This policy primer highlights successful and promising strategies that support faster adoption of zero-emission medium- and heavy-duty vehicles (ZE-MHDVs). These strategies include policies, regulations, incentives, infrastructure, and innovative approaches. The primer provides a high-level description of these actions and policies, where they are being used, and examples of their successes. Because vehicle innovations are not static and stakeholders are constantly exploring new ways to promote zero-emission commercial vehicle adoption, this toolkit will be a regularly updated “living document.” Indeed, we welcome suggestions and additions from our global stakeholders on effective actions.
This resource is intended to be used in harmony with Drive to Zero’s two other policy tools: (1) the Global MOU Progress Dashboard, a visual overview of ZE-MHDV policy progress by country, and (2) the Global MOU Policy Browser, a collection of country-specific ZE-MHDV policy research in regions covered by the Global Memorandum of Understanding (MOU) on ZE-MHDVs. Each of these resources add a new perspective and level of detail to broaden the understanding of how to build a policy ecosystem that facilitates the accelerated deployment of ZE-MHDVs.
Constituting only 4% of the global on-road vehicle fleet, MHDVs are responsible for roughly 36% of on-road fuel consumption and upwards of 73% of NOx emissions. If meaningful action is to be taken against climate change and air pollution, there must be a coordinated global undertaking to reduce the impact of MHDVs and ensure that the future of transportation and goods movement does not have an adverse impact on the environment and public health. Facing these combined challenges, zero-emission technologies offer the only complete path forward.
Regulations for ZE-MHDVs are one of the most impactful policy interventions a government can take to curb emissions from MHDVs. Regulations can take many forms, and it will be up to each country to design the most adequate regulatory package to promote ZE-MHDVs. Many countries have adopted CO2, energy efficiency, and/or emission standards for new MHDVs that limit greenhouse gas (GHG) emissions and, if sufficiently stringent, indirectly encourage manufacturing and operation of ZE-MHDVs. Other regions have implemented procurement requirements for their fleets or sales requirements for their manufacturers. Regulations may differ across countries, but they must be stringent enough to advance the deployment of ZE-MHDVs and achieve emissions-reduction goals consistent with the Paris Agreement. While there is no single regulatory solution, understanding the spectrum of approaches will ideally inform strategic decision-making and policy.
Procurement requirements for ZE-MHDVs refer to a regulation or a set of regulations that require fleets and/or operators to gradually adopt and purchase ZE-MHDVs, often in increasing percentages over time. These requirements can aid in growing demand for ZE-MHDVs and provide certainty to original equipment manufacturers (OEMs) and fleets over the long term. As a result, stakeholders have greater confidence to make investments and ensure critical elements, like charging infrastructure, are in place prior to vehicle deployments.
Municipal fleets operate a range of different commercial vehicles, from shuttles and smaller work trucks to heavy-duty refuse trucks. These vehicles typically operate in residential areas that are vulnerable to diesel pollutants.
Zero-emission transit buses are at the leading edge of the beachhead model, with successful large-scale deployments in cities across the world. Because transit buses are typically operated by municipal or regional government agencies, purchase requirements can guarantee the deployment of zero-emission transit buses in cities, where their operational needs are well-known and well-suited for electrification. In 2019, California adopted the Innovative Clean Transit regulation, requiring an increasing percentage of total new bus purchases to be zero-emission through 2029. In 2022, New Zealand’s requirements for urban buses established that public transit buses must be zero-emission from 2025 onward. The European Union’s Clean Vehicle Directive similarly requires procurement of clean vehicles through 2030.
OEM Sales Requirements: ZEV Mandate
Sales requirements for OEMs refer to regulations that require vehicle manufacturers to sell zero-emission vehicles (ZEVs) as an increasing percentage of their annual sales. ZEV mandates—specifically those aimed at MHDVs—would create a minimum market for ZEV manufacturers to grow their businesses, develop their supply chains, and innovate to meet new duty cycles. Sales requirements are one of the most effective ways to involve private-sector actors, like OEMs, to increase supply and scale production to meet minimum standards. Sales requirements also provide a greater level of certainty to other stakeholders, giving confidence to fleets and reducing risk for companies and financiers with the motivation to invest.
California’s first-of-its-kind Advanced Clean Truck (ACT) regulation established a ZEV mandate for California’s truck market. Through ACT, manufacturers are required to sell zero-emission trucks as an increasing percentage of their annual California sales from 2024 to 2035. By 2035, zero-emission truck/chassis sales will need to be 55% of Class 2b–3 truck sales, 75% of Class 4–8 straight-truck sales, and 40% of truck-tractor sales. This regulation has been adopted in several other U.S. states, and rulemaking for a similar mandate has begun in Canada.
