In the midst of the current energy and environmental crisis, the transportation sector is considered one of the main sources of pollution. Indeed, it accounts for 24% of global CO2 emissions, 75% of which is generated by cars. Moreover, this pollution is increasingly becoming a health concern. Indeed, it indirectly causes more than 300,000 deaths per year in Europe, according to the WHO.

To address this issue, governments are implementing regulations that restrict thermal vehicles to favour soft mobility and electric vehicles. One of the main regulations is the introduction of Low Emission Zones (LEZ). These zones consist of urban areas where access is reserved for the least polluting vehicles. Their goal is to reduce road pollution and the concentration of suspended particles, such as nitrogen dioxide (NO2) or ozone (O3). This regulation, which is being implemented worldwide, is reshaping the mobility landscape and creating many opportunities for startups.

In this article, we will present the regulatory situation in Europe and worldwide, its challenges, as well as entrepreneurial initiatives.

LEZs across the world

The concept of LEZs originated in Sweden, with the opening in 1996 of the first zones in Stockholm, Göteborg and Malmö. This first restriction only applied to heavy vehicles (>3.5 tonnes), which generate a large proportion of the pollution.

In 2008 a European air quality directive required states to measure and limit nitrogen dioxide levels in their cities. This regulation encouraged countries to introduce LEZs to limit the presence of particularly polluting slow-burning vehicles in cities. It also encouraged countries to avoid EU fines, such as the €11m levied on France in 2019.

Today, Europe has a total of 320 LEZs. This represents an increase of 40% compared to 2019, which should rise to 507 by 2025. In France, a law has even been passed in 2021 requiring all urban areas with more than 150,000 inhabitants to have a LEZ. Certain countries even want to go further and introduce Zero Emission Zones (ZEZ). This is the case for Belgium, with the goal of opening 35 ZEZs by 2030, and the Netherlands with 26 ZEZs. These regulations also exist outside of Europe, in cities like Beijing since 2017 or Haifa and Jerusalem since 2018.

While they are relatively recent, initial studies have been conducted to validate the benefits of these measures. One example is the city of London, which has recorded a 30% drop in nitrogen dioxide since the implementation of the LEZ in 2008 and a 50% drop in suspended particulates (PM10).

Challenges faced by LEZs

The environmental and health benefits of LEZs are undeniable. However, there are still regulatory and social challenges that are worth mentioning.

First, from a social point of view, the introduction of these zones bans a certain number of old vehicles, whose owners belong to the lower classes. Indeed, the cars of the poorest members of the population 10% are on average 11 years old, which means they are banned in the LEZs. The figure drops to 6 years for the richest 10%, according to the French National Transport and Travel Survey (ENTD).

Furthermore, the replacement cost for a new vehicle or for an electric vehicle is quite high. It takes an estimated 15 years for an electric car to become less expensive than a thermal car. It is therefore an important investment, which is not affordable for everyone.

These measures also encourage people to use other means of transportation, such as public transport. However, this population shift requires greater transport infrastructure to meet demand. In fact, in the French Ile-de-France region, nearly 40% of people use their car to go to work. Consequently, important efforts may be required to complete and strengthen the public transportation offer.

Technical and legal challenges

Apart from public transport, some people favour soft mobility such as bicycles or scooters. However, cities are not yet fully adapted to these vehicles, namely in terms of parking. According to the FUB, more than 400,000 bicycles are stolen every year in France. As far as electric scooters are concerned, mobile fleets are regularly vandalised. There is therefore a need to rebuild users’ confidence in these means of transportation.

From a regulatory point of view, certain elements also need to be adapted in order to take full advantage of these LEZs. First, in France, the length of a truck is limited to 18.75 metres. However, the electric/hydrogen retrofit of trucks requires a compartment/battery to be placed between the cabin and the load, which makes the truck longer. Germany and the Netherlands are currently changing their legislation to authorise longer trucks. This will help popularise zero-emission trucks, which are able to enter LEZs. Regulatory work therefore needs to be done in France and other European countries to ensure that these innovations are not restricted.

New opportunities for entrepreneurs

To address the challenges that come with Low Emission Zones, startups have developed various products. Their solutions help make soft mobility more accessible and safer, but also help old vehicles adapt to these new requirements.

Solutions for light vehicles

First, to mitigate the stealing and damage of light vehicles such as scooters or bicycles, several storage projects or intelligent bicycle shelters have been created. This is the case of Duckt, an Estonian company acquired by the American company ACTON in 2022. Duckt offers a solution to lock and charge light electric vehicles. Its infrastructure can be easily installed on the pavement. Other companies are creating larger infrastructure such as La ruche à vélo, which installs secure bicycle storage facilities in car parks in collaboration with cities such as Annecy or Angers. These facilities are important to address the increase in use of these vehicles, with 33% more bicycles on the road in 2022 than in 2019, according to the Vélo & Territoires network.

Solutions for larger vehicles

Apart from ensuring the safety of these light vehicles, it is also important to allow the free movement of larger vehicles, which are needed for last-mile deliveries. For example, Midipile is developing a modular pedal quadricycle equipped with photovoltaic panels and a battery. The technology ensures deliveries with an autonomy of more than 200 km. This vehicle can thus ensure the safety of delivery personnel, while replacing utility vehicles.

Larger vehicles such as trucks or school buses were actually the first to be affected by Low Emission Zones. However, many vehicles are currently on the road and will be prohibited from entering these zones in the upcoming years. As a result, it may be worthwhile to buy new electric or hydrogen-powered vehicles such as those developed by Volta Truck in the United States. However, many combustion trucks are still in good condition. This is why startups like E-Néo and Pepper Motion have developed retrofit solutions for trucks and buses. For instance, E-Néo’s solution combines electric batteries and hydrogen in order to extend trucks’ lifespan.

Conclusion

The increasing number of Low Emission Zones worldwide and the tightening of requirements is reshaping the urban landscape of major cities. This change does have social and regulatory limits. Nevertheless, it is also an important source of opportunity for startups that want to revolutionise the way we live and work. But it is also an important source of opportunities for startups that want to restructure mobility. The latter are now supported by investors, as demonstrated by the 150% increase in investment in transport-related startups in 2021 in France, with €600m invested according to an Avolta report.

Article written by Sacha Cherif, VC Analyst at Early Metrics and translated by Mahaut Chappot de la Chanonie