Transcript:
James Lawler: Welcome to Climate Now, a podcast that explores and explains the ideas, technologies, and the practical on the ground solutions that we’ll need to address the climate crisis and achieve a net zero future. I’m James Lawler. If you like this episode, leave us a review, share it with your friends, or tell us what you think at contact@climatenow.com.
Today, we’re going to be talking about electrifying municipal and commercial truck and bus fleets. How might changing business strategy and policies support cleaner transport? I’m speaking with Ray Minjares, who is director of the Heavy Duty Vehicles Program at the International Council on Clean Transportation, or ICCT, a nonprofit think tank.
We are going to explore the economics of the trucking transition from fossil fuel-driven to electric, along with policies that will drive and are driving that transition. But first, our new segment: this week in climate news. This week in Climate News, I’m joined by Dina Cappiello from RMI. Dina, great to see you again.
Dina Cappiello: Nice to be here.
James Lawler: So what do we got this week in climate news?
Dina Cappiello: (1:03) Well, there’s really been a couple interesting developments this week, and the first one I wanna talk about is a French bank BNP Paribas was sued over its fossil fuel lending. Obviously this has been a huge narrative globally, which is the funding for fossil fuels.(1:19)
Three climate organizations are the ones that sued, so Oxfam, Friends of the Earth, and I’m not gonna try to pronounce the last one cause it’s French and I do not know French are all suing BNP Paribas. And this was inspired, if you all remember, about that big lawsuit dealing with Shell.
This was in, in Holland, the Netherlands, where they actually were sued and actually they were ordered to make deeper cuts in greenhouse gas emissions. So for me, this is going even deeper, right? And gets into the issues of who is liable for carbon emissions. Is it the people that produce the fossil fuels? Maybe not burn them because they go into cars or is it the people that actually fund the development of fossil fuels. And so it’s gonna be very interesting to see what happens with this case. In France, there is a particular law that gives them a window to actually sue a bank and they think they actually have legal justification for it.
In the United States, when lawsuits of this kind have been attempted, there has been a lack of jurisdiction, which is like you are not responsible, right? For the pollution or for the effect of the pollution in this case, which is climate change and some of the weather changes, et cetera, that we’re seeing. (2:54) So for me, it was a really interesting tactic to kind of get after what we all know is a big issue when it comes to solving the climate crisis, which is actually the money and the big money behind fossil fuels.
James Lawler: (3:06) Yeah in this article, there’s a quote from the advocacy officer at Oxfam France, which is one of the partners in this lawsuit. The quote’s kind of interesting. It reads “BNP Paribas continues to write new blank checks to the largest fossil fuel companies without setting any conditions for an oil free, gas free ecological transition.” That language, I think is kind of noteworthy in that there’s a recognition in it that some transition is important, right?
The expectation on the part of these parties that are suing is not that the spigot turns off immediately, right? Because we all know that that just can’t happen. But, it’s implying that companies who are sponsoring oil and gas and society really needs to take this transition seriously and needs to be reflected kind of in all steps in the value chain.
So does that signal that we’ll see more mandates on the part of financiers for accommodations for transition? You know, if they are lending to fossil fuel producers in the future, I don’t know.
Dina Cappiello: Right. And this comes at a time where some banks are pulling out of net zero commitments and net zero alliance here in the states. And I also think when you look at that quote it’s hitting them where it matters, which is their pocketbook. And it’s just a really, I think, interesting strategy and one to definitely watch in terms of what the outcome is.
James Lawler: Another story, we saw this week, was United Airlines and other companies, they’ve started to fund a hundred million dollars to invest in sustainable aviation fuels. Sustainable aviation fuel or SAF as it’s called, is hard to find. So airlines are trying to support its development by setting aside this money to invest in new SAF companies and startups.
There’s a lot of energy around how do we produce more sustainable fuels given that it’s sort of widely understood that aviation is gonna be one of those hard to abate sectors, and we’re gonna need to sort of tackle it from the standpoint of producing fuel in such a way as to be sustainable.
Dina Cappiello: So another really interesting news story this week for a lot of reasons was that the IEA, the International Energy Agency, came out with its global methane tracker and methane obviously is a super important topic when it comes to climate change ’cause it’s a super potent greenhouse gas, many times more powerful than carbon dioxide and some of the other greenhouse gasses.
