How the EU petrol and diesel ban could affect businesses

Last updated: 22 April 2024 Views: 589
How the EU petrol and diesel ban could affect businesses

One of the biggest pieces of environmental legislation in European history is finally making progress. After months of debate and a major compromise with Germany, a new law banning petrol and diesel engines in new cars from 2030 looks set to get the go-ahead. The result could change transport infrastructure forever - and have a dramatic impact on businesses across the continent.

Naturally, problems for one company always present opportunities for another. The new law is an important step forward in curbing climate change and air pollution, but it also has ramifications for everyone from startups to car corporations. Here’s the lowdown on the proposed law, what it actually encompasses, and the positive and negative implications it could have for businesses in Europe and beyond.

What is the EU petrol and diesel ban?

In 2020, the European Union set out its plans to limit the effects of climate change in its European Green Deal, with the aim of making the union climate neutral by 2050. A pillar of this policy is the EU Climate Law, adopted by the European Parliament in 2021. This law made a 55% reduction in emissions by 2030 and climate neutrality by 2050 legally binding for all member states, with the aim of driving further legislation in support of its goals.

The new ban on petrol and diesel vehicles is one such law. The proposed legislation will demand a 100% reduction in emissions from new road vehicles sold in the EU. This effectively makes it a ban on petrol and diesel vehicles, as a 100% reduction in emissions from either type of engine is not possible. The idea is to accelerate the transition to electric vehicles, and the expansion of electric vehicle infrastructure such as fast charging stations.

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The ban does not extend to existing road vehicles, which will still be allowed to be driven and sold as long as this is not in contravention of local law. It’s also worth noting that the UK had already outlined its own ban on the sale of petrol and diesel engines from 2030, while Paris is set to outlaw all petrol and diesel vehicles in the city by 2030, making the law an extension of an existing trend.

Additionally, biofuels which demonstrate a significant reduction in emissions over petrol and diesel will still be able to be sold under the new law. This is thanks to an exception secured by Germany, which worried about the damage an impending ban on the sale of combustion engines could have on its specialist manufacturing sector, which produces many combustion engine parts for car giants such as Volkswagen and BMW.

What impact will the ban have on transport in Europe?

The hope from many lawmakers is that the ban on most combustion engines won’t substantially change the infrastructure of European cities. Instead, it should trigger a steady shift to electric vehicles, which will utilise much the same infrastructure as current vehicles. The only anticipated change is the construction of new car charging stations, and the retrofitting of existing petrol stations to accommodate this.

The increased power demands of electric vehicles may necessitate some changes to power infrastructure, but this may also not be as dramatic as you’d think. While more power will be drawn from the grid, the National Grid ESO’s own predictions suggest that by using smart charging technology, energy stored in car batteries could be ‘borrowed back’ by the grid when needed, and cars charged only as much as is necessary. This could actually lead to less energy being used for transport by 2050 than is used today.

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The other obvious impact may be on public transport. While a 1:1 switch from combustion vehicles to electric vehicles may be desirable, there remain concerns about the amount of rare earth metal and other materials needed to make electric vehicles, including the lithium used in car batteries. As such, it’s likely that clean public transportation methods such as trains, trams and electric buses may have to pick up some of the slack from road vehicles. Bikes are also likely to be more preferentially treated, with a massive expansion of cycle lanes and other infrastructure.

How will the EU petrol and diesel ban affect businesses?

For most businesses, the immediate consideration is how to transition your petrol and diesel fleets, whether these are trucks, company cars, or forklifts and industrial vehicles. Electric alternatives already exist for all of these, but some are still relatively early in their development. It may nonetheless be worth switching over now to gain familiarity with them, and to put the necessary infrastructure in place ahead of time.

There are other considerations, too. One is the impending ban on all petrol and diesel vehicles in major cities, with the expansion of London’s ultra low emission zones and Paris’ progressive ban on older cars. Businesses in these areas - and other large cities, which are likely to join suit eventually - should put a transition plan in place. Businesses may also benefit from tax credits or discounts for going electric in some areas, and will enhance their green credentials, providing a welcome PR boost.

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For businesses in the automotive industry, the rise of electric vehicles has been a while in the making, and plans to transition are likely already in place. However, the switch does present opportunities for new firms. Germany’s Mittelstand - its wealth of medium-sized businesses - comprises many specialist firms producing parts for combustion engines which will likely have to pivot away, even with the country’s insistence on pursuing biofuel alternatives. There could be opportunities here for EV parts manufacturing and development to step in and forge new relationships with car manufacturers.

There are also invariably opportunities for European businesses across the EV sector. Fast charging, batteries, cameras, sensors, software and parts are all fundamental to the creation of both new electric vehicles and new autonomous vehicle technologies, the latter of which will doubtless also be spurred on by the switch to electric vehicles. Convincing people to switch to EVs will require the addition of value through features as well as saving money and the environment, and startups have a unique opportunity here to provide these services, particularly in countries with a heavy car manufacturing base, such as France and Germany.

There’s still a little while to go until the proposed phase-out, and the law hasn’t officially been ratified yet. But there is a clear direction of travel in Europe and elsewhere, and it's firmly away from petrol and diesel. Getting ahead of the curve could save you money in the long run, and potentially open up new business opportunities. Cleantech has never been bigger, and the automotive industry looks set to ensure that growth continues.

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