The transport sector is a significant contributor to the nation’s emissions at 21%,1 accounting for 3.8 tonnes of CO₂ per capita (excluding aviation).2 Against this backdrop, CO₂ emissions from the transport sector must fall by more than 3% per year until 2030 to ensure that Australia is on track to meet its Net Zero target.3
In this article, we explore the best fuel for each mode of transport, drawing on consumer and investor sources of anxiety: cost, range, and infrastructure challenges.
Cars and Light Commercial Vehicles (LCVs)
Electric Batteries in Cars
In 2023 it was reported that cars and LCVs are responsible for 60% of emissions in the Australian transport sector and 10% of emissions overall.4 Consumer concerns regarding range and cost have stimulated efforts at both federal and state government levels to encourage the uptake of electric vehicles (EVs) by offering AUD$3000 rebates,5 as well as an AUD$171 million investment in EV charging facilities over four years as part of the NSW Electric Vehicle Strategy,6 and an AUD$500 million commitment as part of the National Electric Vehicle Strategy.7
The 2024-25 Federal Budget (the Budget) committed to provide AUD$154.5 million over six years commencing on 1 January 2025, plus AUD$12.6 million annually thereafter, to implement a New Vehicle Efficiency Standard (NVES), compliant with the New Vehicle Efficiency Standard Act 2024. The NVES is aimed at enhancing fuel-efficient vehicle options to lower transport emissions.
The Budget funding includes AUD$84.5 million over five years to establish a regulatory body for administering the NVES, which includes gathering comparable data with international counterparts. The Budget also allocates AUD$60 million over four years for electric vehicle charging infrastructure.8
The uptake of EVs is well-positioned to foster investor confidence in the production and supply of charging facilities to be rolled out at a national level.
Driving Green or Grey?
Despite the rapid charging speed of hydrogen vehicles, Toyota’s Carbon Policy Manager, Andrew Willis, admits hydrogen “infrastructure is limited” and is therefore “holding up wider adoption”.9 With a keen emphasis on achieving Net Zero targets, the amount of electricity required for hydrolysis presents inefficiencies in hydrogen production. Moreover, a staggering 96%10 of the hydrogen production is categorised as grey hydrogen. Despite the cost advantage of grey hydrogen at approximately AUD$1-2 per kg, compared to green hydrogen at approximately AUD$5-7 kg, grey hydrogen relies on fossil fuel sources, thus undermining Net Zero targets.
The Budget aims to achieve this through the introduction of the Hydrogen Production Tax Incentive (HPTI). The HPTI promises refundable tax credits of AUD$2 per kilogram of renewable hydrogen produced at qualifying facilities from 1 July 2027 to 30 June 2040. These credits will be available for up to ten years for projects that secure final investment decisions by 2030.
Further information is available in our recent article Hydrogen on the Horizon: Unpacking Australia’s New Hydrogen Production Tax Incentive.
Overall, strong Federal infrastructure support resulting in increased investor and consumer confidence positions EVs as a more pragmatic option compared to hydrogen cars and LCVs.
Heavy Duty Trucks
The International Council of Clean Transportation claimed that a switch to battery-electric trucks could save up to 63% greenhouse gas emissions over the vehicle’s lifecycle, with a further 84% reduction when solely using renewable energy.11 The use of battery electric trucks has sparked government interest. In 2023, the Australian Renewable Energy Agency (ARENA) granted AUD$20 million to Team Global Express for the purchase of 36 medium and 24 light battery electric trucks, and AUD$20.5 million to support financing battery electric trucks purchased through the Clean Energy Finance Corporation and Taurus Motor Finance agreement.12
More recently, the Budget has allocated an investment of AUD$115 million in a battery electric bus depot under the Zero Emission Bus Transition Strategy that will introduce 1,200 new electric buses by 2028.13
Why Don’t We Make the Switch?
While EV batteries provide a compelling solution to reducing emissions, the size and weight of the battery used in trucks is problematic to handle, ship, and poses significant fire risks. Specialist training and co-ordination across the supply chain on an inter-state basis must be achieved to make this a feasible option.