What’s so interesting about this, and I’m gonna read the headline, and this is a headline that is not in the news, this is not a journalist headline. This is actually the IEA’s own headline, which is “Methane emissions remained stubbornly high in 2022 even as soaring energy prices made actions to reduce them cheaper than ever.” And so what I thought was so interesting is this is a government agency body that’s really calling out the oil and gas sector for “hey you have made bumper income” – is actually what they use – “from this energy crisis. This will take up a fraction of that income to fix and you’re not doing it.”
There’s a lot of work being done around methane to incentivize the industry to do the right thing and to control these leaks, which happen during the transportation of natural gas. They happen when you burn natural gas or methane gas in your homes, right? But this is really saying to the oil and gas companies, you know, this is something that can be easily done and it’s time to do it to actually address the issue of methane leakage.
James Lawler: There’s another story from CBS News, and I wonder if this is even too obvious to report on, but in case you have your head under a rock, the winter weather has become warmer and weirder– newsflash.
Dina Cappiello: I live in DC it was record breaking temperatures yesterday we hit 81. In February.
James Lawler: It was 81 degrees yesterday in Washington?
Dina Cappiello: It was 81 degrees. My kids went to school in shorts in February.
James Lawler: Wow. Yeah. It’s interesting to think that kids will have very different concepts of seasons than just one generation, because we’re sort of at that point where that one or two degrees takes us from in many parts of the country and the world from freezing or below freezing to above freezing, where you see very different things. And then of course, with the weirdness of the weather patterns, we’re getting these crazy days happening in the middle of winter. It’s all quite disturbing.
There’s this small pond near where I live and there’s this pair of geese and they come every year and they usually come sometime mid to late March and I was walking outside and, and I heard them and I was like, oh, here they are. They arrived about a month early.
I haven’t seen ’em since. So they might have come and realized that they were too soon.
Dina Cappiello: I mean, everybody’s confused. I mean animals are confused and migration patterns are one of the first things to be affected. Not to mention food production. I don’t know if that was this week, but there was this crazy story.
It was in the New York Times two days ago. How climate change is making tampons and lots of other stuff more expensive. So because of climate change, and this is where, this is where my head was going from animals to actually agriculture, cotton farmers in Texas suffered record losses amid heat and drought last year.
And it shows and, and the whole article’s about how global warming is this secret driver of inflation. And because of that cloth diapers spiked 21%, tampons 13%, cotton balls 9%, gauze, bandages, 8%, because they’re all kind of connected to cotton. And then cotton was affected by climate change. And it was the biggest loss on record, so Texas farmers had to abandon 74% of their planted cotton crop.
James Lawler: Wow.
Dina Cappiello: That’s nearly 6 million acres.
James Lawler: Wow.
Dina Cappiello: Because of heat and parched soil, cuz of a mega drought brought by climate change. And so I feel like this whole program has gone full circle, right? To suing a major bank for funding businesses that emit fossil fuels that contribute to global warming, a pocketbook effect, to actually the consequences of climate change on cotton fields, really hitting multiple people’s pocketbooks, whether you are, you know, a woman who needs it monthly or whether you need diapers, or whether you need cotton balls, and all the dots that you have to connect to kind of understand that mega story.
James Lawler: Now to our interview, our guest today: Ray Minjares is from the International Council on Clean Transportation.
Ray manages a global team of researchers supporting the transition to soot free low carbon and zero emission commercial truck and bus fleets across major vehicle markets. In the past on the Climate Now Podcast, we’ve discussed how diesel burning engines not only releases CO2, but other harmful gasses including nitrous oxide. And nitrous dioxide collectively, also known as NOx, which is hazardous to human health.
In September of 2022, he sat down with me to discuss the clean trucks of the future and how we can use existing technologies and market solutions to usher them in. We also discussed the role of government incentives and regulations in supporting this transition.
Note that since we spoke some of the proposed EPA regulations we discussed have in fact been enacted. Ray explained exactly what they’ll mean for the future of sustainable trucking. So Ray, on this podcast, we’ve spoken in the past with companies that are working on drop-in renewable fuels and on retrofitting diesel engines and the folks who are working on that I think, by and large, would agree that all of that is a bridge to electric vehicles, batteries and hydrogen potentially.
