Climate change is now hitting us harder than ever and therefore large-scale global reductions in carbon emissions have become inevitable. The EU has taken a big step in the right direction by further improving the Renewable Energy Directive. The new legislation includes the establishment of a national e-mobility crediting mechanism in each Member State to significantly reduce emissions from transport. The author proposes that the new credit mechanism should be built on the global, transparent and integrity-based rules of the Voluntary Carbon Market. With that both goals, an increase in the renewable energy share of transport and a reduction in greenhouse gas emissions, become achievable the same time.
This year's extremely hot summer has made it clear to everyone how much the fight against climate change is already having an impact on economic processes. This is likely to intensify in the future and carbon emission reductions will inevitably become mandatory in all industries. In my previous article I pointed out that the most effective economic instrument for climate action is carbon pricing, which, at an equilibrium state, can keep the warming of our planet's atmosphere on the desired path. In equilibrium, the price of carbon-heavy goods and services will be increased by carbon pricing just enough to reduce demand by the necessary amount, while green investments in climate action will receive just enough additional funding to ensure that the green transition of the economy is achieved according to plan.
The problem now is that we are far from paying the equilibrium carbon price, so global carbon emission is still too high, and climate investment is not happening at the expected scale. This process is currently the greatest threat to our society, our civilization and the lives of our children and grandchildren. Therefore, reducing the carbon emissions of the economy must become a top priority for both market regulation and business decision making. Emission reduction projects should be supported by all available means.
Of course, the world is moving in the right direction, but not at the right speed yet. The European Union's "Fit for 55" framework aims to accelerate Europe's green transition. One of the key elements of this is the third edition of the Renewable Energy Directive (RED III), which requires the renewable energy share of the total EU energy consumption to reach at least 42.5% by 2030. Narrowing our focus to the transport sector, Member States can choose to reduce the carbon intensity by 14.5% or increase the share of renewables in final energy consumption up to at least 29% by 2030. In my view, the regulator's goal is a "permissive or", so the renewable energy share and carbon emission reduction targets can be voluntarily "and" related.
In addition, the RED III regulation takes a major step towards the market uptake of carbon pricing in transport by making it mandatory for Member States to launch a national e-crediting mechanism to support the uptake of electromobility as a green powertrain from May 2025. In simple terms, e-credits can be issued and monetized by e-mobility investors to improve the economics of their investments. While the e-credits generated must be purchased by fossil fuel suppliers who are unable to meet the mandatory green targets set in the regulation within their annual turnover. The regulation is already included in the forthcoming revision of the domestic National and Climate Plan of Hungary (NEKT), which has chosen the renewable share as a national target.
The e-credit scheme for mobility is already in place in several EU countries (e.g. Germany, Austria, France, etc.), which are still operating under the previous legislation, but the new legislation will make the setting up of a crediting mechanism mandatory in all EU countries. ChargeUp Europe, an advocacy group for e-Mobility Solution Providers (eMSP) and Charge Point Operators (CPO), published a recommendation for national governments in this regard this summer. The recommendation - which is reminiscent of the current German and Austrian systems - is applicable to both national sustainability targets and proposes a very simple measurement and implementation methodology. It correctly recognizes that the value chain can be captured from the perspective of CPOs. It also highlights that a solution is needed to include private (business or private) CPOs as well, which accounts for around 85% of total charging volume, in the crediting mechanism. Furthermore, there is room for aggregation to ensure that the e-mobility crediting scheme that will be implemented, is complete and efficient.
The weakness of the proposal is that, in addition to the measured option, it leaves room for a flat rate residential charging option too (proposal: 1500 kWh charging settled per annum, which covers about 10.000 km of battery electric mileage) and does not expect a license plate-based identification of vehicles on the public charging network. It is easy to see that there’s a potential of "over-crediting": if the flat rate is chosen in large number by those who drive less than 10,000 km per year. It also carries a "double counting" risk: the charging turnover of battery electric vehicles already counted based on mileage or flat rate, may also be counted on the public charging network too. Both over-crediting and double-counting are qualified cases of greenwashing, which is simply unacceptable for a national e-mobility crediting scheme.
I believe the proposal made by ChargeUp Europe should be further refined as follows. Let's link "and" in relation to the two main objectives: the national crediting mechanism to be developed should be based on the transparent, carbon emission reduction focused rules and principles of the global Voluntary Carbon Market, or at least should be considered in addition to the national renewable energy share based crediting scheme. This is precisely the purpose of the Voluntary Carbon Market, which already has a well-established international operating mechanism for the credible measurement, validation and accounting of emission reduction projects. Thus, verification should be done parallel in the same process based on both renewable share and carbon emission reduction targets. Furthermore, instead of a flat rate calculation, a simple annual vehicle mileage-based calculation for private charging transactions should be introduced, where the specific electric consumption of the identified electric vehicle is represented by an appropriate catalogue value (e.g. WLTP), thus eliminating "over-crediting". Finally, the possibility to identify vehicles based on their registration number at public and company-owned private charging points should be introduced to avoid the risk of "double charging" at a system level.
Although the proposed system requires slightly more preparation, the expected benefits far outweigh them. Nations can set renewable share and carbon emission reduction targets and achieve them together without the risk of institutionalized greenwashing. After parallel verification to both targets, e-mobility investors are free to decide whether to sell their credits on the national e-credit market or on the global Voluntary Carbon Market based on actual market prices, thus maximizing the benefits of the e-mobility credit scheme. This will allow them to trigger more green investments, which is the inherent goal of RED III. Finally, such a national crediting mechanism - built on the principles of the Voluntary Carbon Market - can be easily and transparently extended to other industries to support the green transition of other sectors.