The decarbonisation of transport: Legal issues on the route to net zero

The transition to net zero will be led by innovative technology, but it will also need the right funding and delivery mechanisms. In order to ensure that these work as intended and have the necessary longevity, flexibility and capability, providers will need to anticipate the legal and regulatory issues that they are likely to face and subsequently put in place appropriate contractual structures to provide the necessary protections and allocations of liability.

In this article, we assess some of the main considerations for transport and mobility providers and, crucially, how solutions can be delivered when the regulatory and funding environment is only slowly adapting to the demands of new technologies and business models. In doing so, we draw on our experience of supporting clients that are leading the way in the provision of a wide range of sustainable transport and mobility solutions. We act across the transport and mobility eco-system on projects ranging from the roll-out of electric vehicle charging infrastructure through to the development of alternative fuel supply chains and the role of urban mobility in delivering net zero.

The legal complexities brought about by MaaS

The role of integrated mobility solutions in urban environments is a core area that has the potential to accelerate the transition to net zero. The recent International Transport Forum (ITF) Innovative Mobility Landscape report highlighted the role of Mobility-as-a-Service (MaaS) in delivering decarbonisation; however, the deployment of new mobility solutions raises a series of legal issues to resolve.

The shift to e-mobility has been led until now by a shift in technology and the development of new business models. What has been less evident is how these new technologies and business models are provided to consumers on an integrated, efficient basis. In the race for market share, providers have concentrated on building out their own propositions and are now faced with integrating these with other providers’ solutions. This includes the integration of trip-planning and payment technology with legacy fares and ticketing systems. Where the technological issues are capable of being addressed, for example, by the use of common APIs, there will still remain intellectual property, liability and data-sharing issues to be mediated through the contractual documentation.

From a legal perspective, any transport or mobility solution is a network of contractual rights and obligations. The simpler the solution for the end user, the more complex the underlying contractual arrangements are likely to be. Providers and public authorities need to be clear as to their respective roles and responsibilities. It will be important to ensure that the different elements of the contract documents work together effectively and promote the right behaviours by both customer and suppliers.

The contract documents also need to ensure that the funding and operational models support each other. Issues that could arise include who takes the risk in different elements of the proposition, which will depend on who is best placed to manage them and the financial benefit that is derived by each party. The term over which a funder recovers its investment and the ability to manage changing circumstances will need careful consideration.

The contract documentation should include watertight provisions for addressing situations where the reality of delivering the solution diverges from the parties’ expectations. This may be particularly the case where the pace of technological change is rapid, customer demand is difficult to forecast and the provision of long-term subsidy support is uncertain. From a funding perspective, ensuring that the proposition is packaged to make it easily understandable by external financiers can also be relevant. While some transport and mobility solutions replicate revenue streams familiar to finance providers, many do not or can be hard to fit into existing categories. It can be a challenge to develop hybrid funding and contract models in a way that delivers the solution while remaining bankable.

Square pegs in round holes

It is also often necessary to fit new transport and mobility solutions to regulatory and legislative regimes that did not contemplate the products, services or technologies that are being deployed. The issues that surround managing personal data compliantly whilst supporting the development of mobility services are well known. It is also a feature of many new solutions that they operate at the intersection of several different regulatory regimes, none of which adequately deal with the totality of the proposition.

Providers will need to comply with applicable competition and public procurement law, and the delivery of services in accordance with consumer protection regulations not only requires compliance but also the trust that users build up in the brand. The compliance requirement should not be underestimated, with the forthcoming Consumer Omnibus Directive introducing financial incentives for compliance with consumer law, similar to those which have driven compliance with the General Data Protection Regulation (GDPR) in relation to the control and processing of personal data.

From the provider and investor perspective, this operating environment represents both a challenge and an opportunity. In addition to having great technology and the right delivery and funding models, the solutions that perform best are likely to enhance the prospects of longer-term success by anticipating and dealing with emerging legal and regulatory risks on an ongoing basis.