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VIII. Pricing and fiscal policy guide market forces, and, together with finance, channel public and private funds towards the most sustainable transport services.

Financial instruments and policies have to be realigned so they set the right frameworks that enable investors and users to provide and request the most sustainable transport services. Their timely adaptation will prevent lock-in into soon-to-be-obsolete and carbon-intensive infrastructure and technologies; as well as avoid sunk cost for industry and society. Financial institutions must focus on green investments, shift their portfolios accordingly, and define lending and grant policies based on sustainability criteria. Public finance is to leverage innovative financing mechanisms and to de-risk private investments, and Subsidies to fossil fuels in transport need to be phased-out urgently and funds collected from inefficient and polluting modes be used to support people-centred and low-emission mobility solutions.

Facts and figures

Fossil fuel subsidies: Globally, fossil fuel subsidies were USD 5.9 trillion in 2020 or about 6.8% of GDP, and are expected to rise to 7.4% of GDP in 2025. (Read more: IMF)

Transport stimulus packages: WRI study finds that 44% of global recovery funds (USD 130 billion) announced between March 2020 and February 2021 support sustainable transport. (Read more: WRI)

Externalities of road transport: Negative externalities from road transport include automobile dependency, crashes, road damage, environmental damage, congestion and oil dependence. (Read more: Santos et al.)

Tax breaks for company cars: Company cars cost Europe’s taxpayers EUR 32 billion a year in subsidies (T&E). Company cars represent over half of new cars sold every year in Europe and they are responsible for 73% of new-car emissions. (Read more: T&E)

Catalytic measures

Finance transport investments based on their contribution to low-carbon and sustainable mobility
Invest in affordable and decarbonised public transport and level of service
Manage and price parking (e.g. on street charges, workplace levies, parking maximums, pavement parking bans)
Price CO2 and integrate the transport sector to emission trading schemes
Phase out fossil fuel subsidies (e.g. diesel privileges)
Label modes, vehicles and products to provide users with info on carbon-intensity on point of purchase and use
Regulate advertising for unsustainable, oversized ICE vehicles (e.g. prohibit or mandate messages on “causes climate change” as in “causes lung cancer”
Introduce workplace green travel plans (including but not limited to parking charges, car sharing, incentives for public transport use, teleworking, low carbon travel policies such as rail over aviation, etc.)
Regulate export and import of second-hand ICE and EV vehicles through emission, safety, and recycling standards
Adapt tax laws to discourage provision of company status cars as employee benefits or salary packages
Legal mandates for new Zero Emission Vehicles
Develop business models for fleet electrification
Develop business models for charging infrastructure operation, including operators of the energy sector and prosumers
Tax vehicles based on emissions, weight, footprint, and energy efficiency

Other resources