Australia stands at a critical juncture in its efforts to decarbonise the heavy-duty transport sector. We examine the potential path forward for decarbonising the road freight sector.
Transportation is a significant contributor to global CO2 emissions, responsible for about 24% of total emissions in 2022. 35% of direct CO2 emissions from road transport are attributed to trucks and buses, even though they represent fewer than 8% of all vehicles (excluding two- and three-wheelers). To achieve net zero by 2050, road freight emissions need to be reduced by 15% from 2022 to 2030, declining at roughly 2% per year. It’s time to take a closer look at diesel’s domination and the future of sustainable heavy-duty transportation in Australia.
Key takeaways
- Diesel still rules: despite the push for greener options, diesel trucks dominate the market, making decarbonisation difficult.
- Hydrogen and electric on the horizon: hydrogen and electric trucks show promise but need major infrastructure upgrades before they go mainstream.
- Renewable diesel’s quick fix: renewable diesel offers an immediate emissions solution, but cost and scale of production challenges are prominent.
- Australia’s opportunity: with the right investment, Australia may have the potential to become a renewable diesel powerhouse and lead the green trucking revolution.
- Collaboration is key: to decarbonise, industry leaders, energy providers, and the government must work together.
Diesel domination
Diesel still dominates the road freight sector. For example, in the European Union (EU), only 0.6% of trucks purchased in 2022 were electric, with 96.6% running on diesel. Promisingly, the sale of electric trucks in the EU increased almost threefold in 2023 to account for more than 1.5% of sale share. However, there is clearly still a long way to go to catch up on diesel. High energy requirements, short refuelling times, status quo bias, and long asset lifespans are contributing to diesel’s market dominance and lend to the conclusion that the heavy-duty transport sector is one that is “hard-to-abate”.
The emergence of hydrogen and electric trucks
Several sustainable options have been developed to address trucking emissions. More than 300 models of hydrogen and electric trucks are available globally. For instance, Hyundai introduced the world’s first hydrogen heavy-duty truck in 2020, powered by a 190kW hydrogen fuel cell that provides a range of 400kms on a single charge. Refuelling takes only 8 to 20 minutes,1 making it a promising fuel alternative for long-haul routes, especially in countries such as Australia where refuelling downtime is a critical factor.
However, hydrogen presents challenges, notably the space required for storage. Just one kilogram of atmospheric pressure hydrogen requires eleven cubic metres of space. Accordingly, hydrogen needs to be liquified or compressed for trucking use, requiring a lot of energy and expensive equipment, which has led to high costs and slowed its adoption.
Alternatively, electric trucks (e-trucks) are gaining traction as the dominant renewable alternative for road freight. When compared to diesel, e-trucks are generally cheaper to own and maintain. Combining this with carbon pricing and government incentives, they are a clean and affordable solution for the trucking industry. With ambitious policies such as the EU’s CO2 standards for heavy-duty vehicles (which target a 90% CO2 emissions reduction by 2040) and the United States’s (US) heavy-duty emissions regulation, it is no surprise that e-truck sales are expected to continue to rise.2
Lagging infrastructural development
Although the uptake of hydrogen and electric battery trucks will grow over the coming decade,3 widespread adoption will not be possible unless associate (and extensive) infrastructure is developed and deployed.4
McKinsey and the World Economic Forum together report that the technology required to charge an average 400kWh battery in 45 minutes could cost between €200,000 and €350,000 per charge point, while the capex for hydrogen fuelling stations can range from €2-€3 million for a 1,000kg/day station, depending on the output pressure.5
In time, these costs are expected to drop because of advances in technology and utilities of scale.6 Harmonised standards to achieve maximum interoperability of charging infrastructure will be essential to enable the fast roll-out of charging infrastructure, mitigate risks for manufacturers, operators and importers, and allow technologies to benefit from economies of scale. To this end, the recognition by the EU and US of the adoption of the megawatt charging system by international standardisation organisations is an important development.7
In Australia, the deployment of interoperable charging infrastructure is being undertaken by companies like NewVolt Infrastructure Pty Ltd. Working alongside industry bodies, logistics operators, buyers and government authorities, NewVolt is developing a national network of shared charging infrastructure, exclusively for the electric trucking industry.
