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WPRT: The Regulatory Environment


The alphaDIRECT Insight

With commercial trucks being responsible for almost 25% of the CO2 produced by all transportation, the recently implemented emission regulations in Europe were a significant milestone for the industry and the environment. The regulations are not only the toughest in the world with respect to CO2 but also include cash penalties for each vehicle that doesn’t meet the requirements. Westport’s HPDI systems operates on natural gas and reduces the CO2 emissions from commercial vehicles by approximately 20% according to the company. This Management Series focuses on how the European regulations effects the industry, the markets and specifically Westport Fuel Systems and its commercially available HPDI systems.

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Shawn Severson: First, I’d like to thank you, David, for taking the time to speak with us today. The last time that we spoke with Westport Fuel Systems we discussed your long-term strategic outlook and market drivers. Today, our focus is on European carbon dioxide emissions standards and the regulatory environment. In April 2019, the European Parliament set the first-ever European CO2 emission standards for heavy-duty vehicles. What is the significance of these regulations for the freight sector?

David Johnson: Thank you, Shawn, it’s a pleasure to be with you again. These regulations are a really big deal. When I joined the company a year ago, I was very excited about the potential of Westport Fuel Systems and where the company could go, but when the regulations hit in April, it was a significant milestone for the industry, the company, and the environment. These are the first CO2 regulations in Europe for commercial trucks. To put things in perspective, commercial trucks on the roads in mature economies like Europe and North America comprise around 4-5% of the vehicle parc but disproportionately contribute to more than 25% of the CO2 produced by all of transportation. So, they’re an outsized lever in the battle against climate change and reducing the carbon intensity of transportation. Regulations for heavy-duty vehicles and the freight sector were needed.

The regulations are not only the toughest in the world with respect to CO2 for commercial vehicles but they also include penalties. So, the fact of the matter is, if the OEMs that are required to respond to these regulations fail to meet the requirements, they’ll end up paying penalties in cash for each vehicle that doesn’t meet the requirements. It’s a meaty penalty and important to recognize in the total equation of what we’re trying to achieve.