Partnership on Sustainable Low Carbon Transport

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Climate Finance Still Falling Short

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Opening Perspectives

During COP 20, security measures are all around us, from the mirrors used to peer under buses as we enter the convention site, to the X-ray machines used to screen any dangerous cargo at the gates.  Yet, as negotiations plod along, our collective insecurity grows more evident, as any sense of local security we may experience is illusory in the absence of concrete actions to stem the tide of global climate change. 

Climate finance is one of the most essential building blocks for transport to secure its place as a contender in the COP 21 race.  Yet, progress in COP 20 climate finance negotiations continues to fall short of the mark, placing at risk needed investments in sustainable transport, especially among rapidly developing and motorizing countries. 

Climate Finance for Sustainable Transport: Great Leaps Required

At the Ministerial Dialogue on Climate Finance, the SCF presented findings from its recently released Biennial Assessment and Overview of Climate Finance Flows Report.  The report indicates that current global climate finance flows range from $340 to $650 million per year, while estimates of capital flows from developed to developing countries span a wider range from $40 million to $175 million, underscoring broad uncertainty.

With the goal of raising the bar for climate finance, COP 20 Parties continue to announce pledges to the newly operational Green Climate Fund (GCF). International pressure continues to mobilize more financial pledges to the GCF, with Australia announcing a four-year contribution of $165 million, and Belgium pledging $62 million. While pledges have now passed the $10 billion mark, ministers expressed concern that contributions lag far behind the Fund’s ambitious target of $100 billion annually by 2020.

To put these numbers in context, it must be noted that significant transformational investments are required to increase sustainable transport infrastructure and services to mitigate climate change.  In the 2015-2035 period, the projected incremental transitional investment is just over $3 trillion, of which over 80% is related to low-carbon modes such as railways and mass transit.  These investments are in addition to existing global investments in transport, which are estimated at $1-2 trillion annually.

Though transport investments are currently dominated by investments in OECD countries, the greatest need is in non-OECD countries. Of estimated total current annual transport infrastructure investment, 60% is allocated to OECD countries and 40% to non-OECD countries.  In the future, even if adequate global finance is available, about 85% would need to be directed towards fast-growing non-OECD nations (and only 15% to OECD nations) to meet development needs and curb projected growth in motorization.

Sustainable transport systems will continue to require significant public funding due to their nature as a public good; yet, the investment challenge, especially in emerging economies, is too great to be addressed solely
by the public sector.  The private sector must also be a significant source of finance, in addition to providing expertise for design and operation, and managing risk.  Climate finance is another crucial source of financing for transport, but its application so far has been too limited for transformational change. 

Although climate finance has backed 140 transport projects in 43 countries to date, this leaves more than 150 countries without any climate financed transport projects. This balance must change rapidly if transport is to maximize its global mitigation potential. Furthermore, climate finance shows a current bias toward ‘shift’ and ‘improve’ projects (below graph), and it will be necessary to expand application of climate finance in the realm of ‘avoid’ projects for transport to be an effective lever in meeting the 2DC target.

Back at the COP, a number of Parties have pointed out current discrepancies in the operational definitions of climate finance and the resulting difficulties in MRV; the crucial role of credit transparency in harnessing trust between countries, and the creation of a post-2020 road map for climate finance. Thus, progress in the area of climate finance remains painfully slow, and the road to Paris appears treacherously long.

The UNFCCC process is ineffective in providing guidance on how to arrange the funding required to implement sustainable, low carbon transport at the required scale. Climate finance is still focused on the implementation of specific projects rather than building capacity and developing policies to more effectively leverage public and private finance.

With incremental global sustainable transport investment needs projected at $3 trillion over the next 20 years, climate finance activity must make a quantum leap to deliver its potential contribution.  Lack of progress on climate finance stymies progress on NAMAs and in turn, the more crucial transition to INDCs, which will establish economy-wide targets, and thus quantify economy-wide (and transport-specific) financial requirements.

Taking the Pulse of ADP

Money remained a sensitive issue in this morning’s ADP session, in which developing countries lamented the difficulty of building INDCs without assurance of annual pre-2020 contributions from developed countries, and developed countries expressed reluctance to make additional pledges without post-2020 involvement from developing countries, while all sides called into question the nature of the ‘developed’ and ‘developing’ labels.

