Chapter 4: Transport and mobility

Transport is among the most emissions-heavy sectors. In 2019 the sector represented 23% of global energy-related emissions according to the 2022 Intergovernmental Panel on Climate Change (IPCC) Mitigation Report. The vast majority (70%) came from road vehicles, another 11% from shipping, 12% from aviation and just 1% from rail.

Decarbonisation paths vary dramatically. For passenger and light-duty transport the consensus is clearest: electrification using lithium-ion batteries. For shipping and aviation, the longer asset life-cycles, longer distances and heavier loads create a challenge.

Opportunities to collaborate exist sector-wide. Australia can learn about operational structures, ownership and maintenance of electrification infrastructure at mass scale from world-leading China.

EVs and charging provide rich opportunities for China and Australia to work together, particularly as Australia prepares for new policies to accelerate take-up and build charging infrastructure. From manufacture and supply to managing a grid powered largely by variable renewable energy; via university-level information exchanges on new technology innovations and business partnerships.

Another key driver is the drop in the cost of lithium-ion batteries. In the early 2000s, the cost of a lithium-ion battery was around USD1,000 per kWh. This fell to USD137 per kWh, tantalisingly close to the tipping point where the upfront price of EVs achieve pricing parity with internal combustion vehicles – estimated at USD100 per kWh. Much of this cost reduction is due to China’s co-ordinated supply chain ecosystem and innovations in advanced manufacturing processes.

The IEA has called for a redoubling of efforts to improve efficiency, innovate and scale technology to avoid total costs rising. It launched its own initiative to help ensure reliable supplies and suggested considering extending EV incentive schemes.

Lithium is mined in Chile, Argentina and Australia and lithium processing and battery manufacture is dominated by China.

Australia can increase economic complexity by developing its own battery manufacturing ecosystem. Coming together to learn from the recent past is a simple first step.

Lithium-ion batteries have emerged as one of the key technologies on which the new electrified transport sector depends. The primary cathode material is lithium, but the batteries also contain nickel, cobalt and manganese.

Advantages over other battery types such as nickel-cadmium include energy density, cycle life, calendar life and cost per kWh.

Knowledge-sharing and skill swaps

Australia plans to establish a AUD500 million fund to build on the nation’s nascent EV charging network and invest in hydrogen highways for heavy transport. Promised tariff and tax exemptions will bring down the ticket price of EVs, encouraging market expansion beyond the lacklustre 1% of total vehicle sales in 2020.

China’s electric recharging infrastructure is already at mass scale and growing. The government’s goal is to have 40% of the vehicles sold in the country be EVs by 2030 and by 2025 to have in place charging infrastructure to meet the needs of more than 20 million cars.

Massive capital investment and heavy government intervention have played a crucial role in helping the Chinese EV market to flourish, but China’s experience offers valuable lessons for Australia.

There is room for China and Australia to collaborate on EV charging from a grid powered largely by a variable, renewable electricity generation source. Information exchange on bidirectional charging and the ability of EV owners to offer grid support services could occur at the university level, along with direct and powerful knowledge sharing between businesses.

By contrast, several cities in China have heavily committed to electric buses, preferring the lower upfront costs and tolerating the longer recharging cycle (four to six hours). Shenzhen, for example, has completely electrified its public bus fleet of more than 16,000 vehicles.

For heavy-duty, long-haul trucking, the economics of competing recharging and refuelling infrastructures may tend towards the emergence of a dominant technology rather than the co-existence of both. In this heavy-haul context, hydrogen fuel cells may have the advantage over electrified batteries.

Heavy-haul duty cycles make electrification more challenging, with longer charging times and the need for higher capacity charging points. Hydrogen fuel cells, green methanol and renewable diesel have a shorter refuelling time. Renewable diesel is hydrogenated vegetable oil, which is close to a drop-in fuel for diesel engines. The logistics of establishing a refuelling network for a new fuel, particularly hydrogen, are significant but once established may have a compounding effect.

The Queensland, New South Wales and Victorian Governments have committed to developing a hydrogen highway along Australia’s east coast, providing funding to build essential infrastructure for long-haul transport.

There is much to learn from China’s policy support for the supply and demand side in the green hydrogen economy.

Ammonia and hydrogen are not ‘drop-in’ fuels that can be introduced to existing diesel-engine vessels. Ports would need to be equipped with ammonia- or hydrogen-storage facilities to refuel vessels. There are also barriers that ammonia will need to overcome before it can become a mainstream maritime fuel, such as its toxicity and NOx emissions. The world’s first ammonia-ready vessel, a Suezmax tanker of about 160,000DWT was constructed at a Chinese shipyard and delivered in early 2022. But this is an outlier for now: in the near-to-medium term a large-scale switch from diesel engines in vessel fleets with long lifecycles seems unlikely.

Another alternative is green methanol, which does not have ammonia’s challenges with safety and NOx emissions. Green methanol is based on green hydrogen and biomass, biogas or atmospheric CO2 and is closer to a drop-in fuel than ammonia or hydrogen.

In the longer term, SAF will need to occupy a much higher proportion of the fuel blend. BloombergNEF projects its use will need to reach 18% of total aviation fuel by 2030 and (depending on the energy mix) between 39% and 95% by 2050.

The aviation industry is tackling the challenge collaboratively. In October 2021, around 290 airlines that are members of the International Air Transport Association (IATA) committed to achieve net zero carbon by 2050 under the campaign ‘Fly Net zero’. Most of the gains are from the switch to SAFs, but new technology, operational efficiencies and offsets will also play a part. 

What next?

The transport and mobility sector is one of dramatically different paths.

There are some quick wins: the increasing electrification of passenger vehicles and the charging infrastructure to enable longer journeys; and hydrogen buses, which are already widely used in China.

There are also some slow and difficult wins which will carry significant logistics challenges. This is especially the case in long-haul trucking, shipping and aviation.

Australia can play a meaningful role by working on solutions over the coming decades. The abundance of renewable energy sources brings a competitive advantage to utilise the surplus to produce new fuels and address harder challenges.

Australia could also lead in the education space, training the world’s best technicians and engineers across the sector.

What is critical is the need to re-engage in constructive dialogue about how Australia can contribute to the global challenge. Joining Australian innovation with China’s scale and speed would bring much needed new solutions to market in both countries and the region.