent of exports relying on sea trade. Ports themselves are large energy users and many are in the process of transitioning to renewable energy supplies. Significantly, ports will also play a role in the supply chains of zero-emission fuels, not just for ships, but also for trains, trucks and industrial applications.
Australia’s maritime sector faces additional challenges to decarbonisation given Australia’s distance from many of our trading partners and position at the end of global shipping lines. While electric ships may prove commercially-viable in the near term for relatively short distance shipping,[66] long distances and heavy loads are not suitable transport characteristics for this technology. The size of batteries required to power long trips would mean there is little room left for the freight itself. This lack of energy density means Australia will need to wait for further breakthroughs in alternate fuel sources to move away from a reliance on fossil fuels.
Federal Government policy that supports the decarbonisation of the maritime sector primarily focuses on the production of low- and zero-emission fuels. The Future Fuels and Vehicles Strategy and the National Hydrogen Strategy both discuss options to support the development of biofuels and hydrogen. However, the maritime industry would benefit from a more comprehensive action plan for decarbonisation, covering port infrastructure as well as fuel development.
A comprehensive plan for decarbonising maritime transport would support the acceleration of numerous industry actions already underway. These include feasibility studies into creating hydrogen hubs at Port Kembla and the Port of Newcastle,[67] other potential hydrogen projects in Bell Bay, Tasmania[68] and Port Pirie,[69] Geelong Port’s achievement of carbon neutral status,[70] and NSW Ports introduction of an Environmental Incentive[71] providing rebates on port charges for vessels that have reduced emissions beyond regulatory requirements.
Case Study 9: Clydebank Declaration for green shipping corridors[72]
International shipping is not included in national carbon accounts, yet it contributes around three per cent of all global emissions – having a large impact on achievement of global decarbonisation goals. But the shipping sector is also one of the harder-to-abate transport industries due to the long-distances travelled, heavy loads carried, as well as its truly international nature and low-margin economics. The decarbonisation of harder-to-abate industries can benefit from the implementation of early demonstration projects, which create learnings that can be applied for broader adoption.
In November 2021, at the COP26 meeting in Glasgow, 22 countries, including Australia, committed to support zero-emission shipping demonstration projects by signing the Clydebank Declaration. Signatories to the Declaration have committed to support the establishment of at least six zero-emission maritime routes between two (or more) ports by the mid 2020s. These routes are referred to as green shipping corridors and will require access to zero-emission fuels, land side infrastructure and new vessels capable of running on new fuels.
Signatories to the Declaration will support green corridors by facilitating partnerships between ports, shipping operators, fuel producers and other parts of the value chain. Signatory countries must also consider how to include green shipping corridors in relevant national action plans and address project barriers through revising regulatory frameworks, using incentives and providing supporting infrastructure.
The degree of uncertainty around freight’s future presents challenges. There is little to be gained and much to lose from governments or industry ‘picking winners’ when technologies remain in their infancy. But there is plenty to do in the near-term to prepare for a zero-emission freight system, irrespective of which technologies emerge over the medium- to long-term. The challenge for regulators and policy makers is to ensure Australia is well-placed to capitalise on the benefits of change when it arrives.
For governments, the overarching decarbonisation goal should be to bring forward the development curve of low and zero-emission propulsion for long-haul freight. With a number of existing decarbonisation initiatives already in place, there is a lot of potential for greater national coordination of academic, public and private sector efforts. As technologies approach commercial viability, governments should enable pilots and trials within flexible regulatory arrangements, and look to accelerate the transition of fleets to lower-emission solutions. This may include applying incentives for the adoption of low- or zero-emission technologies, or phasing out schemes that support traditionally-powered heavy vehicles.
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Recommendations to decarbonise Australia’s freight fleet
What needs to change
Change barrier
Actions required
What needs to change
There is no national transition plan for heavy vehicles and the role of Australia’s transport networks in a decarbonised future.
Change barrier
Actions required
Policy Readiness
Federal and state bodies through National Cabinet should develop, consult with industry on, and implement a cohesive national plan for the decarbonisation of freight transport. This should provide a pathway to reduce end-to-end emissions across supply chains, with short-, medium and long-term actions to support change, and the role of intermodal networks will be fundamental to this work.
Commercial Readiness
Governments should build on the work in the National Freight and Supply Chain Strategy to identify and address gaps and deficiencies in nationally significant freight corridors and locations. This includes resolving planning and investment issues to provide efficient connections to Inland Rail in line with its completion, as well as support for the development of new hubs and intermodal terminals, and addressing last mile and urban encroachment issues.
What needs to change
The local and last-mile freight task is growing rapidly in line with the popularity of e-commerce, bringing increased emissions, pollution and noise in urban areas.
