Understanding carbon abatement cost in transportation

With 2030 fast approaching, many businesses are facing the challenge of working out where to focus their sustainability efforts as they race to slash CO2e emissions. One of the best ways to gauge how impactful different decarbonization actions could be is to consider the corresponding carbon abatement cost.

In this article, we explain what carbon abatement cost refers to, and we’ll explore the different types of carbon abatement. We will also consider the trend in carbon abatement cost over time as it relates to transportation. Carbon abatement was one of the key themes discussed during the recent Einride Webinar – “Sustainable road freight: Why now is the time to make the switch” – now available to watch on demand.

What is carbon abatement cost?

Carbon abatement cost is a way to measure – and compare – the cost-effectiveness of decarbonization. It is the expense or financial investment associated with reducing, avoiding, or negating carbon dioxide (CO2) emissions or other greenhouse gases (GHGs). The most common way to express this measurement – used when discussing climate change mitigation efforts on a global scale – is cost per tCO2e. This represents the cost per (metric) tonne of CO2 equivalent; that is, how much it costs to mitigate 1000 kilograms of CO2e.

Another common term is marginal abatement cost. This refers to the additional cost incurred from implementing a mitigation measure or policy in order to achieve a specific level of emissions reduction.

The measurement of carbon abatement cost helps industry, academia and policymakers to present and compare the costs of CO2e mitigation. To better understand carbon abatement cost, it’s important to bear in mind that there are three different routes for abating emissions:

• Reducing emissions: Implementing measures – including system efficiencies – to reduce the release of greenhouse gases into the atmosphere.
• Avoiding emissions: Preventing the generation of greenhouse gas emissions by adopting alternative technologies or practices that do not rely on fossil fuels.
• Removing emissions: Removing greenhouse gases from the atmosphere through natural means – such as forest conservation and protection – or technological means, such as carbon capture and storage (CCS).

The first two categories are direct mitigation measures, in that they focus on addressing the root cause of the emissions. On the other hand, removing emissions is about sequestering or negating CO2e that has already been emitted.

When it comes to removing emissions, an important distinction must be made between removing emissions at the source or within the value chain (“removing emissions”), and removing emissions away from the source or beyond the value chain (“offsetting emissions”). To offset emissions is to compensate for the emissions generated in one activity (such as freight transportation) by investing in projects that reduce or sequester the equivalent volume of emissions elsewhere (such as reforestation). Note that for the transportation sector, removing freight emissions at the source is not possible.

Offsetting emissions won’t move the needle

Carbon offsetting is a controversial practice (the TV host John Oliver has even dedicated a full segment to the theme in his satirical Last Week Tonight show). The EU parliament wants to improve consumer protection against misleading sustainability claims, and as part of this, green claims based on carbon offsetting would only be allowed for residual emissions and instances where emissions have already been reduced as much as possible.

When it comes to reforestation – one of the most common forms of carbon offset projects – there is an issue of traceability. Businesses might pay for an assurance that a group of trees will be planted, but there’s no guarantee that they will grow successfully and remain untouched. Similarly, if a business pays for an assurance that a group of trees (or area of forest) won’t be cut down, there’s no guarantee that those trees won’t be removed at a later time. A joint investigation led by the Guardian found that the forest carbon offsets approved by the world’s leading certifier (and used by several big-name corporations) are “largely worthless” and could exacerbate the impacts of climate change.

Carbon capture and storage is one method that has been attracting attention. When it comes to CCS, one of the primary disadvantages is its high cost per tonne. Removing carbon in this way to negate transportation emissions is simply impractical. No matter how big your carbon capture is, you will not gain the benefits of scale (and if it’s not scalable and not cost-effective, it’s not sustainable)..

Carbon offsetting should only be seen as a complementary strategy alongside other emission-reduction efforts that focus on actually reducing or avoiding emissions. To rely on offsetting emissions alone will not effectively move the needle on climate change.

James Temple, Senior Climate & Energy Editor at MIT Technology Review, says carbon removal hype is becoming a dangerous distraction: “The noise, news and hype are feeding a perception that carbon removal will be cheap, simple, scalable, and reliable – none of which we can count on.”

Furthermore, climate offsetting should be reserved for negating emissions that are challenging to eliminate through direct mitigation measures. Freight emissions need not fall into the class of emissions, since battery electric technology – combined with digital intelligence – is very capable of providing businesses with the benefits of direct mitigation. Additionally, transforming freight operations with intelligently deployed electric vehicles will unlock the benefits of scale.

Reducing emissions and avoiding emissions in transportation

In transportation, emission reduction can be achieved – to some extent – through optimizing the transport network to improve efficiencies and to minimize empty miles. Better route planning and load consolidation could reduce emissions in the range of 10-20%.

The real emission mitigation comes from emission avoidance – such as by switching away from fossil-fuel-based transportation in favor of sustainable road freight based on battery electric vehicles. When it comes to tailpipe emissions, it’s possible to avoid these emissions at the source (since there are no tailpipe emissions with battery electric vehicles), and when it comes to well-to-wheel emissions, these can be reduced by up to 95%. Read our deep-pe article on why battery electric is the winning technology for decarbonizing freight at scale, compared to alternatives like hydrogen-powered fuel cells and biodiesel / hydrotreated vegetable oil (HVO).

For businesses with goods to move, the best way to decarbonize freight is to first and foremost switch to electric vehicles on high-emission lanes, while optimizing the remainder of their network. This enables them to gain the benefits of a mixed fleet as they progress on their journey to fully electric freight operations.