Carbon Pricing and Cap and Trade
Placing a price on carbon is one of the most direct ways to create a market for ZE-MHDVs, since carbon emissions would create a higher cost for producing and operating petroleum-powered vehicles. Policies that create carbon prices may include federal or state carbon taxes or cap-and-trade systems. Cap-and-trade policies encourage innovation and reduction of emissions by assigning a value to the cost of carbon and limit to its release through transportation, energy generation, and many other kinds of industrial activities. Cap-and-trade programs can also generate valuable revenue streams that can be reinvested into the green economy, further accelerating decarbonization efforts. Cap-and-trade policies are often best leveraged in combination with other policies and must be stringent enough to effectively reduce emissions.
Clean or Renewable Fuel Standards
Clean or renewable fuel standards refer to regulations that target the carbon intensity (CI) of fuels used in transportation by establishing performance standards to reduce emissions.
These regulations may work in different ways: an LCFS creates a cap on CI and credits low-carbon fuels production below that cap, whereas a renewable fuel standard identifies low-carbon fuels and establishes a volumetric requirement for their use, often blended into petroleum fuels. However, they both create incentives to produce low-carbon fuels. Generators and refiners of electricity and low-carbon biofuels earn credits for producing or selling their fuels, making low-carbon fuels less expensive and more abundant.
The world’s first LCFS originated in California and uses a gradually decreasing CI benchmark for fuels sold. Different fuels may generate credits or cost credits based on whether CI is above or below the benchmark that year. Oregon, Washington, and British Columbia are joining California to strategically align policies to reduce GHG and promote clean energy. Similar programs have been developed in the United Kingdom and Canada under the Renewable Transport Fuel Obligation and Clean Fuel Regulation, respectively. The U.S. Renewable Fuel Standard highlights the renewable fuels considered under this policy.
Fuel Economy Standards: Vehicle Efficiency Standards / GHG Standards
Fuel-economy and GHG standards refer to policies and regulations aimed at increasing the fuel efficiency of vehicles and/or reducing the amount of GHGs a vehicle emits during operation.
Improving the fuel economy of MHDVs may take several forms, but the requirements are typically technology-neutral and allow automakers the option to include technologies that meet the minimum standards. Zero-emission technologies not only meet minimum standards but can also create financial incentives, such as surplus credits, that allow vehicle manufacturers the flexibility to continue improving the fuel economy of their gasoline- or diesel-powered vehicles.
In the European Union, the current CO2 regulation for heavy-duty vehicles requires a modest reduction in overall CO2 emissions from MHDVs through 2030, while recently proposed updates to these standards include much more substantial reduction targets. The U.S. Phase 2 emission standards for MHDVs similarly require a reduction in GHG emissions through model year 2027. In California and China’s light-duty vehicle markets, a parallel management component connects fuel-economy standards with ZEV production performance, giving manufacturers options in how they achieve compliance.
One of the most direct methods of accelerating ZE-MHDV adoption is by introducing financial incentives that make manufacturing and owning these vehicles less expensive. Reducing the up-front cost of a ZE-MHDV, which typically costs more than a petroleum-powered vehicle, has been effective in some of the regions with the highest rates of ZE-MHDV adoption. Vouchers and direct subsidies allow fleets and operators to earn point-of-purchase savings on ZE-MHDVs. Tax policy is another way to reduce the total cost of acquiring ZE-MHDVs via tax exemptions, rebates, or fees on polluting vehicles. Other considerations may relate to the electrical rate charged by utilities or infrastructure providers, which should be normalized for transportation uses and highlights the importance of working closely with utilities and distributors. Several policies and novel approaches to financing vehicles are covered in the Innovative Policy section below.
Voucher Incentive Programs or Direct Subsidies
Voucher incentive programs are a tool that government agencies can use to attract industry participants; engage fleets; and distribute public funding efficiently, equitably, and directly to clean vehicle projects by reducing technology costs at the point of purchase. Public funds are used to reduce the incremental cost between a combustion engine vehicle and a zero-emission vehicle. Caps for each category of vehicle may set an upper limit of public funds for each vehicle project. Dealer networks help fleets navigate the voucher process and take on the financial responsibility of completing voucher redemptions. Voucher program designs are highly customizable to allow program planners to express preferences for clean air goals, invest in targeted communities, and evolve to add new technologies.
