The transportation sector is one of the major contributors to greenhouse gas emissions and air pollution in Europe. According to the European Environment Agency, road transport accounted for 72% of the total greenhouse gas emissions from the transport sector in 2018. Moreover, road transport is also responsible for a significant share of air pollutants, such as nitrogen oxides and particulate matter, that affect human health and the environment.
In order to address these environmental challenges, the European Union has set ambitious targets to reduce greenhouse gas emissions from the transport sector by 60% by 2050 compared to 1990 levels. To achieve these targets, the EU has implemented various regulations and initiatives, such as the Euro standards for vehicle emissions, the CO2 emission standards for new cars and vans, and the European Green Deal.
However, regulations alone are not enough to ensure a transition to a low-carbon and sustainable mobility system. There is also a need for innovative solutions that can provide access to cleaner and more efficient vehicles, while reducing the environmental impact of vehicle ownership and operation. One such solution is light commercial vehicle leasing.
Light commercial vehicles (LCVs) are vehicles with a maximum mass of up to 3.5 tonnes, such as vans, pick-ups, and minibuses. They are mainly used for transporting goods and passengers for commercial purposes. The Europe light commercial vehicle leasing market size stood at a value of around USD 10.69 billion in 2023. The market is further expected to grow in the forecast period of 2024-2032 at a CAGR of 7.10% to reach USD 19.82 billion by 2032.
In this blog post, we will explore how light commercial vehicle leasing contributes to environmental sustainability in Europe. We will discuss how leasing enables access to newer and more fuel-efficient vehicles, how leasing promotes vehicle electrification and the adoption of alternative fuels, and how leasing models incentivize fuel-efficient driving behavior and vehicle maintenance. We will also highlight the advantages of light commercial vehicle leasing for environmental sustainability, and provide an environmental impact assessment of the leasing market.
Environmental Challenges in the Transportation Sector
The transportation sector faces several environmental challenges that pose a threat to the climate, the environment, and human health. Some of these challenges are:
Carbon emissions: The transportation sector is the second-largest source of greenhouse gas emissions in the EU, after the energy sector. In 2018, the transport sector emitted 919 million tonnes of CO2 equivalent, which represented 19% of the total greenhouse gas emissions in the EU. Road transport was the main contributor, with 656 million tonnes of CO2 equivalent, or 71% of the transport emissions. LCVs accounted for 12% of the road transport emissions, or 79 million tonnes of CO2 equivalent.
Air pollution: The transportation sector is also a major source of air pollutants, such as nitrogen oxides (NOx), particulate matter (PM), and ozone (O3), that have adverse effects on human health and the environment. According to the European Environment Agency, road transport was responsible for 40% of the total NOx emissions, 11% of the total PM2.5 emissions, and 15% of the total PM10 emissions in the EU in 2018. LCVs contributed to 17% of the road transport NOx emissions, 8% of the road transport PM2.5 emissions, and 9% of the road transport PM10 emissions.
Vehicle fleet: The environmental impact of the transportation sector depends largely on the characteristics of the vehicle fleet, such as the age, fuel type, and emission standard of the vehicles. According to the European Automobile Manufacturers Association, the average age of the LCV fleet in the EU was 11.3 years in 2019, which means that most of the LCVs on the road were not compliant with the latest emission standards. Moreover, the majority of the LCVs in the EU were powered by diesel, which is a more polluting fuel than petrol or alternative fuels.
To address these environmental challenges, the EU has adopted various regulations and initiatives to reduce greenhouse gas emissions and air pollution from the transportation sector. Some of these are:
Euro standards: The Euro standards are a series of emission standards that set the maximum limits for the emissions of NOx, PM, and other pollutants from vehicles. The Euro standards have been progressively tightened since 1992, and the latest standard, Euro 6, applies to all new LCVs registered since September 2016. The Euro standards have helped to reduce the emissions of NOx and PM from LCVs by 95% and 97%, respectively, since 1992.
CO2 emission standards: The CO2 emission standards are a set of regulations that set the maximum limits for the average CO2 emissions from new cars and vans. The CO2 emission standards aim to improve the fuel efficiency and reduce the fuel consumption of vehicles. The current CO2 emission standards for new LCVs require a 31% reduction in CO2 emissions by 2030 compared to 2021 levels. The CO2 emission standards have helped to reduce the average CO2 emissions from new LCVs by 21% since 2012.
European Green Deal: The European Green Deal is a comprehensive strategy that aims to make the EU climate-neutral by 2050. The European Green Deal covers various aspects of the economy and society, including the transportation sector. Some of the key objectives of the European Green Deal for the transportation sector are to increase the share of renewable and low-carbon fuels, to boost the deployment of zero- and low-emission vehicles, and to enhance the infrastructure and incentives for sustainable mobility.
These regulations and initiatives are essential to ensure a transition to a low-carbon and sustainable mobility system in the EU. However, they also pose significant challenges for the vehicle manufacturers, operators, and users, who have to comply with the stricter emission standards, invest in cleaner and more efficient vehicles, and adapt to the changing mobility patterns and preferences. This is where light commercial vehicle leasing can play a key role in facilitating and accelerating the transition to sustainable mobility.