In the afternoon session, developing countries largely focused on the means of implementation, climate finance and capacity building, while developed countries focused primarily on MRV, accountability and transparency; yet, all expressed a common need to act now.  The United States’ speech focused on the scope of INDCs and the need to revise the term "differentiation" to reflect changes in the world since the 1992 Rio Earth Summit, though some developing countries would accuse the developed countries of driving these changes.  India also highlighted the topic of INDCs (focusing on the voluntary basis of the concept) and the importance of raising the bar for climate finance and technology transfer.  Ironically, Australia was insistent in discussing the importance of economic sustainability, when it is in fact a villain in these circles.  As these conversations continue at the expense of forward process, the opportunity cost for transport rises, and the urgency of filling sustainable transport’s funding gap increases.

Thus, the finger pointing continues with little progress toward the COP 20 finish tape, as the clock ticks on.  As ADP negotiation draft revisions continue, we will assess tomorrow the potential positive and negative impacts for sustainable transport within this process.

PPPs at the World Climate Summit

The SLoCaT Partnership presented at the World Climate Summit in a plenary session entitled, “Effective Approaches to Public-Private Partnerships for Climate Change Solutions.”  National and sub-national governments will need to increasingly engage in public-private partnerships (PPPs) to finance necessary infrastructure to combat climate change, and this session outlined key frameworks for successful PPPs, based on lessons learned, stakeholder involvement, and potential opportunities and challenges.

At the Summit, SLoCaT discussed several key issues regarding transport PPPs.  First, transport PPP project managers must develop greater institutional capacity, reduce financial risk, and enlist intermediaries to aggregate projects appropriately to maximize green growth and efficiently combat climate change.  Second, transport faces several barriers to capturing PPP opportunities, which include insufficient revenue streams (as collective benefits are not easily monetized) and the political risks of replacing informal with formal transport systems.  Finally, SLoCaT showcased positive examples of PPP projects in several transport subsectors, including public bike systems, land development on rails rights-of-way in China and Japan, intermodal passenger hubs in Mexico, emerging electric bus leasing schemes, and BRT systems in several countries.

Mexico Makes Strides toward INDC Submission

Today’s ‘cause for optimism’ section shifts focus from national to regional actions.  In a COP 20 side event, Mexican government ministers discussed a recently signed MOU on short-lived climate pollutants between the governments of Mexico and California, and in this context described efforts toward the ongoing development of Mexico’s INDC. 

Juan José Guerra, Minister of Environment and Natural Resources, recognized the central importance of planning mitigation actions via INDCs, which Mexico plans to submit in the first quarter of 2015.  Next, INECC presented Mexico’s new emissions baseline, indicating that Mexico’s transport sector is responsible for producing 26.7% of its GHGs and 19% of its black carbon, and noting that the country is working to develop more realistic indicators to raise the effectiveness of its climate change policies.

Finally, Rodolfo Lacy, Deputy Secretary of Planning and Policy, reported on the status of SEMARNAT’s NAMA program, which to date has 43 registered projects, including one focused on urban transport.  Lacy also described progress in updating Mexico’s Programa Especial de Cambio Climático, which will guide the country’s mitigation actions until 2018, and which contains detailed measures to ensure that Mexico is able to meet the mitigation targets to be specified in its forthcoming INDC.

Closing Thoughts

While running this morning in Lima’s Bosque El Olivar, I witnessed a strange paradox.  Military police were deployed at key intersections to ensure the security of COP 20 delegates staying in nearby hotels, yet these officers did nothing to secure the paths of pedestrians while crossing neighborhood streets, as car commuters raced through well-marked crosswalks.  This seemingly insignificant vignette illustrates the fact that achieving transport security will require not only significant shifts in financing, but also even more significant cultural shifts.

In the absence of sufficient financing, sustainable transport infrastructure needs will fall short, and without needed cultural change, new infrastructure will be of little use.  Thus, it is time for COP 20 delegates to step forward with required top-down financing pledges, and for local and national policy makers to step up and put available financing to its best use.  And certainly, we must rethink our definitions of security, at both global and local levels, if sustainable transport is to join the front-runners in the race toward COP 21.

Upcoming Transport Events at COP 20

Please visit the Transport Day website for a full listing of COP 20 transport events. 

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