Change barrier
Actions required
Policy Readiness
Commercial Readiness
Governments can support and accelerate electrification of the local freight fleet. For instance, where appropriate, authorities should allow electric trucks to make deliveries outside of regular hours. State and territory governments should consider providing special access to designated low-emission zones in urban areas.
What needs to change
The vast majority of freight haulage relies on fossil fuel-powered vehicles, but the timeline for a commercially-viable transition to zero-emission heavy vehicle technology is uncertain.
Change barrier
Actions required
Policy Readiness
Commercial Readiness
Technology Readiness
While governments should avoid ‘picking winners’ among zero-emission technologies for long-haul freight, they should bring forward the development curve for a range of potential solutions by supporting real world deployment. These could be better coordinated among academic, public and private sector stakeholders by tying research to common national objectives.
Policy Readiness
As technologies approach commercial viability, governments should enable pilots and trials within flexible regulatory arrangements, and look to accelerate the transition of fleets to lower-emission solutions. This may include applying incentives for the adoption of low- or zero-emission technologies, or through phasing out schemes that support fossil fuel powered heavy vehicles.
Regulatory Readiness
Technology Readiness
Regulators should work with industry to identify potential barriers to implementation of zero-emission freight in future, and ensure these are addressed before enabling technologies become commercially available.
3. Decarbonising assets through construction, operation and waste will require sustained innovation and reform
CONTENTS
Unlocking a zero-carbon future for infrastructure construction
Decarbonisation of infrastructure operations can be accelerated
Improving waste management can unlock hidden avenues for decarbonisation
Harnessing ESG investment as a driver of change
Recommendations to decarbonise infrastructure construction, operation, and waste
Despite improvements in vehicle efficiency over recent decades, Australia’s transport emissions have risen by 48.8 per cent against 1990 levels. But change is on the horizon, with the commercialisation of technologies that will underpin decarbonisation of public transport and light vehicles – of which the latter is consumer-led. Freight decarbonisation is on a slower trajectory, but there are clear steps governments and industry can take now to accelerate the change required.
In contrast to the gains made in energy, pre-pandemic transport emissions rose steadily from 9.7 per cent in 1990 to 19 per cent of Australia’s national total in 2019. There was a brief dip during 2020, but transport emissions have bounced back to make up 18.1 per cent of the national total last year. Actual emissions are likely much higher as well, given emissions from international aviation and shipping are excluded from these totals.
This upward trend reflects some of the challenges we face as a nation – vast distances between cities, production regions and markets, as well as a growing population with changing needs. But emerging technologies will turn this trend on its head. This is particularly true for light vehicles, which are on the cusp of a major transformation. Uptake of hybrid- and battery-electric vehicles is growing rapidly as their prices fall relative to internal combustion engine vehicles. The trajectory towards a low- to zero-emission light vehicle fleet is now all but certain.
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1. Energy is the first frontier of Australia’s decarbonisation journey
CONTENTS
Sun and wind will overwhelmingly power Australia’s future
Firming will be an essential component of a low-carbon electricity system
The path to decarbonising Australia’s energy system has been clear for many years: a renewables-dominated electricity system, backed by a diverse mix of storage technologies, and declining reliance on fossil fuels for energy in other parts of the economy. A low-carbon energy system is vital for a low-carbon Australia, and the sooner energy decarbonises, the easier Australia’s transition to net zero will be – but this must happen in an orderly fashion.
The good news is that we have the tools for the job and we know how to do it. Industry has been driving the transition at pace over recent years, and Australia has been installing wind and solar resources at a per capita rate ten times quicker than the world average. This has been driven by rapidly changing economics, with wind and solar having clearly surpassed fossil fuel-fired generators as the least cost sources of new supply. Energy projects have been added to the Australia New Zealand Infrastructure Pipeline (ANZIP) at record pace over recent years, with 100 renewable energy projects with an estimated total cost of $254 billion now under development or construction across Australia. The recent announcements of early coal plant closures for Liddell in 2023, Eraring in 2025, and Yallourn in 2028, are real-time examples of new low-cost renewables forcing out higher cost legacy fossil fuel generation.
The major challenge is completing this transition at least cost and with no disruption for energy consumers. This is where governments can do more. While state and territory governments are pushing forward with their own energy transition priorities and projects, and institutions, including the Energy Security Board and the Australian Energy Market Operator, are providing guidance, the absence of Federal coordination and leadership is the equivalent of boxing with one arm tied behind our back.
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For more information
please contact
Mollie Matich
Director, Policy and Research
Infrastructure Partnerships Australia
[email protected]
Jon Frazer
Director, Policy and Research
Infrastructure Partnerships Australia
[email protected]
For media enquiries contact:
Michael Player
Director, Communications and Engagement
Infrastructure Partnerships Australia
[email protected]