So my first question for you is do we need those bridges or, you know, through a combination of smart policy and the right investments just jump right into, you know, electric vehicles and, and hydrogen propulsion and if so, what is the path to do that?
Ray Minjares: Yeah. My perspective is that, by and large, we don’t need that bridge and I’ll explain why. First of all, a zero emission engine, there’s nothing cleaner than that so that is our ultimate objective if we’re gonna seriously tackle and sustain those reductions in emissions over the long term, right? We’re talking about a transformational technology that is commercially available today.
So the question becomes how much does it cost and can it perform what we’re seeing, particularly for those fleets that have dedicated parking, a place where they can reliably return. At the end of the day and have fairly predictable routes and schedules. So think of a bus or think of a garbage truck, even certain vehicles that are pulling containers off of ships and depositing those at a regional warehouse.
Those are the types of vehicles that are fairly short range that can by and large charge overnight, and that can deliver the work that diesel trucks or diesel engines are delivering already today. So from that perspective, those are the types of vehicles that we can already electrify, there’s no need for a bridge.
James Lawler: That is something we’ve heard before. You know, the short range round trip vehicles, which make up a pretty substantial percentage of our fleet, you know, that are returning to home base, et cetera. But I do wonder when you get into the practicalities of actually being a fleet owner and facing the investment costs in changing your fleet, right?
Which is wholesale replacement. What is that profile like? I’d imagine that it might be cheaper, let’s say, to maybe retrofit your engines or to go to a different fuel source versus the much larger investment and probably time horizon in acquiring a fleet of battery powered vehicles.
Ray Minjares: Yeah, I think the economics are what are gonna drive this transition. I mean, we’re seeing this outside of the United States, just bringing that international perspective, you know, there are thousands of electric buses being deployed as we speak in the city of Santiago, Chile, where they do not provide any direct subsidies for bus electrification.
How are they able to do that? They have figured out that it’s not the technology that’s the limitation. It’s the way in which the vehicles are purchased that is the limitation, and who owns the vehicles that is the limitation. So we’re seeing that fleets are successful at deploying these new technologies by simply changing or coming up with new arrangements with respect to who owns the vehicle and who operates the vehicle.
James Lawler: Mm-hmm.
Ray Minjares: So if you today are a truck owner in the United States and your business model is, I’m gonna buy a brand new truck. I’m gonna own it for three years, and then I’m gonna sell it off to somebody else.
James Lawler: Mm-hmm.
Ray Minjares: You’re doing that because you have an economic incentive to do that. You’re not holding onto that truck for very long at all.
But that doesn’t really fit the business model of an electric vehicle, which has such a higher upfront cost because the benefits of owning and operating an electric vehicle are in its fuel savings, right? You’re effectively paying for that fuel upfront when you’re paying more upfront for that vehicle.
But if you’re only holding onto it for three years instead of, let’s say it’s full useful life, then you’re not holding onto that vehicle long enough to reach that breakeven point. So in the case of Santiago, the fleet, which is really governed and funded by the government, has abandoned a business model where the operators are owning the vehicles.
Instead they have separated that asset ownership from the operations and have created a system where you have one group, really, it’s a bunch of investors. Think of banks or utility companies, people who have a lot of capital to throw around, they’re the ones buying those vehicles and basically leasing them to operators.
And those operators, they don’t have to worry about, do I have the money to be able to access one of these vehicles? My expertise isn’t gonna be in finding money. My expertise is gonna be in, how do I operate this vehicle most efficiently and effectively. I’m seeing that kind of set of solutions coming here to the United States and we are seeing, I think, people may be familiar with what’s known as a vehicle as a service right?
These will be companies who buy fleets of vehicles. Their business is not to operate the vehicles. Their business is to lease the vehicles or make them available to whoever wants them, whether it’s a day, a month, a year, and that’s how they make money. Penske is a great example of a company that doesn’t operate those vehicles.
They lease those vehicles.
James Lawler: Oh, really?
Ray Minjares: Yes, that’s right. Penske is a company that buys large volumes of trucks and they’re exclusively a truck leasing company. So they are in the business of offering up these vehicles to operators. Right? And Penske has just recently announced a partnership with Shell to install charging infrastructure at certain locations for their vehicles.