The Role of Light Commercial Vehicle Leasing in Promoting Sustainability
Light commercial vehicle leasing is a form of vehicle financing that allows the user to access a vehicle for a fixed period of time and a fixed monthly fee, without owning the vehicle. The user can choose the vehicle model, the contract duration, the mileage limit, and the service and maintenance options. The leasing company owns the vehicle and bears the risks and costs associated with depreciation, resale, and maintenance. At the end of the contract, the user can return the vehicle to the leasing company, extend the contract, or switch to a new vehicle.
Light commercial vehicle leasing can contribute to environmental sustainability in the transportation sector in several ways. Some of these are:
Access to newer and more fuel-efficient vehicles: Leasing enables the user to access newer and more fuel-efficient vehicles, which have lower emissions and fuel consumption than older vehicles. According to a study by Leaseurope, the average age of the leased LCV fleet in the EU was 2.9 years in 2019, compared to 11.3 years for the total LCV fleet. Moreover, the average CO2 emissions from the leased LCV fleet in the EU were 159 g/km in 2019, compared to 181 g/km for the total LCV fleet. By accessing newer and more fuel-efficient vehicles, the user can reduce the environmental impact of vehicle operation and comply with the emission standards.
Promotion of vehicle electrification and adoption of alternative fuels: Leasing can also promote vehicle electrification and the adoption of alternative fuels, such as hybrid, electric, hydrogen, or natural gas, which have lower or zero emissions than conventional fuels. Leasing can lower the barriers to entry for these vehicles, such as the high upfront cost, the uncertainty about the resale value, and the lack of infrastructure and incentives. According to a study by Leaseurope, the share of alternative fuel vehicles in the leased LCV fleet in the EU was 7.4% in 2019, compared to 3.8% for the total LCV fleet. By promoting vehicle electrification and the adoption of alternative fuels, leasing can support the transition to a low-carbon and sustainable mobility system.
Incentivization of fuel-efficient driving behavior and vehicle maintenance: Leasing can also incentivize fuel-efficient driving behavior and vehicle maintenance, which can reduce the emissions and fuel consumption of vehicles. Leasing contracts often include clauses that reward the user for driving within the mileage limit, maintaining the vehicle condition, and avoiding damages and fines. Moreover, leasing contracts often provide the user with access to digital tools and services, such as telematics, fleet management, and driver training, that can help the user to monitor and improve the driving performance and vehicle efficiency. By incentivizing fuel-efficient driving behavior and vehicle maintenance, leasing can enhance the environmental sustainability of vehicle operation.
These are some of the ways that light commercial vehicle leasing can contribute to environmental sustainability in the transportation sector. However, leasing also has some advantages for the user, the leasing company, and the society, that can further support the environmental goals.
Advantages of Light Commercial Vehicle Leasing for Environmental Sustainability
Light commercial vehicle leasing has several advantages for the user, the leasing company, and the society, that can further support the environmental sustainability of the transportation sector. Some of these are:
Cost savings: Leasing can help the user to save costs associated with vehicle ownership and operation, such as the purchase price, the depreciation, the resale, the maintenance, the insurance, and the taxes. Leasing can also help the user to avoid the penalties and fines for non-compliance with the emission standards. According to a study by Leaseurope, the average monthly fee for leasing an LCV in the EU was EUR 392 in 2019, which was lower than the average monthly cost of ownership of an LCV, estimated at EUR 464. By saving costs, leasing can increase the affordability and accessibility of cleaner and more efficient vehicles.
Flexibility: Leasing can provide the user with flexibility to choose the vehicle model, the contract duration, the mileage limit, and the service and maintenance options, according to the user's needs and preferences. Leasing can also provide the user with flexibility to switch to a new vehicle at the end of the contract, or to extend the contract, depending on the market conditions and the user's satisfaction. By providing flexibility, leasing can increase the adaptability and convenience of sustainable mobility solutions.
Innovation: Leasing can stimulate innovation in the vehicle manufacturing and leasing industry, as the leasing companies have to offer newer and more fuel-efficient vehicles, and provide value-added services and solutions, to attract and retain the users. Leasing can also stimulate innovation in the vehicle recycling and reuse industry, as the leasing companies have to dispose of the returned vehicles in an environmentally friendly and profitable way. By stimulating innovation, leasing can increase the competitiveness and attractiveness of sustainable mobility solutions.
Circularity: Leasing can promote circularity in the vehicle life cycle, as the leasing companies have to optimize the use and reuse of the vehicles, and minimize the waste and emissions associated with the vehicle production, operation, and disposal. Leasing can also promote circularity in the vehicle value chain, as the leasing companies have to collaborate with the vehicle manufacturers, suppliers, operators, and recyclers, to ensure the quality and efficiency of the vehicles and services. By promoting circularity, leasing can increase the resource efficiency and environmental performance of the transportation sector.
These are some of the advantages of light commercial vehicle leasing for environmental sustainability. However, to assess the actual environmental impact of leasing, it is necessary to conduct an environmental impact assessment of the leasing market.
Environmental Impact Assessment
An environmental impact assessment is a process that evaluates the potential environmental effects of a project, policy, or activity, taking into account the direct, indirect, and cumulative impacts. An environmental impact assessment of the light commercial vehicle leasing market in Europe would require a comprehensive and systematic analysis of the environmental aspects and impacts of the leasing activities, such as the vehicle production, operation, and disposal, the fuel consumption and emissions, the infrastructure and incentives, and the stakeholder involvement and awareness. An environmental impact assessment would also require a comparison of the leasing scenario with the alternative scenarios, such as the vehicle ownership or the public transport, to determine the net environmental benefits or costs of leasing.
