You would expect most people around the world to be well versed in the metaphor of the ‘carrot and stick’. At its most basic, it’s a simple concept exploring the relationship between reward and punishment for achieving a desired outcome of any particular situation. But, when taking a more complex look, it exists in almost every facet of life.
The carrot and stick are ever-present in the transport industry. It can relate to the day-to-day through examples like extensions and clauses in contracts, the reinforcement of positive and punishment of negative workplace behaviour or, in a more long-term sense, the ongoing attempts to decarbonise the road transport sector.
With Australia committed to net zero 2050, huge leaps need to be made in this industry to ensure the nation can even get close to those targets – let alone meet them. If anything, the transport sector is moving away from its end goal of total decarbonisation and looms as a potential whipping boy in any overall failure to meet those lofty ambitions.
The advent of the new year has seen us hit a critical juncture in decarbonisation of the transport industry. With Australia’s truck fleet considerably older than its European and North American counterparts and overall sales – according to the Truck Industry Council – only strengthening, is the carrot needed, or the stick?
These next few years of truck sales could lay the bedrock of what travels on our roads for the next 20 years or more. So, will it be diesel, will it be electric, could it be hydrogen?
It will almost certainly be a combination of the three, with diesel likely to reign supreme and electric running up behind, but diesel and decarbonisation do not go hand in hand.
So, what is the next thing needed to motivate a wider shift away from diesel. Is it the carrot, or the stick?
Director of Policy and Strategy at Freight Victoria Andrew Newman believes one cannot exist without the other, and early rewards need to be aligned with future policy change to ensure the sector can take tangible action towards these goals.
“When you’ve got a structural change that’s happening the economy, if there’s no action by government you have a situation where industry can only invest to the extent to where they’re still competitive in the market as it is,” Newman tells ATN.
“If you were to look at carrots and sticks, you need to start with carrots – and a clear communication of what that stick will be. Then, you put those carrots in place and, when the stick commences, the stick takes over.
“Regulation – which is the stick – creates a new playing field for people to compete on, and it creates that fair competition. You can’t just do it overnight though, because with the levels of investment in the current industry standards, half the industry would be killed off before it gets there.
“What the carrot does is it informs the industry as to where the playing field is going to be and then helps the industry get there.
“Around the world we’ve seen decarbonisation policies implemented by governments that provide grants and subsidies, but some of the problems with those are unless you have an actionable change for when the subsidy ends, the problem is still there.
“But you can’t have them in place forever, because otherwise they become a cost that isn’t really changing what they are trying to change, and when those grants end industry reverts back to what it was doing before.
“In the case of the freight transition, the grants need to be incredibly large in order to make an impact, but if you haven’t moved the playing field for when that period ends, you’ll go back to what was happening before.
“You need the carrot to help people get up the ladder and get to that new playing field, so initially that’s subsidies and grants to help industry operate, but it has to come with ‘five, ten years from now you legally have to be there anyway’.
“They have to work parallel to each other or they’re just not effective.”
Compared to some of its international counterparts Australia’s battery electric heavy vehicle industry is still in something of a growth phase.
The unique geographical challenges that Australia presents to EVs across the board are still well in the process of being solved and, if they aren’t, the potential for the industry to boom beyond the nation’s east coast is slim to nil.
However, despite being behind some European and North American countries and regions in the EV race, there are plenty of lessons to be learned in Australia’s own efforts to progress its road transport decarbonisation goals.
One prime example is a recent policy implementation that has taken hold in the Netherlands – a nation that has often been lauded for its front-foot approach to sustainability.
As of January 1st, 2025, 14 Dutch cities have implemented zero-emission zones for urban freight, meaning polluting vans and trucks are prohibited from entering these areas.
Major cities Amsterdam, Rotterdam, Utrecht and The Hague are all among the cities that implemented the policy at the turn of the new year, and even more are expected to opt in as it progresses.
In Amsterdam, any areas within the A10 ring road are classified as ‘low emission’ zones for diesel vehicles. Diesel vans must meet Euro 5 emissions standards and above, while trucks and buses must meet Euro 6 standards and above.
Within the city’s S100 ring road all vans and trucks must be emission free if registered for the first time on or after January 1st.
