The automotive industry is an essential part of the Spanish economy – Spain is the world’s eighth-biggest producer of automobiles – but it is also the sector associated with the most greenhouse gas emissions. Transport accounts for 26% of Spain’s overall emissions, with private cars accounting for 63% of this percentage. A new report by the ESADE Institute for Social Innovation and the Caixa d’Enginyers Foundation, entitled The Transition Towards a Low-Carbon Automotive Industry: Challenges and Opportunities for Sustainable Investment, concludes that, in order to prevent serious environmental and health-related consequences, the automotive industry must evolve towards greater sustainability by taking steps to promote electric vehicles, disinvest in fossil fuels, improve fuel-efficiency and reconsider mobility in general.

Daniel Arenas, Associate Professor at ESADE and one of the co-authors of the report, commented: “One of the greatest challenges is to encourage people to buy electric cars, which by the year 2030 should account for 35% of all vehicle purchases.” He added: “The government should contribute and regulate conventional cost limitations in cities.”

From a financial standpoint, Josep Oriol Sala, President of Caixa d’Enginyers, observed: “The role of the financial sector in the shift towards decarbonisation is vitally important for the energy transition towards a low-carbon economy because of its capacity to finance low-carbon technology projects and promote socially responsible investment.”

Sustainable mobility: a necessity and a challenge

The report by ESADE and the Caixa d’Enginyers Foundation suggests that, in contrast to the prevailing trend in Europe, Spain’s greenhouse gas emissions have increased by 17.8% since 1990s. This trend is in conflict with the current expert consensus that the global temperature increase must be limited to no more than 2ºC (or, preferably, 1.5ºC). With this goal in mind, companies and organisations in the automotive industry have pledged to promote a more environmentally sustainable mobility model. Nevertheless, a comprehensive proposal involving manufacturers, suppliers, consumers and the public sector is necessary. The public sector must play a key role by regulating, planning and incentivising this transition, taking on part of the cost of transitioning towards lower-pollution alternatives, and addressing various challenges associated with these efforts.

Although electric vehicles are an attractive possibility, various challenges remain: electric cars still have a carbon footprint, albeit a smaller one than conventional vehicles; the manufacture of electric vehicles is associated with a high level of emissions; the charging of electric vehicles has an energy impact; and the mining of minerals necessary for the manufacture of electric vehicles has various social and environmental impacts.

Moreover, electric vehicles currently have only a minimal presence in Spain. Although the production of electric cars in Spain has quadrupled over the past five years, these vehicles still account for less than 1% of all private cars nationwide. This is primarily due to the lack of adequate charging infrastructure and prices that remain unaffordable for most consumers. According to the report, in order for this mode of transport to be viable, the number of public charging stations would have to increase by more than a factor of 90 with respect to 2015 levels.

Some companies are already rethinking their approach to mobility. The report highlights various cases, including Silence, a leading Spanish producer of electric scooters that is poised to become the top supplier for scooter-sharing systems in Spain; Nissan, an automaker that has collaborated with public institutions to promote electric cars and car-sharing schemes; Som Mobilitat, a cooperative car-sharing model involving sustainable vehicles; and other organisations such as Wallbox and the Barcelona City Council.

How to financially support a low-carbon automotive industry

According to the report, climate change poses physical, regulatory and technological risks for the financial sector, but it also presents an opportunity: the companies that best adapt to a more environmentally sustainable economy will enjoy competitive advantages, greater profitability for their investments and better financing opportunities.

In relation to financing, the report notes that the market for green bonds and climate-aligned bonds has grown over the past five years by a factor of three, reaching a global total of $1.2 billion, most of which has gone towards efforts to reduce the carbon footprint of transport. Although most green bonds are issued by railway operators, more and more automotive companies are starting to use these instruments to develop electric and hybrid vehicles as well as battery-charging infrastructure. Nevertheless, green bonds still account for just 2% of all bonds issued by the automotive industry.