Financing Sustainable, Low Carbon Transport – an uncompleted, but critical, agenda to realize sustainable development

by Cornie Huizenga, Thursday, May 15

The sustainable transport community got a boost on 4-5 May at the Ascent Meeting in Abu Dhabi, which was an important staging post for the UN Secretary General’s Climate Summit on 23 September in New York.  Secretary General Ban Ki-moon has decided to engage directly on climate change to help ensure that the new climate change agreement that is to be agreed in December 2015 in Paris, France will be sufficiently ambitious.

6 Transport related initiatives were presented in Abu Dhabi divided over 4 impact areas: transportation; cities; energy; and short-lived climate pollutants.  The 6 initiatives reflect well the growing consensus that effective action on transport needs to combine an expansion of transport infrastructure and services with a reduction of the negative externalities of transport including greenhouse gas emissions. If success fully implemented these Ascent transportation initiatives will result in an expansion of railways that at the same time will be more energy efficient; wider use of public transport through amongst other Bus Rapid Transit systems; accelerated introduction of electric vehicles in urban areas; improved fuel efficiency of new light duty car fleets; and greater action on the greening of freight and logistics.

This positive action on transport, which combines technological and behavioral change, sends out a powerful message to the negotiators in the United Nations Framework Convention on Climate Change (UNFCCC) process on the new climate change agreement. The transport sector embraces the idea that transport can and should be part of climate action to realize the 2-degree scenario called for by the Intergovernmental Panel on Climate Change (IPCC) and it is ready to take action on this even before a new global agreement on climate change is in place.

The transport sector’s awareness of the need and willingness to move towards sustainable transport was also demonstrated through the Voluntary Commitments it made at the 2012 World Conference on Sustainable Development in Rio de Janeiro.  This included a $175 billion Voluntary Commitment for more sustainable transport by the World’s 8 largest Multilateral Development Banks. Since the Rio+20 Conference, the transport community has come together around a Results Framework on Sustainable Transport that is guiding the outreach of the transport sector towards the discussion on a set of Sustainable Development Goals (SDGs) that will shape the post 2015 development agenda on sustainable development.

Now that there is growing consensus on the need to reduce transport related GHG and the manner in which this can be done; the debate needs to shift towards the financing required to rapidly scale up the development and operation of sustainable, low carbon transport infrastructure and services.The challenge is not that we do not know what to do, but doing it fast enough. This to avoid that business as usual policies and investments result in a transport sector that has high locked in GHG emissions and which also in other respects (road safety, air pollution and congestion) is not sustainable.

Within the financing challenge there are a number of key questions and issues that need to be addressed:

  • What part of GHG emission reduction measure,or other sustainability measures in the transport sector,can be funded through passing on the costs to users?Considerable improvements in fuel economy or fuel quality improvements can be achieved with consumers picking up the tab for realizing such improvements. Likewise, the promulgation of new tire manufacturing standardsthat can result in fuel savings of up to 5% do not require any large investments on the side of governments;
  • How to re-direct public sector funding from supporting and enabling a car dominated infrastructure towards multi-modal transport infrastructure services which can reduce the modal share of car or truck based passenger and freight transport? At a societal level this does not require more funding, as demonstrated by the OECD, but it does call for changes in funding patterns. In many countries, cities are overly dependent on the national government for access to funding for transport infrastructure and services and lack the mandate or capability to develop effective financing structures. It is unlikely that a project-based approach to funding of sustainable, low carbon transport will be able to deliver in time. A program based approach in which national governments co-finance worthwhile city based initiatives has proven to be more effective in scaling up the realization of sustainable transport;
  • How to tap private sector as a more significant contributor to develop sustainable, low carbon transport infrastructure and services? There is agreement that public sector funding, even aided by Official Development Assistance (ODA) or Climate Financing will fall far short of what is necessary to put in place the sustainable, low carbon infrastructure and services to enable the eradication of poverty and the pursuit of sustainable prosperity called for in the new post 2015 agenda for sustainable development. There is a shortage of good instruments to tap the private sector at scale for sustainable transport. At the same time there is a lack of understanding and capacity within the sustainable transport community on how to best work with the private sector on realizing sustainable, low carbon transport;
  • How to better leverage both public and private funding sustainable transport through sustainable transport directed ODA (e.g. MDB $ 175 billion)? While an impressive amount it is estimated by the MDBs that $175 billion will cover at most 3-4% of required investments in sustainable transport in the coming decade. To improve the leverage of funding from both the private sector and institutional funders (e.g. pension and sovereign wealth funds) the public and private sector parts of MDBs will need to learn to work better together;
  • How to make Climate Financing (e.g. Global Environment Facility, Clean Development Mechanism, Green Climate Fund) work better for the transport sector? The role of these funds, which are limited in size, should not be to directly fund the realization of low carbon transport infrastructure and services but rather to develop a pipeline of high quality programs and projects that can be taken up by the public and the private sector. Some have argued that even the $175 billion pledged by the MDBs for more sustainable transport would be more effective if largely allocated to project development rather than project financing.

There is a growing number of SLoCaT members and other organizations that acknowledge the need to ensure that funding will be available to realize the agenda for sustainable, low carbon transport on which there is increasing consensus. This includes for example the TRANSfer project of the German International Cooperation (GIZ) Program, which has a dedicated stream on financing; the Volvo Research and Education Foundations (VREF) Initiative on Financing Urban Access; the Climate Bonds Initiative which has a dedicated low carbon transport working group that aims to increase access of transport sector to climate bonds; or the Global Infrastructure Basel Foundation that promotes sustainable infrastructure financing practices.

A key role for SLoCaT will be to link up these different initiatives on financing of sustainable transport and to connect them with global policy discussions on sustainable development and climate change. SLoCaT will in this context continue to target the Open Working Group process developing recommendations on SDGs and the Ad-hoc Working Group on the Durban Platform for Enhance Action (ADP) of the UNFCCC developing a new post 2020 global climate change agreement. It will also increasingly focus on the High Level Political Forum that will be tasked with monitoring the implementation of “The Future We Want”, the outcome document of Rio+20 as well as the SDGs, once adopted by the UN General Assembly. Another important forum that should take up financing of sustainable, low carbon transport is the Intergovernmental Committee of Experts on Sustainable Development Financing.