The Budget allocated $523.2 million through the Battery Breakthrough Initiative. This will be administered by ARENA to advance battery manufacturing capabilities in Australia through targeted production incentives. An additional AUD$20.3 million will support the Building Future Battery Capabilities to scale up and improve standards within value chains to enhance battery manufacturing for the transport sector, including heavy vehicles.14
Expressions of Interest can be registered here.
Despite Federal and State commitments to invest in EV charging infrastructure, ‘range anxiety’ from truck drivers and owners remains. The lack of charging points in remote areas across long journeys makes the switch to EV batteries a less favourable option. If consumer and investor confidence is restored, the Electric Vehicle Council predict that 100% of the national fleet will be electric by 204015 meaning that ample energy generation for EVs would be required to avoid severe grid impacts.
Power Without the Bulk
Although hydrogen is unlikely to be a good fit for cars and LCVs, the combination of its rapid fuelling time and similar range to fossil fuel offers a superior solution for trucks when compared to EVs. Additionally, the AUD$80 million investment in hydrogen refuelling networks on key freight routes16 could promote a similar “turnkey” service to that seen in South Korea. This approach bridges gaps in the supply chain by manufacturers also guaranteeing a network of green hydrogen refuelling stations across standardised routes, as well as promoting job opportunities and investment in remote areas.
Based on this, hydrogen is poised to emerge as the preferred solution over EV batteries in trucks, due to the lack of weight restrictions and perceived consumer range anxiety.
Trains
Much like trucks, trains are likely to encounter challenges related to the size and weight of batteries, as well as experiencing lengthy charging times and causing subsequent grid impacts. However, the fixed rail routes and existing infrastructure could be more easily tapped into to make recharging EV batteries a problem of the past. Germany rolled out a hydrogen fuelled trainline in 2018 and has experienced great success that was quickly offset by the excessive manufacturing and running costs. Going forward, Germany will be replacing the remaining diesel trains with electric battery trains, not hydrogen.17
Recent industry consultations on the Australian Railway Association’s forthcoming rollingstock decarbonisation critical path have identified that energy supply will be a critical factor in determining the commercial viability of these new technologies.18 Ultimately, despite the success of hydrogen trains, the lower cost and competitive efficiencies of electrical battery powered trains are likely to attract better consumer and investor confidence.
Shipping
Shipping accounts for around 3% of global CO2 emissions but continues to face challenges in transitioning to alternative fuels such as hydrogen, ammonia, or other biofuels.19 The Danish shipping giant, Maersk has begun to make the move to greener fuels, but an industry wide transition would require a regulatory overhaul and a harmonised approach from shipping developers and manufacturers.
Electric batteries are an unlikely contender for the shipping sector due to the lengthy re-charging times. However, Australia is well-equipped to supply and transport ammonia and hydrogen, particularly since the AUD$30 million partnership between Singapore and Australia to create a ‘green shipping corridor’ by 2050.20
Ammonia has also been hailed as a potential long-term near net zero shipping fuel with fewer barriers to market entry. Although much of our existing exposure to ammonia has not been as a shipping fuel, the International Code of the Construction and Equipment of Ships Carrying Liquefied gases in Bulk codifies the requirements of ammonia as shipping fuel.21 As well as toxicity to humans and wildlife, the low density of ammonia22, compared to hydrogen, would require it to be stored at higher volumes, reducing the capacity to carry cargo resulting in reduced profit margins. Like hydrogen, the availability of green ammonia is limited, and whilst regular ammonia does not produce CO2, it does produce N2O23, a more potent alternative.
The large-scale uptake of green hydrogen will need to be backed by large investments to facilitate the specialist storage containers which are at temperatures of around −253°C. The key challenge is large scale production and shipping manufacturers who are likely to turn to additional fuel sources, such as biofuel, until hydrogen can be produced and stored at a sufficient scale to meet demand. The Australian landscape lends itself well to the mass production of biofuels and many ship engines would not require substantial refits to utilise them.24
To meet the demands for shipping fuel, multiple sources of low-carbon variants, such as biofuel, will be pursued alongside hydrogen until supply is at a sufficient scale to meet demand.
