The High Cost of Vacillation Over Sustainability

The political and regulatory back-pedalling now under way on decarbonisation is turning into a hugely expensive exercise for the global car industry.

It’s a good case study, with a big lesson for the need for investment in Sustainable Aviation Fuels too. Without consistent policies and mandated reforms, investors won’t be willing to stump up the billions of dollars needed to produce the vast volumes of SAF targeted by the airline industry.

According to a report in the Financial Times, prestige carmakers have borne more than US$75 billion in write-downs and restructuring costs in the past year alone, as policy shifts caused them to unwind or rethink EV plans that, until recently, were being sold as unavoidable.

Also, Reuters cites industry reports that the damage reflects a brutal combination: weaker than expected EV demand in key Western markets, a policy reversal in the United States under President Trump, and a softer and more accommodating regulatory stance in Europe.

Luxury brands like Rolls-Royce and Bentley, Audi and Porsche have eased off their earlier enthusiasm for an all-electric future, scaling back or slowing their earlier ambitions.

But it’s not only the prestige end of town in retreat. The even bigger story is that mass- market and volume producers are doing much the same.

Honda for example has just announced a hit of up to US$15.7 billion, as it restructures its EV business and cancels three planned electric models for the US market. It’s pivoting instead towards hybrids. Stellantis has booked EUR22.2 billion in charges as it rejigs its product line- up to better match consumer demand and changed US emissions settings.

Ford last year killed a planned three-row electric SUV and pushed back an electric F-150 programmes; General Motors is retooling some EV facilities back towards petrol-powered production; Volvo abandoned its previous goal of being all-electric by 2030 and has now decided to discontinue the EX30 in the US later this year. Mercedes-Benz has also delayed key electrification milestones.

The reasons go well beyond “stubborn demand for combustion engines”, although that is plainly part of it.

Consumers in many markets still baulk at higher upfront EV prices, and are worried by slow rollouts of charging infrastructure, by range anxiety on longer trips, and doubtful resale values.

Hybrids have emerged as the compromise technology of the moment: lower emissions than conventional cars, without requiring drivers to place faith in an infrastructure rollout that remains uneven.

Carmakers, meanwhile, are finding themselves caught between sunk costs in EV platforms, the need to keep petrol and hybrid lines alive for longer, and a strategic threat from Chinese rivals that have become far better at building affordable electric cars at scale (and are finding more homes in Europe, since Trump’s “liberation” tariffs slowed US demand).

Reuters notes that European groups in particular are being squeezed between the cost of complying with emissions rules and the reality that Chinese companies have simply become more competitive at producing EVs that mass consumers can afford.

Policy instability has made all of this so much worse.

In the US, the Trump administration has moved sharply away from EV support: eliminating the US$7,500 tax credit, rescinding California’s EV rules, rolling back incentives embedded in fuel-pricing, and creating further uncertainty around charging infrastructure and industrial policy.

But Europe isn’t free from blame. The European Commission has moved to give carmakers “breathing space” by stretching compliance with tougher 2025 CO2 targets over three years rather than one, after previous warnings that the industry faced up to 15 billion euros in fines. That may be politically convenient, but it sends another signal that deadlines are negotiable. Businesses can cope with tough rules. What they struggle with is rules that oscillate.

That’s the real cost of vacillation. Governments first pushed manufacturers, investors and suppliers towards a rapid electric transition; companies committed capital, redesigned factories, signed supplier contracts and sold shareholders a narrative of irreversible change.

Now, as governments change course they are being forced to pay again to reverse course. Ironically of course, some of that redirection has been caused by lobbying from the very same industries who are now paying the price.

But the result is hardly a smooth, pragmatic transition; billions of dollars wasted, planning credibility shredded, and decarbonisation slowed.

Meanwhile Chinese competitors are press ahead with more or less coherent industrial strategies, anchoring their EV position in the market.

The same is true of SAF production.

But then – who knows? If President Trump’s “excursions” cause our oil supplies to be cut off and there’s a bit of energy sdll being produced, this could be just the prompt needed to get people buying EVs again.....

China is already the biggest producer and a major exporter of waste cooking oil and animal waste oils, key feedstocks for SAF production. It’sproducing 350,000 tonnes annually, again, mostly exported to Europe. The WEF expects China to be a major global supplier, already breaking ground on numerous projects.Shackled by uncertainty, investors outside China remain reluctant to put up the funding necessary if the world’s airline industry is to come close to its decarbonisation goals.

Equally too, SAF might become affordable, as jet fuel prices surge beyond $200 a barrel. But by that dme we’ll have larger issues to deal with.

Peter HarbisonChairman, Greener Airlines 23 March 2026