You also have smaller startups. Forum mobility is one example. WattEV is another example. They are in the business of building the charging and also in the business of owning the vehicles, but they’re not an operator. So they will contract with whoever needs an electric truck and whoever needs charging, they will contract with those companies at a certain price.
So those companies can gain access to that infrastructure, right? And those are companies that are able to avoid that risk both in terms of the financial risk of owning these vehicles and the other risks to their bottom line that might come from having to take on large loans. Right?
James Lawler: Yeah, that makes a lot of sense.
So I think what you’ve explained is that the way to deal with this, the sort of economics and this new business model for truck usage is really the key to not requiring kind of bridging technology in the diesel realm, which is an interesting conclusion.
Ray Minjares: Yeah, I think the financial aspect of this in terms of business model, in terms of how we pay for these vehicles is absolutely a part of the solution, right?
As far as I’m concerned, technology is not the barrier here. We know these vehicles work. We know they can deliver diesel-equivalent performance. Because we’re talking about a systemic change, it means that we also need to look beyond the vehicle to include the financial ecosystem that reinforces the diesel ecosystem. Right?
James Lawler: Hmm. What do you mean by that?
Ray Minjares: Well, just going back to the example that I gave of companies that are buying new trucks and only holding onto them for three years.
James Lawler: Yeah.
Ray Minjares: And expecting some residual value that they can use after that, that becomes a profit to them, right?
There’s another example I can give, which is a very common business model where you might have a trucking company. Except you have one employee, and that is yourself, and you have one asset, and that is your truck.
And you make money off of how many containers you can ship, right? On a daily, weekly, or monthly basis. So you’re, you’re making money the more miles you’re driving, but because you’re one person and you have one vehicle, and this might be your first job arriving in the United States.
So we have been working with a population of African immigrants that are in the city of Seattle. These people come to Seattle, they get a job as a truck driver and as an Uber driver, they don’t have money to buy a brand new truck. So what do they do? They buy a used truck. They buy a truck that’s probably been driven 600,000 miles already.
Maybe it’s got another 300,000 left. This is a truck that might already be 10 or 15 years old. And what they’re doing is they’re trying to get the cheapest truck that they can get. That still runs, right? And will deliver those miles. So those are customers that obviously can’t afford the high upfront cost of an electric truck, but absolutely would benefit from the fuel savings given how much they have to drive, right?
Whether you’re buying a new truck and selling it for three years, or whether you are buying a 15 year old truck that’s got maybe three or four years left on it, you know, those are two business models that exist because they depend on the degradation of that diesel engine over time for that value proposition to make sense.
James Lawler: Right.
Ray Minjares: And they depend on the calculations that each one is making with respect to fuel prices. And those are two different perspectives on fuel prices. But if diesel engines were not the option, and if all we had was electric vehicles, those two business models may not exist.
And that’s what I mean in changing the ecosystem is if all we had was a world where we were operating electric vehicles, we would have different business models.
James Lawler: Ray, what about hydrogen fuel cells? Do you think that’s also a coming solution to trucking emissions? We had a previous guest talking about hydrogen trucks, and one advantage that they mentioned is that fuel cells are a lot lighter than batteries.
Do those economics work? Do you think we’ll be seeing a lot more hydrogen fuel cells powering heavy duty trucks?
Ray Minjares: I see hydrogen as a niche solution. I don’t see hydrogen as the primary solution in the trucking space, and I’ll tell you why. First, just look at the market. Every commercially available truck that we have that’s electric today is battery powered, right?
There are products that are hydrogen that are announced that are coming to market here in California. Hyundai will bring its XCIENT fuel cell electric truck, I think as soon as January, and that’ll be a fleet of about 30 hydrogen fuel cell trucks, and so that’ll be great. and we have other startups in the mix.
But you know, if you’re in the market for an electric truck and you look at what the incentives are and which products are actually available, you’re gonna struggle to find a hydrogen fuel cell truck. What’s the reason for that? Well, the reason is that when you look purely at the economics, a hydrogen does not compete so well for the market when you’re looking at those short range depot charging applications.
The fuel is too expensive, the infrastructure is too expensive, there’s just not enough. ability and resources to make the business case for investing in that hydrogen fueling infrastructure.
