Connections Transport & ICT 98288 More Climate Finance for Sustainable Transport Jane O. Ebinger, Nancy Vandycke, and John Allen Rogers $553 million Actions to reduce greenhouse gas (GHG) emissions to stabilize warming at 2oC, as agreed by the international community in 2009, will fall short if they do not include the transport sector. Transport is responsible for around 23% of global carbon dioxide emissions and emissions are expected to rise without further action to curb emission growth and invest in low carbon transport modes. Investment needs are estimated at around $3 trillion to increase the sustainability of existing and new transport systems and to mitigate The amount of approved climate change over the 2015–35 period. This is in sustainable transport projects addition to existing annual investments estimated supported by CIF at $1–2 trillion. Public sector financing while an important catalyst will not be sufficient to meet needs. The actions taken today to send the right policy signals, and establish the enabling institutions and regulations to attract the necessary private finance will be critical to support this transformation. Significant investment opportunities exist in public transport systems, vehicle efficiency improvement, and reducing the need for travel through demand management, regional development policies, and land use planning. As the international community embarks on the road towards CoP 21 in Paris, there is a case to be made for more climate finance flowing towards transport. GHG emissions are growing faster in transport than help lock-in a carbon intensive development path in any other sector. On-road passenger and freight for the long term. Change will require financing activity can be expected to increase worldwide, by from all available sources—public, private, bilateral 2050 to more than two and a half times the level of and multilateral. So far, international climate finance activity in 2015, driven principally by urbanization flows to the transport sector has been small relative and economic growth in developing countries with- to other sectors, such as energy. out strong mitigation action to decouple growth and emission trends. Incentives for Investment Large investments are urgently needed to increase The multiple benefits that accrue with invest- the sustainability of existing and new transport ments in low-carbon transport systems – such as systems and mitigate climate change. Making the improved health, air quality, congestion, and jobs right choices in transport is all the more important - must be factored into decision-making processes. to avoid lock-in to unsustainable growth patterns Focusing solely on the high costs of achieving GHG in the future—today’s fossil-fuel based investments abatement through changes in transport technol- MAY 2015 Note 16 ogy, like investments in fixed energy infrastructure, harmful fuel subsidies and introducing pricing for fails to recognize the local and global develop- auto use that induces shifts to low-carbon modes. ment benefits associated with improved transport Further gains will come from regulatory simplifica- systems. Accounting for these benefits sharply tion; advancing new vehicle technology standards; increases the incentives to invest into complex and implementing maintenance and renovation transport projects. programs to improve energy efficiency and safety For example, policies mandating fuel-efficient in the existing vehicle fleet. vehicles, plus widespread adoption of electric and Cities. Around 70% of the global population will hybrid vehicles, public transport, more advanced live in cities by 2050 and more than 90% of the biofuels, and more-efficient freight transportation increase will be in developing countries, so getting in the European Union, Brazil, China, India, Mexico, urban transport systems right is critical to avoid and the United States are estimated to yield the locking-in of unsustainable development patterns following benefits by 20301: in the future. This can be supported through invest- • Eliminate 2.4 billion tons of CO2 emissions per ments in improved public transport, urban plan- year ning, and car ownership and use. Most generally, • Save 20,000 lives funding must move away from focusing solely on a • Save 4,700 terawatt-hours of energy project-based approach to embrace a policy-based • Yield inflation-adjusted (2010) monetized ben- measures. This should include “avoid” strategies efits of $456 billion that reduce the need to travel. Quantifying the development benefits associ- Countryside. In many rural areas of developing ated with comprehensive demand-side transport countries, building all-weather roads increases developments at the project and program level is incomes, work opportunities, agricultural produc- data intensive and requires complex measurement tion, school attendance, and health facility access, methodologies and frameworks to account for be- thus reducing poverty and mortality rates. Invest- havioral change and changes in energy consump- ments are needed to improve the resilience of road tion associated with millions of mobile emission networks to short- and long-term climate change. sources. Freight. Maintaining economic growth while lower- Work is needed to develop the economic tools and ing the demand for on-road (and typically fossil- measurement systems to better account for climate fuel based) freight transport is especially difficult. risks and opportunities, and reach consensus on a Emissions can be reduced by investing in industrial common framework for sustainable transport. This node and corridor development to create more effi- will help to better inform project developers about cient supply chains; shifting to rail, waterborne, and green solutions and finance opportunities and har- multimodal transport; raising efficiency standards ness the gains from building a transport system on heavy-duty vehicles; and introducing voluntary that is low carbon and resilient. green-freight approaches such as the U.S. Smart- way system. “Avoid” strategies can also reduce the need to travel. Opportunities for Climate Finance Nationwide. National policies influence the speed of transition to a low-carbon, climate resilient For more information on this topic: transport system. Opportunities to shift invest- ment to lower carbon pathways include reducing SLoCaT Climate Finance Transport Database: http://www.slocat.net/news/1447 CIF website: http://www-cif.climateinvestmentfunds.org/ 1 World Bank and ClimateWorks Foundation, 2014, Climate-Smart Development, Adding up the benefits of actions that help build pros- perity, end poverty and combat climate change. Connections is a weekly series of knowledge notes from the World Bank Group’s Transport & Information and Communication Technology (ICT) Global Practice. Covering projects, experiences, and front-line developments, the series is produced by Nancy Vandycke, Shokraneh Minovi, and Adam Diehl. The notes are available at http://www.worldbank.org/transport/connections MAY 2015 Note 16