Aviation
A Smooth Take Off…
Much like shipping, the shift to hydrogen fuelled aircraft would require strong financial outlays, such as government incentives and public and private investment in the supply and storage of hydrogen.
To enable a complete overhaul, many aviation giants have committed to the development of hydrogen-compatible fleets. Airbus has announced that they could be taking flight as early as 203525and Boeing around 2050.26 The development of hydrogen aircraft has sparked global interest and significant investment from the likes of Japan with an impressive 4 trillion JPY (AUD$39.2 billion)27 public-private investment partnership, Increased market entrants will promote competitive pricing and accelerate technological developments, such as the production and storage of hydrogen.
One Size Won’t Fit All.
As part of the Federal Government’s Jet Zero Council, Qantas suggested in their recent report that government Sustainable Aviation Fuel (SAF) mandates should be implemented to reach production targets of 5% by 2030 and 28% by 2040, as well as providing a AUD$1.5 million grant to de-risk investment opportunities.28 Head of Sustainability, Andrew Parker, believes that this strategy will strengthen Australia’s fuel independence and create economic security.29 Additionally, long term contracts with fuel providers could play a vital role in meeting targets, such as the Delta and Neste partnership who have committed to replacing 10% of traditional jet fuel by 2030.30
The Budget includes several initiatives to advance the domestic low carbon liquid fuels industry, including SAF. AUD$18.5 million is allocated over four years to develop a fuel certification scheme. An additional AUD$1.5 million over two years will fund an analysis of the costs and benefits of demand-side measures for sustainable fuels.31
At this stage, no single feedstock would produce a sufficient volume of fuel to enable a direct transition to SAF and whilst both hydrogen and biofuel production are being slowed by infrastructure challenges, commercial and cross-border partnerships are likely to increase investor appeal and enable large scale production.
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1‘Towards net zero for transport and infrastructure’, Australian Government, Department of Infrastructure, Transport, Regional Development, Communication and the Arts (Web Page, 2024) <https://www.infrastructure.gov.au/infrastructure-transport-vehicles/towards-net-zero-transport-and-infrastructure>.
2‘Shifting Gear: The Path to Cleaner Transport’, Climate Council (Web Page, 19 May 2023) 13 <https://www.climatecouncil.org.au/wp-content/uploads/2023/05/CC_MVSA0354-CC-Report-Road-to-Personal-Transport_V5-FA-Screen-Single.pdf>.
3Ibid.
4‘The National Electric Vehicle Strategy’, Australian Government (Web Page, 19 April 2023) <https://www.dcceew.gov.au/energy/transport/national-electric-vehicle-strategy>.
5Ibid.
6‘NSW Electric Vehicle Strategy’, NSW Climate and Energy Action (Web Page) <https://www.energy.nsw.gov.au/nsw-plans-and-progress/government-strategies-and-frameworks/electric-vehicle-strategy>.
7‘National Electric Vehicle Strategy’, Department of Climate Change, Energy, the Environment and Water (Report, 2023) <https://www.dcceew.gov.au/sites/default/files/documents/national-electric-vehicle-strategy.pdf>.
8‘2024-25 Federal Budget Wrap’, Roads Australia (Web Page, 15 May 2024) <https://roads.org.au/2024-25-federal-budget-wrap/>.
9Emilia Terzon, ‘Toyota is pushing hydrogen cars but will they ever be as cheap to run as EVs?’, ABC News (online, 29 Jan 2024) <https://www.abc.net.au/news/2024-01-29/toyota-hydrogen-cars-future-electric-vehicles-uptake-challenges/103390084#:~:text=%22The%20refuelling%20infrastructure%20is%20limited,the%20growth%20in%20the%20volumes.%22>.
10‘Hydrogen as a fuel: the pros and cons’, Pirelli (Web Page) <https://www.pirelli.com/global/en-ww/road/cars/hydrogen-as-a-fuel-the-pros-and-cons-53908/>.
11‘Battery electric trucks emit 63% less GHG emissions than diesel’, The International Council on Clean Transportation (Web Page) <https://theicct.org/battery-electric-trucks-emit-63-less-ghg-emissions-than-diesel/>.