California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) and Clean Off-Road Equipment Voucher Incentive Project (CORE) are examples of successful voucher incentive programs, providing direct subsidies and cost reduction at the point of sale to alleviate financial burdens on fleets and ensure a smooth transition. Additionally, programs like HVIP also provide critical resources to dealers and technical assistance to fleets, which often lack accurate and reliable information on zero-emission vehicles. China has found tremendous success in electrifying their urban bus fleets through generous direct subsidies that have positioned them as the largest ZE-MHDV market in the world. Canada has also set aside funds through the Incentives for Medium- Heavy-duty Zero-Emission Vehicles (iMHZEV) Program to offer point-of-purchase cost reductions to eligible ZE-MHDVs. The Netherland’s Zero-emission Truck Purchase Subsidy Scheme (AanZET) provides subsidies based on the size of the enterprise, and vehicle type.
Tax Benefits and Exemptions
Tax benefits have long been a common mechanism governments can invoke to encourage certain behavior in an economy. Tax benefits are a key avenue through which the total cost of owning and operating (TCO) a vehicle can be reduced. These regulations refer broadly to policies that provide tax benefits for owning and operating a ZE-MHDV or exempt ZE-MHDV operators from various taxes.
To encourage the uptake of ZE-MHDVs, implementing the right taxes (or exemption from taxes) can be a key element of a well-rounded policy approach. While tax benefits such as the elimination of sales tax, value-added tax, or motor-vehicle tax—or the inclusion of ZE-MHDVs as tax-deductible—will ultimately reduce TCO, these mechanisms are often limited in their ability to provide direct and up-front point-of-sale cost reductions. In the commercial MHDV segment, tax credits have not been as impactful in promoting uptake of clean vehicles, primarily because the credit is not applied at the point of purchase and fails to immediately reduce ZE-MHDVs’ higher up-front costs. Nevertheless, vehicle purchase incentives offered through tax credits do reduce the total lifetime cost of the vehicles. Each country’s tax codes differ—some more than others, which is important to consider when appraising the viability and effectiveness of tax-based, cost-reduction mechanisms.
In New Zealand, heavy electric vehicles (EVs) are exempt from Road User Taxes through 2025. In the United States, a new section of the Inflation Reduction Act creates a tax credit for qualified clean commercial vehicles up to 30% of the vehicle cost if it is not powered by a combustion engine. In Norway, rather than subsidizing ZEVs, the country has instead implemented taxes on the polluting vehicles.
Infrastructure availability is one of the most pressing issues to address in the transition to ZE-MHDVs. Installing the infrastructure needed to recharge large vehicle fleets requires planning, skilled labor, and often distribution grid upgrades that cost local utilities and fleets time and money. Policies targeting the advancement of infrastructure development are key to implementing a well-planned, interoperable network of refueling stations for ZE-MHDVs. Alongside the private sector, governments must enable, encourage, and require utilities to plan for, invest in, and take an active role in installing ZE-MHDV infrastructure at the pace required to meet rapid market growth.
Utility Infrastructure Investment
Electric utilities are knowledgeable industry partners with an interest in expanding ZE-MHDV adoption. However, they may be restricted from participating in charging markets due to regulations on competition or how utility funds can be invested. If states or utility commissions see a need for electric utilities to fill in charging infrastructure gaps and to participate in competitive charging markets, utilities may provide charging at a large and rapid scale. California’s SB 350 directed electric utilities to propose EV charging investments, which has led to more than $1 billion in proposed activities in the state.
Electric utilities may have the interest and the authority to financially support ZE-MHDV sales. Depending on how they are regulated, utilities may benefit from the extra energy provided to ZE-MHDV operators, be able to collaborate with vehicle operators on vehicle-to-grid support, or otherwise benefit from putting downward pressure on rates for all ratepayers.
Interoperable Charging Standards
As more vehicles are electrified around the world, the need for recharging and refueling infrastructure grows. It is vital to ensure the investments made today will have a long-lasting impact in accelerating the deployment of ZE-MHDVs and the public and private infrastructure that will support them. However, vehicles or charging stations may not always use the same connection standards, meaning vehicle operators may experience limited access to charging facilities or charging station operators will not be able to service the maximum number of vehicles in operation. Beyond the physical connector/plug, there are several separate protocols that manage the connection between the vehicle and charge point, communicate payment, and determine when to initiate or terminate the charging process. Greater interoperability will further support the business case for operating charging stations and will increase access to charging in an early market. Interoperability becomes even more important when vehicles may be traversing state or country borders with different standards.