And then the other factor here is that a hydrogen fuel cell is just not as efficient at delivering power compared to the battery, right? We’re talking about 60% efficiency. The most efficient diesel engine we think we can get is close to 50%, maybe a little bit higher than 50%
Batteries were maybe more in the 80% or higher ranges. So they’re just, that’s money, right?
James Lawler: Yeah. Right.
Ray Minjares: That is gonna cost somebody
James Lawler: Let’s move to regulation policy. What is the current regulatory landscape on emissions from heavy duty vehicles in the United States?
Ray Minjares: Yeah. The U.S. EPA has authority under the Clean Air Act, which was originally passed by Congress in 1970 and further amended in 1990 signed in both times, by the way, by Republican presidents
EPA has been using this authority to establish emission standards for the engines that power heavy duty vehicles beginning as early as 1974. Those emission standards have been revised multiple times over the last several decades.
So today manufacturers of heavy duty vehicle engines must comply with what we refer to now as the 2010 Engine Standards.
James Lawler: And what are some of those rules that are in the 2010 engine standards?
Ray Minjares: Yeah, so when EPA is setting emission standards and when they did that back in 2001, they were including pollutants such as nitrogen oxides, particulate matter, hydrocarbons, and other common air pollutants that EPA really must control so that all the US states can comply with the Clean Air Act Air Quality Standards.
EPA, when they set emission standards, they do not tell manufacturers how to meet them. So we refer to these as performance-based. EPA obviously uses information about the cost of the available technologies, the performance of the available technologies, but all of that is simply to inform what is the actual stringency of the emission limits themselves.
So EPA set those emission limits for engines. I should also make sure I mentioned that when EPA did that, they also required new fuel quality standards, so it required multi-billion dollar investments in the refinery infrastructure in this country.
And since that time, other countries have actually made the same requirements on their refineries. But it’s an important thing to mention, I think, at this moment in time, because as we look forward to electrification, as far as we can tell, EPA does not have that same authority to require the installation and deployment of electrification infrastructure.
So that is gonna be a major barrier as EPA looks to the future and how to move towards zero emission vehicles.
James Lawler: A quick note, as we mentioned at the start of this episode, the EPA has introduced new engine standards. The rule change was finalized last December, but when we spoke with Ray, they were still in the proposal stage.
The rules are some of the most stringent yet, affecting all trucks starting the 2027 model year. They not only call for dramatically reduced emissions, but for a higher lifespan of engines as well.
Ray Minjares: There is another component on greenhouse gasses that I won’t get into unless you ask. But just to focus here on the nitrogen oxide emissions, the NOx emissions limits, the ultimate end goal here for this proposal is to achieve about a 90% reduction in emissions compared to new engines sold today.
James Lawler: Okay.
Ray Minjares: The way that they expect that to be done is really in two ways. One is through what I would describe as incremental improvements in existing emission control technologies.
We’re not trying to invent the catalytic converter here, right? That was a monumental step and a historic step. Here, we are looking at existing after-treatment controls and EPA is simply saying we want those to operate at a higher efficiency with better performance.
In addition to that, EPA is setting requirements on the durability of those systems, and so they want them to last for as long as the vehicle is operating, and that can be more than 10 years. So that’s basically the essence of the EPA proposal.
James Lawler: Okay. And since you dangled it out there in such a tantalizing fashion, I will ask you about greenhouse gas emissions.
Ray Minjares: Well, I’m glad you did, because it’s hard to talk about this proposal if we’re not including the discussion of the greenhouse gas standards. And that’s because EPA has been instructed by the president to use this opportunity to also revisit existing greenhouse gas emission standards for heavy duty vehicles.
EPA is proposing that those standards be changed to at least align with what is the baseline expectation for electric trucks. And the reason that’s important is because these manufacturers, who are selling in California and Washington and Oregon and other states that are actually requiring the sale of electric trucks, they’re gonna get basically a free pass when it comes to the greenhouse gas standards at a federal level when they’re meeting those state requirements.
So, EPA wants to avoid the possibility that the sale of electric trucks could lead to manufacturers selling less efficient and higher emitting diesel trucks.
So that’s the main intent EPA has behind the greenhouse gas element of their proposal. Now, EPA just recently announced that they are not going to adopt that proposal, but in fact, re-propose the changes that they originally proposed back in March because they’ve realized that there’re going to be even more electric trucks sold as a consequence of the inflation reduction act that Congress passed.