Another potential issue is that high-powered charging also creates issues for the electricity grid and so careful planning and investment will be required to accommodate this increased load. A potential mitigant to this risk may be to install co-located renewable energy sources and batteries to decrease stress on the local power grid. However, these solutions would require even greater capex.8
Might more diesel be the answer?
Renewable diesel, an advanced biofuel, may offer a pragmatic interim solution to reduce emissions while electric and hydrogen infrastructure is developed.
Unlike other biofuels like ethanol-blended petrol and biodiesel, renewable diesel is synthetically refined to directly replace petroleum diesel and is compatible with existing engines and infrastructure. It can reduce lifecycle greenhouse gas emissions by 60-80% and tailpipe emissions by about 4% (depending on the feedstock used),9 making it a promising “drop-in” replacement fuel for the trucking industry which can be used by existing infrastructure and assets.
Renewable diesel is not without its own challenges. The cost of producing renewable diesel is estimated to be twice that of standard diesel.10 Applying this situation to a price sensitive industry where fuel costs can account for between 17% to 30% of a typical trucking operation’s total expenses, it is clear that achieving economies of scale will be critical to renewable diesel becoming an economically viable option. In addition, the use of feedstocks for fuel that could otherwise be used for cooking and human nutrition raises serious social issues. Reuters reports that food and fuel markets are becoming so tightly connected that rises in demand for renewable diesel could trigger shortages of edible oils such as palm oil, an essential cooking medium for millions of people across Africa and Asia.
While renewable diesel production has “boomed” in the US,11 no renewable diesel is currently produced in Australia.12 However, CSIRO notes that Australia’s large landmass, temperate climates, advanced farming practices, access to renewable feedstocks, established supply chains and renewable energy potential all point towards the conclusion that Australia may have a significant opportunity to develop a competitive domestic industry for renewable diesel.13
Testament to this, the Australian Government has identified low carbon liquid fuels (LCLF) as a priority sector as part of Future Made in Australia and is fast tracking support for the development of a LCLF industry.14 With an initial focus on sustainable aviation fuel and renewable diesel, the government opened a public consultation and committed $1.5 million over 2 years from 2024-25 to undertake a regulatory impact analysis of the costs and benefits of introducing mandates or other demand-side measures for the LCLF industry. It will be intriguing to observe the industry feedback, and the results of the analysis, including whether the Australian Government invest further to expand the domestic LCLF industry.
The future of sustainable heavy-duty transportation in Australia
Australia stands at a critical juncture in its efforts to decarbonise the heavy-duty transport sector. While diesel remains the dominant fuel, the emergence of hydrogen and electric trucks offers a promising path forward. The development of hydrogen and electric infrastructure will be essential for these technologies to gain traction. In the meantime, renewable diesel presents a viable short-term solution, though achieving cost-effective production and balancing socio-economic issues remains a significant hurdle.
With Australia’s vast resources, including renewable feedstocks and advanced farming practices, the country has the potential to become a leader in renewable diesel production and green trucking technologies. By fostering collaboration between industry leaders, government bodies, and energy providers, Australia can both reduce its carbon footprint and set a global example for sustainable transport. The next decade will be crucial, and with the right investments, Australia can meet its emissions targets while advancing innovation and industry growth.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.
1Ibid.
2International Energy Agency, Global EV Outlook 2024: Moving towards increased affordability (Report, 2024).
3Rodríguez (n 13).
4International Energy Agency (n 14).
5McKinsey & Company and World Economic Forum, Road Freight Zero: Pathways to faster adoption of zero-emission trucks (Report, October 2021).
6Ibid.
7International Energy Agency (n 14).
8McKinsey & Company and World Economic Forum (n 17).
9Ibid.
10Australian Government, Low Carbon Liquid Fuels: A Future Made in Australia: Unlocking Australia’s low carbon liquid fuel opportunity (Consultation Paper, 2024).
11Ibid.
12CSIRO, Sustainable Aviation Fuel Roadmap (Report, 2023).
13Ibid.
