The road transport industry finds itself at a crossroads. Legacy technologies are being disrupted by new products and services; incumbents and established market players are being threatened by younger and more innovative companies; and the traditional stakeholder landscape is being reshuffled with new entrants from industries that had, until recently, little to do with the transport sector. Consumer behavior is also slowly but progressively shifting from traditional models of mobility (e.g. private car ownership) to new and more sustainable ones (e.g. mobility on demand). More recently, triggered by environmental concerns and emerging challenges around established technologies and fuels, such trends have witnessed an acceleration and intensification creating even more momentum for Zero-Emission Vehicles (ZEV’s) and more sustainable mobility technologies and services.
Such a dynamic environment has attracted major investments, with global funding volumes doubling annually for several years now. Cleaner and more sustainable mobility is one of the great challenges of our time. As innovation brings self-driving cars, alternative fuel vehicles, ride-sharing, and other technologies to more people, road transport will become cleaner, faster, and safer. In such a dynamic environment, lenders have a pivotal role to play in the setting of targets, standards and regulatory principles, but even more so in spurring investment into cleaner and more sustainable mobility.
Banking and other financial institutions are playing a major role in the decarbonization of transportation: lending to sustainable transport sectors – including rail and urban public transport – has been steadily increasing and now constitutes the majority of our yearly transport lending volumes. Against this background, Green Power Systems comes at the right time: much has been achieved. More needs to be done to help further current market needs and gaps in the innovative road transport sector.
The California Energy Commission’s Clean Transportation Financing and Investment Initiative explores actions to increase private investment and complement state government incentives to accelerate the commercialization of California’s clean transportation vehicles, fuels, technologies and infrastructure.
California’s transportation sector accounts for 40 percent of the state’s greenhouse gas (GHG) emission inventory and an additional 10 percent reflects emissions from petroleum production and refineries. The California Energy Commission (CEC) has managed the Clean Transportation Program under Assembly Bill (AB) 118 (Núñez, Chapter 750, Statutes of 2007) and AB 8 (Perea, Chapter 401, Statutes of 2013) to reduce GHG emissions in the transportation sector. The CEC has provided seed funding for electric vehicle charging and hydrogen refueling infrastructure, low carbon fuel production plants, vehicle and component manufacturing plants and other projects for the last 10 years at roughly $100 million per year.
The enabling legislation allows the program to deploy funds through competitive grants, revolving loans, loan guarantees, loans, or other appropriate funding measures, to public agencies, vehicle and technology entities, businesses and public-private partnerships. This fund is authorized through 2023 and complements other programs such as the Low Carbon Fuel Standard, Short-Lived Climate Pollutant Plan, incentive funds managed by other agencies (California Air Resources Board, California Public Utilities Commission, California Department of Food and Agriculture, California Department of Recycling and Resource Recovery) and other climate change initiatives. Even though progress has occurred to stimulate development of clean transportation options, the California goal to reduce GHG emissions by 40 percent below 1990 levels by 2030 requires greater investment from private capital sources beyond current levels of government incentives and private capital commitments.
Under the “Clean Transportation Financing and Investment Initiative”, the CEC is seeking information to increase private investment in clean transportation fuel, infrastructure and vehicle projects in California supported by incentive funds, mandates, and regulations to achieve GHG emission reduction requirements. This initiative will begin with a Request for Information (RFI) and may include additional staff research, public workshops, a financial investment workgroup, and proposed actions to conduct new pilot programs, establish new initiatives, and explore optional financing mechanisms.