EDF report introduces innovative financing model to accelerate adoption of zero-emissions vehicles

Model lowers barriers to adoption of clean shipping

February 16, 2021
Natalie McKeon, (212) 616-1338, nmckeon@edf.org

(New York, N.Y - February 17, 2021) Environmental Defense Fund (EDF) today published a report on how companies can transition their shipping from fossil-fuel powered delivery trucks to zero-emissions vehicles. The report introduces a first-of-its kind financing mechanism for delivery-dependent brands to get to zero-emissions shipping, especially for companies that do not own and/or operate their fleets, filling what has been a critical gap.

“Leading companies have made commitments ranging from net zero to pledges to eliminate emissions company-wide,” said Aileen Nowlan, senior manager, Environmental Defense Fund. “But the reality is that none of these targets can be reached without zero-emissions shipping.”

Until now, there has been no way for companies to influence the adoption of clean shipping options by their carriers.

The financing model for a Zero-Emissions Delivery Zone (ZED Zone) works to solve this problem by unlocking opportunities for accelerating fleet electrification, while delivering substantial financial, social and environmental returns for businesses, investors and communities. For example, the report finds that by sponsoring just 15 zero-emissions delivery vehicles, companies can create $1 million of health benefits from reduced air pollution.

In a ZED Zone financing model, inspired by Virtual Power Purchase Agreements for renewable energy:

  • Companies, or “shippers”, sponsor a group of Zero-Emissions Vehicles (ZEVs) through payment plans and utilization guarantees.
  • Private and public financiers provide the capital needed to purchase ZEVs and make them available to carriers.
  • Carriers add ZEVs to their fleets based on the confirmed demand enabling shippers to procure cleaner shipping options.
  • The sponsoring companies agree in advance that their packages might not necessarily travel on the new ZEVs. While the financing model could be used for vehicles based anywhere, the greatest benefit could be achieved by prioritizing depots in the ZED Zone, communities with disproportionate health and equity impacts from air pollution.

A ZED Zone financing model gives companies the power to accelerate clean shipping in their supply chains by making time-bound commitments to adopt and pay for 100% zero-emissions shipping. Further, it provides companies with a mechanism for demanding that financiers, carriers and EV managers make EV options readily available so they can drive progress against their climate and equity commitments.

“Transportation is the largest source of new greenhouse gas emissions in the U.S., in large part because of the increase in delivery vehicles on the road. What’s worse, warehouses and distribution centers are often concentrated in low-wealth communities and communities of color,” added Nowlan. “That’s why a central goal of this new model is to create a mechanism for financing ZED Zone deployment in communities experiencing the greatest burdens, ensuring that the pollution reduction benefits are targeted where they are needed most.”

Commentary from companies and financiers

“Transitioning to zero-emissions delivery by 2025 is a cornerstone of IKEA’s climate commitments. The Zero-Emissions Delivery Zone financing model and EDF’s innovative solutions to cleaner shipping are invaluable in helping us navigate toward this ambitious goal,”

-Steve Moelk, Project Implementation Manager, IKEA North America Services, LLC

“Etsy is committed to advocating for and supporting solutions that will reduce the impact of shipping, and fleet electrification is a critical step in that climate journey. We’re excited to work with carriers to implement a ZED Zone model to deploy zero-emissions vehicles and enable a cleaner delivery future.”

-Chelsea Mozen, Director of Sustainability and Impact Engagement, Etsy

“The transportation sector is a significant source of GHG emissions with harmful impacts for health and quality of life, particularly for our urban centers. Collaborative and capital efficient approaches like ZED Zones can achieve meaningful reductions in air pollution, assist businesses and governments with their climate goals, and benefit all communities.”

-Bert Hunter, EVP & Chief Investment Officer, Connecticut GreenBank

 Read the full report here.

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One of the world’s leading international nonprofit organizations, Environmental Defense Fund (edf.org) creates transformational solutions to the most serious environmental problems. To do so, EDF links science, economics, law, and innovative private-sector partnerships. With more than 2.5 million members and offices in the United States, China, Mexico, Indonesia and the European Union, EDF’s scientists, economists, attorneys and policy experts are working in 28 countries to turn our solutions into action. Connect with us on Twitter @EDFBiz