Numerous standards are already in place, but significantly more consideration and thought must go into adopting and improving standards—especially in regions such as the European Union or North America where vehicles may be traveling across borders frequently to fulfill operations. In the United States, the Federal Highway Administration has proposed interoperability standards that would set minimum requirements for the buildout of the National Electric Vehicle Infrastructure (NEVI) projects funded by the Infrastructure Investment and Jobs Act. In Chile, requirements to ensure electric vehicle supply equipment (EVSE) interoperability have been introduced to build confidence in the network and ensure vehicles will be able to charge without concerns of having the right plug connection or protocol. In the European Union, the User Centric Charging Infrastructure (USER-CHI) project aims to define and establish the basic guidance for interoperable charging infrastructure, specifically focusing on the Trans-European Transport Network (TEN-T) corridors.
EV Readiness Requirements & Favorable Electric Rates
The costs of installing EV charging stations can mount quickly. In addition to the station itself, costs typically include labor for trenching and contracting work, onsite electrical upgrades, and installation of EVSE and/or auxiliary technology such as batteries or renewable energy (e.g., solar). Governments can help fleets or real estate owners reduce the costs of anticipated infrastructure installations by requiring facilities to be prepared in advance for EV charging. Allocating state or municipal funds to establish “make-ready” programs has been effective in soliciting buy-in from utilities; utilities are now responsible for certain stages of upgrading electrical components where EVSE would be installed.
Refueling ZE-MHDVs is typically less expensive than refueling vehicles powered by petroleum, which reduces a fleet’s operating costs and makes ZE-MHDV ownership more attractive. However, utility electricity rates have not been designed for demanding transportation uses, and situational charging can be more expensive than fueling a traditionally powered vehicle with gasoline or petroleum. Utility rate design, including time-of-use charging and strategies to reduce demand charges, are valuable to fleet operators managing their ZE-MHDV charging.
To accelerate the uptake of ZE-MHDVs globally, it is imperative that innovative solutions be considered to address the barriers present across the industry. As new technologies with varying costs and operational needs are introduced in greater numbers, the need to innovate across sectors becomes imperative. The policies and actions highlighted in this section focus on more alternative approaches to navigate key operational and financial challenges.
Innovative Financing Solutions
Financing solutions can play a critical role in accelerating ZE-MHDV adoption by allowing more fleets to access capital, spreading out high up-front costs across the vehicle’s useful life, and reducing costs through risk mitigation and economies of scale. Governments, green banks, and development banks are well-positioned to assume early risks and demonstrate the viability of financial products, which can then be replicated and scaled up by private companies without the need for direct government support. Ensuring that business and financing models suited for ZE-MHDVs are in place and that key supply chains are being supported is critical to enable cost reductions over the long term and for the financial security of those who own and operate the vehicles.
Concessional loans, also known as soft loans, refer to loans made with friendlier conditions than market loans. They often either have lower interest rates and/or longer grace periods than traditional market loans and can enable the financing of technologies such as ZE-MHDVs that currently come with higher up-front costs.
Since 2009, California’s Truck Loan Assistance Program has supported loans made to small business owners with cleaner vehicles. Authorized lenders award loans to small businesses, and the government sets aside funding in a loan-loss reserve account. The loan-loss reserve protects the lender against potential losses resulting from loan defaults (i.e., the failure of the business to make repayments on their loan). In Colombia, the Inter-American Development Bank (IADB) implemented a program in 2014 to award concessional funding to the country’s development bank (Bancóldex) to offer sub-loans to private banks for them to finance hybrid and electric bus procurements. The preferential terms of IADB’s loan are passed on to the private banks, allowing them to offer lower interest rates, longer financial terms, and grace periods. These programs exemplify how government agencies can activate the private sector to increase the amount of capital available for financing, increase the number of fleets able to access financing, and reduce the costs of borrowing.
Business-Model Demonstration: Electrification-as-a-Service and Residual-Value Risk Mitigation
Governments can also support the deployment of pilot projects that create proof-of-concept for new business models. Electrification-as-a-service bundles all the costs of purchasing and operating ZE-MHDVs and infrastructure and allows fleets to cover these through monthly payments, thus overcoming the up-front cost barrier and allowing fleets to benefit from operational savings. Residual-value risk mitigation—via first-loss protection product—protects lessors against losses caused by vehicle depreciation, allowing lessors to consider a higher residual value for the vehicle and offer better financial terms to lower costs for fleets. Supporting business-model demonstrations and pilots is an effective way to encourage the private sector to innovate and develop products that facilitate adoption at scale, without relying indefinitely on public funding.