Fines register €120 (AU$200) for cars, taxis, delivery vans and coaches and €300 (AU$500) for trucks.
For a considerable amount of time prior to the full implementation of this new law was the subsidising of the purchase of new commercial electric vehicles in the country, where those purchasing the vehicle could claim, at most, €5,000 (AU$8300).
These subsidies were no longer eligible to claim from December 31st, 2024 – the day prior to the new laws taking effect.
“This really good example in the Netherlands is being legislated at the national level and they’ve been designing and implementing this big reform,” Newman continues.
“European countries have tended to stop giving grants for EV trucks, because they’ve started legally requiring the change.
“Our biggest challenge in Australia is our governments have tended not to want to go to the ‘stick’ part of it. Something like the fuel efficiency standard is a great initiative, but it’s probably something that would have been more impactful ten years ago.
“It’s really hard politically, because once you start making noise about some sort of stick arrangements for the freight sector, there’s going to be a lot of pushback on it.
“I think the lesson is you have to start targeting what the regulation is, and it doesn’t have to be cost-based, it doesn’t have to be fines, it could actually be benefits.
“You could start with providing better access or providing cheaper access, and you could start small, but those two things happening independently or in isolation will not be effective.
“What I would say the next step is would be for all the big players to come together, almost accord style, and decide what’s needed to make the transition.
“We have ARENA grants happening and all sorts of money starting to flow through on the grant and subsidy side, but unless you’re able to create an industry that can compete without the support, it won’t be effective.”
That’s what a huge crux of this road transport decarbonisation issue seems to be coming down to. How do you create tangible change to an industry already under immense stress without causing damage?
Whether it be the worsening driver shortfall, a volatile and unpredictable economic environment, the rising cost of fuel, or any one of a number of other factors, adding a fast track to the energy transition with an end result of further fines on top of the already extensive challenges facing the sector could be the well-meaning straw that breaks a lot of camels’ backs.
Newman says while there is so much pressure on transport companies to implement these decarbonisation changes, they’re not necessarily the beneficiaries of such a change.
“If you’re a transport company you’re just trying to win the contracts of the people who own the cargo,” Newman says. “Traditionally the model of the freight sector and the shipping sector have been the same – you own the kit, and you move their stuff around.
“But the shipping lines are in a better space in this regard, because they tend to have more market power and squeak something down the line better than what road transport does.
“You have to ask, ‘who is funding the transition?’, because if it’s only the shipping industry or only the transport industry, then you’re going to see a pretty slow transition.
“There are only going to be so many EVs that companies like Linfox or Team Global Express are going to buy, because the beneficiaries of low-emission transport are not the people who own the trucks.
“Its Coles, Woolworths, Bunnings, IKEA – the people who own the goods being transported.
“When you talk about the beneficiaries of decarbonisation investment, they’re the ones that really want it, but they’re not actually the ones who have to invest in the kit that’s going to enable the outcomes.
“If you’re a transport company saying, ‘we only make $50 a kilometre’, then how are you going to do that? There’s got to be some way for the industry to come together.
“These entire industries have been set up around models where it is a benefit to not actually employ any drivers, but to employ subcontractors.
“That commercial model may not work for a decarbonised model where you can’t just stop and refuel in five seconds, but that model is like a stone for them. It does not change.
“These large companies might innovate and come up with solutions, but their fundamental commercial model is a given, they consider that to be fixed.”
Whatever the carrot and stick may be over the next decade – or less – though, it needs to be implemented swiftly.
As Australia continues to barrel towards those net zero targets, the transport industry will almost certainly be one of the major sectors that is on the receiving end of what could be an unfair level of blame.
“If things are not done in the next five years, it will be worse in 2040 than it is now,” Newman says.
“The government has to settle on its carrot and stick approach, and they’ve got to spend money in the short-term, but that will only be of greatest value if there is a clear regulatory framework we’re heading towards.
“The industry itself must also realise these commercial models that have done the job for the internal combustion engine freight delivery may not be the commercial models needed for a decarbonised industry.
“In the next five years what that commercial model is for a decarbonised freight industry has to be settled.
“But first, urgently, government has to settle on what the stick is, because without that notion of a clear playing field created through regulatory models by 2030, we’re in big trouble.”
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