Transportation’s carbon abatement cost curve

What happens when we consider how carbon abatement cost develops over time? The graph pictured below – published by Goldman Sachs Research – shows the progress of the carbon abatement cost curve (for anthropogenic GHG emissions in the transport sector, including aviation).

The X-axis depicts the carbon abatement potential in transportation, measured in gigatonnes of CO2e. The Y-axis is the corresponding cost in USD (per tonne of CO2e). The upper cost curve is 2022, while the lower curve represents 2023. It’s worth noting that in both carbon abatement cost curves, there is a portion of abatement in which the cost is below 0. This represents the potential for decarbonization at a cost saving; in order words, the cases where – through efficiency and measures like switching to electric vehicles – it’s possible to both save money and save emissions. This is currently a small portion of the overall emission-saving potential in transport; over time, more of the cost curve will fall below 0 cost.

When comparing the two cost curves (2022 versus 2023), we can see there’s a reduction of almost 30%. This means it’s becoming more affordable to decarbonize transportation, through electrification, over time. During the Einride Webinar, Cambridge University Professor David Cebon – also the Director of the Centre for Sustainable Road Freight – said the technology trends show that battery electric freight will lower in cost over time, while diesel freight will increase in cost.

“I think electrification of road freight has the potential within a rather short time to have zero added cost, or in fact to be lower cost [compared to diesel]. And of course, that’s going to depend particularly on vehicle costs coming down and battery costs coming down. They are,” he said.

“The most expensive part of an electric truck is its battery, and the battery is on a learning curve with the entire automotive industry. Battery prices are coming down and are expected to come down year-on-year – and we’ll expect to see the cost of electric trucks coming down towards diesel costs.”

2023 vs 2022 Carbon abatement cost surve for anthropogenic GHG emissions in transport sector, based on current technologies and associated costs. Source: Goldman Sachs

Einride's approach of intelligent electrification of freight transportation pushes this curve down even more, allowing for a larger and cheaper carbon abatement potential than what is pictured in this graph. Einride's digital freight platform harnesses intelligent planning algorithms, unlocking increased vehicle utilization, more optimized electrification planning, and more cost-competitive electrification for a large part of a shipper's network today.

Decarbonize freight to prepare for what’s ahead

Why are businesses moving forward with the transition now? There are a wide range of concrete answers to that. In addition to comparably low carbon abatement cost today, compelling reasons include: having a competitive advantage in the market; faster deployment of subsequent waves by securing assets; mitigating the risk of unexpected or sudden cost increases, including carbon taxes; and avoiding supply chain disruption caused by diesel bans in cities.

By starting the transformation of digitizing data, automating processes, installing necessary charging infrastructure and securing clean electricity, businesses will make their transportation system more efficient and more resilient, further reducing their carbon abatement cost.

Isabelle Källenius – Einride’s Director of Strategic Growth – says regulations are an additional reason to decarbonize today: “For a lot of large players, [transportation] falls under Scope 3 emissions, which is arguably the largest chunk – at least for many companies that I speak to – and the hardest one to tackle as well. To actively tackle decarbonizing transportation is a very good and compelling way to tackle your Scope 3 emissions.”

Isabelle noted that this is especially important for EU businesses (or global businesses with operations in the EU) because as of 2025, businesses will be required to report Scope 3 emissions, in addition to their Scope 1 and Scope 2 emissions. You can learn more about these requirements in our article: What are Scope 3 emissions? And why should you report them?

Another regulatory consideration is the fact that cap and trade systems – a key policy tool for carbon abatement – are becoming increasingly common around the world (explore this map to see where). Under these emissions trading systems, emissions are “capped” and credits can be “traded” (purchased) by businesses whose emissions exceed a certain limit.

The EU Emissions Trading System (EU ETS) is the world's first major carbon market and a central component of the EU's efforts to reduce greenhouse gas emissions and combat climate change. TheETS II – adopted by the European Parliament in April 2023 – will establish a separate emission trading system in which road transport is included, and the trading of CO2e allowances will be handled by the fuel distributors.

When launched (expected: 2027), the ETS II will impact shippers operating within the EU. Over time, as the cap for emissions is reduced, prices are expected to increase drastically. If businesses are slow to transition away from diesel-based freight operations, they will face additional costs associated with purchasing carbon allowances to cover their transportation emissions.

Einride is your transformation partner

For a range of reasons, businesses across the globe are chasing ambitious – yet feasible – sustainability targets. The goal, indeed, should be to decarbonize every aspect of the supply chain. Einride is enabling businesses to lead the way when it comes to reducing and avoiding emissions in road freight – and to do so with world-class traceability.

The important takeaway here: There are cost-effective solutions for tangibly mitigating emissions in transportation. The technology needed to kick off the first wave of your electrification journey already exists today – and the time to make the switch is now. As your transformation partner, Einride can guide you at every step of the way.

“I speak to a lot of heads of sustainability and innovation managers. Still, there seems to be this common misconception that sustainable road freight is a thing of the future,” said Isabelle Källenius. “I try to ensure I am leaving all of these meetings making the point that the tech works. You can do it – now, and at scale.”

Making the switch isn’t about addressing emissions reactively through offsets. It’s about intelligently reducing and avoiding emissions with lasting impact. It’s about going electric – for good.

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The Einride Webinar “Sustainable road freight: Why now is the time to make the switch” is now available to watch on demand. Be sure to sign up to our newsletter to get all the updates regarding upcoming webinars.