Through the New York Clean Transportation Challenge, New York State Energy Research and Development Authority (NYSERDA) is supporting a project that will demonstrate the viability of electrification-as-a-service and a first-loss protection product against residual-value risk.
Governments can also leverage their purchasing power to procure large quantities of buses in a single tender. This approach, known as demand aggregation, reduces costs by leveraging economies of scale. With support from Convergence Energy Services Limited, five cities in India aggregated their EV purchases under a single tender for 5,450 electric buses, the largest global tender for electric buses to date. Combined with the use of gross-cost contracts, which allow fleets to pay for the vehicles through a per-kilometer fee, this approach allowed cities to obtain a preferential price, limit the up-front investment required, and transfer technology risks to service providers equipped to manage them.
Zero-emission zones (General):
Zero-emission zones/areas are a broad term for policies aimed at reducing or eliminating the volume of pollution-emitting vehicles in designated areas or regions—often in and around cities. When tailpipe emissions are eliminated through an exclusion zone, air quality is impacted immediately, especially in high-traffic areas of an urban region. By introducing a scheme that prevents combustion engine vehicles from entering a zero-emission zone, fleets and operators must consider alternative vehicle technologies to gain access and carry out their business.
The parameters of zero-emission zones may differ depending on where these areas are established. Some variants allow near-zero-emission vehicles to enter, while others will levy fees on polluting vehicles.
Zero-emission zones: Off-Road and Ports
Given the sheer volume of goods and people in transit every day, ports— including shipping and airports—can be hotbeds for air pollution and GHG emissions. Reducing emissions from the commercial vehicles that service ships and planes and transport goods and passengers to and from ports is critical to improve air quality around ports and contribute to climate goals.
The Port of Oslo aims to reduce GHG emissions severely from several sources to meet the City of Oslo’s mandate to reduce GHG emissions by 95% by 2030. Recommendations from the Port’s climate action plan include cleaner maritime fuels, installation of shore power, and zero-emission ground freight and cargo-handling operations by 2030. The Port of Rotterdam in the Netherlands has identified a pathway that will coordinate with partners to make all operations, including trips to the port, be zero-emission. The Port is expanding its infrastructure and working to make fuels and vehicles more affordable.
Exclusion Zones: City Centers
Local governments are considering excluding all vehicles that produce air-polluting emissions that exceed a given threshold from operating in the most populated or polluted parts of cities—especially as vehicle mileage increases in many nations, the health impacts of on-road vehicle emissions are better understood, and pedestrians aim to reclaim public roadways to make cities more livable. Allowing exceptions for ZE-MHDVs may permit cities to meet congestion goals while allowing for clean transportation and goods deliveries.
A variation on zero-emission zones specific to cities are green loading zones. Cities may explore reserving curbside spaces for ZE-MHDVs to make deliveries more efficient and profitable for fleets by avoiding time lost trying to park or being stuck in traffic.
Many cities across the world are implementing zero-emission zones with tremendous success, bringing benefits such as improved air quality and public health. So far, zero-emission zones have been introduced in Shenzhen, China, and several Dutch cities, with over 30 more planned in the Netherlands alone.
Governments around the world now have a variety of policy tools at their disposal to help move the needle on ZE-MHDV adoption. Regulations, financial incentives, infrastructure, and innovative policy solutions are available that can help significantly reduce GHG emissions and the harmful environmental and public-health impacts from conventionally fueled MHDVs.
From the stringent sales requirements launched by California to the direct subsidies offered in places like The Netherlands and Canada, there are now a multitude of concrete examples of effective policies to enable and encourage ZE-MHDV adoption. Examples of proposed interoperability standards and more innovative approaches to infrastructure and financing considerations are paving the way for mass adoption, and it will be up to each country to play their part in the global transition.
However, in order to effectively advance the deployment of ZE-MHDVs, governments cannot simply copy these budding examples for their own use nor select only one category of tools to implement. It is critical that these policies are both combined and designed in a manner that works for the local and unique circumstances inherent to each country and its constituents.
To put the world on track to reach the emissions-reduction goals of the Paris Agreement, more of these successful policy strategies will need to advance quickly and on a much larger scale in the near future.