So EPA wants to make sure that they are properly accounting for the even larger deployment of electric trucks there and ensuring that that doesn’t lead to a further erosion of the greenhouse gas standards that apply to diesel trucks.
James Lawler: We should note that once the new EPA rule was adopted, it did not update greenhouse gas standards, beyond engine limits on nitrogen oxides, but instead left the update of truck greenhouse gas standards to a second proposal coming out in March of 2023.
James Lawler: And so what does ICCT, what does your organization recommend? You know, in terms of speeding the adoption of EV trucking.
Ray Minjares: Yeah. The first step that the US needs to take is to clearly say what year the goal is for us to have a hundred percent sales of zero emission trucks. The ICCT’s view is that 2040 is the latest. That year should be simply because when we look at the climate science in order to align with a two degree pathway, it has to be 2040 or earlier.
So those types of steps haven’t been taken in this country, and that’s despite the fact that we have more than a dozen countries that have taken this step, including Canada, who has said 2040 is their target year. And is planning a set of sales requirements for heavy duty vehicles, including California and other US states.
So that’s the first step in the context of what EPA has authority to do. We think that that 2040 target can be met by establishing a pace of electrification that is essentially equivalent to the pace required by the state of California under its existing advanced clean trucks program.
The approach California is taking is twofold. One is that it’s requiring that, through the Advanced Clean Trucks Program, all sales of electric trucks be zero emission in the state. Which is to say if you are a manufacturer selling trucks in California, you have an obligation to ensure that you meet minimum percentage targets. Right?
James Lawler: Right.
Ray Minjares: For zero emission trucks. That’s on the supply side, so California is working to ensure there is the supply.
Then on the demand side, California is adopting at the moment what’s called the Advanced Clean Fleets Program and this program puts an obligation on companies, governments,and they talk about high priority fleets, which is really a way of saying private companies with a revenue of at least 50 million or more.
The obligation will be on them to demonstrate that if they are operating a truck in the state, that they’re meeting minimum zero emission operations requirements. So they need to either basically be only buying electric trucks or ensuring that a certain percentage of their fleet is zero emission.
So think of it as a reporting requirement, and if anyone is caught violating that, then there will very likely be a hefty fine that the state will impose. So in essence, it means if you wanna do business in California, you need to have an electric truck and you need to meet these requirements.
James Lawler: Right. And it’ll be interesting to see how that forces the rest of the market throughout the country.
I’d imagine if you’re a big seller or big producer of trucks, a couple of states start to go this way. You need to start, you need to make some decisions about your future and what you’re gonna be selling everywhere else, right?
Ray Minjares: Yeah. This is not the scenario we want, what we want is a national program. This is gonna make life hard for companies that are trying to work in different states.
And it might mean expenses that you’d have to incur if you wanna register your business outside of California or contract with a business that can meet the requirements.
James Lawler: Mm-hmm.
Ray Minjares: In California, if we had a national program, that would be far, far better, but I’m not seeing it yet and I’m optimistic, but in the absence of national leadership, I think it’s the states that are the ones that are driving the transition.
James Lawler: That was Ray Mijares, director of the Heavy Duty Vehicles Program at the International Council on Clean Transportation or ICCT.
After the December rule came out, we asked Ray his thoughts. He said “The Clean Trucks Plan that EPA adopted in December of 2022 will require more durable, longer-lasting, and more effective emission controls for nitrogen oxides from new trucks compared to what EPA required for model year 2010 and later truck engines. The rule is unlikely to require engines to produce lifetime emissions as low as those required by California’s current rules.”
That’s it for this episode of the podcast. To learn more about electric trucks, diesel fuel, green hydrogen, and sustainable transportation. Check out our other podcast conversations@climatenow.com.
And if you wanna get in touch, email us@contactclimatenow.com or tweet at us @weareclimatenow. We hope you’ll join us for our next conversation.
Climate now is made possible in part by our science partners, like the Livermore Lab Foundation. The Livermore Lab Foundation supports climate research and carbon cleanup initiatives at the Lawrence Livermore National Lab, which is a Department of Energy applied science and research facility. More information on the foundation’s climate work can be found at livermorelabfoundation.org.