12‘Depot of the future delivers Australia’s largest electric vehicle logistics fleet’, Australian Renewable Energy Agency (Web Page) https://arena.gov.au/news/depot-of-the-future-delivers-australias-largest-electric-vehicle-logistics-fleet/>.
13Transport for NSW, Zero Emission Bus Transition Strategy: Executive Summary (Report, 2023) 3.
14The Hon Ed Husic MP, ‘New batter strategy to make more batteries here’ (Media Release, Ministers for the Department of Industry, Science and Resources, 23 May 2024).
15‘Electric trucks: Keeping shelves stocked in a net zero world’, Electric Vehicle Council (Web Page) 13 <https://electricvehiclecouncil.com.au/wp-content/uploads/2022/01/ATA-EVC-Electric-trucks_Keeping-shelves-stocked-in-a-net-zero-world-2.pdf>.
16‘Driving the Nation Fund’ Department of Climate Change, Energy, the Environment and Water (Web Page) <https://www.dcceew.gov.au/energy/transport/driving-the-nation#:~:text=The%20Australian%20Government%20doubled%20the,key%20highway%20routes%20across%20Australia>.
17‘Hydrogen as a fuel: the pros and cons’, Pirelli (Web Page) <https://www.pirelli.com/global/en-ww/road/cars/hydrogen-as-a-fuel-the-pros-and-cons-53908/>.
18‘Federal Government invests $22.7 billion for Future Made in Australia with a focus on renewable energies’, Australian Railway Association (Web Page, 23 May 2024) <https://ara.net.au/news/federal-government-invests-22-7-billion-for-future-made-in-australia-with-a-focus-on-renewable-energies/>
19‘Climate impact of shipping’, Transport & Environment (Web Page) <https://www.transportenvironment.org/topics/ships/climate-impact-shipping#:~:text=What%20is%20the%20impact%20of,emissions%20%E2%80%93%20the%20same%20as%20flying.>.
20‘Singapore-Australia Green Economy’, Department of Foreign Affairs and Trade (Web Page) <https://www.dfat.gov.au/geo/singapore/singapore-australia-green-economy-agreement>.
21‘Potential of Ammonia as Fuel in Shipping [updated]’, European Maritime Safety Agency (Web Page) <https://www.emsa.europa.eu/newsroom/latest-news/item/4833-potential-of-ammonia-as-fuel-in-shipping.html>.
22‘An Overview of Ammonia as Fuel for Ships’ Bureau Veritas, Marine & Offshore (Web Page) <https://marine-offshore.bureauveritas.com/shipping-decarbonization/future-fuels/ammonia#:~:text=There%20are%20several%20advantages%20to,is%20widely%20and%20freely%20available.>.
23Ibid.
24‘Time for International Action on CO emissions from Shipping’, European Union, Climate (Web Page) <https://climate.ec.europa.eu/system/files/2016-11/marine_transport_en.pdf>.
25‘Hydrogen, AN important decarbonisation pathway’, Airbus (Web Page) <https://www.airbus.com/en/innovation/low-carbon-aviation/hydrogen>.
26Marisa Garcia, ‘Japan Plans $26 Billion New Hydrogen-Powered Passenger Jet Program’, Forbes (online, 28 March 2024) <https://www.forbes.com/sites/marisagarcia/2024/03/28/japan-plans-26-billion-new-hydrogen-powered-passenger-jet-program/?sh=717f029064e8>.
27Ibid.
28‘Developing a SAF industry to decarbonise Australian aviation’, Qantas (Web Page) 4 <https://www.qantas.com/content/dam/qantas/pdfs/qantas-group/icf-report-australia-saf-policy-analysis-nov23.pdf>.
29Ibid,
30‘How Delta and Neste are working toward making flying more sustainable’, Neste (Web Page) <https://www.neste.com/products-and-innovation/sustainable-aviation/case-stories/how-delta-and-neste-are-working-toward-making-flying-more-sustainable>.
31The Hon Catherine King MP, ‘Have your say on a future made in Australia: unlocking Australia’s low carbon liquid fuel opportunity’ (Media Release, 13 June 2024).
