The paper concludes that meeting the financing needs for scaling-up low-carbon transport systems will rely on funding from national governments with expanded investment from the private sector. Policymakers can, and should, explicitly promote the development of ST measures. Climate finance should be used more systematically to address the particular characteristics of the transport sector, the diversity of types of ST and the potential for climate and significant co-benefits.
Transportation is responsible for around one quarter of energy-related GHG emissions globally and is the fastest growing of all sources. Significant transformational investments amounting to trillions of dollars are needed over coming decades to shape sustainable, low-carbon transport (ST) systems, especially in the developing regions such as Africa, Asia and Latin America. The International Energy Agency (IEA) has calculated that the adoption of a low-carbon pathway for the transport sector (equivalent to the recommended two degree Celsius scenario of the Intergovernmental Panel on Climate Change) could generate at least USD 70 trillion in cumulative savings up to 2050, with significant potential for additional savings because of other developmental benefits.
Domestic public sector funding is still the major source of finance for transport today, but it is insufficient to meet the investment needed to address the growing demand for transport (passenger and freight) globally, the new international agenda for addressing Climate Change or the Sustainable Development Goals (adopted in September 2015 by the United Nations General Assembly). Increasingly the private sector is being asked to play a role in funding transport.
Official Development Assistance (ODA) presently represents a minor share of total investment in land transport compared to domestic finance, and is not expected to increase in line with demand.However, ODA provided by the Multi-lateral Development Banks (MDBs) and other development finance institutions, is critical for partnering with and leveraging domestic public and private finance.
International Climate Finance (ICF) until now has not had the catalytic effect expected, in transforming the transport sector into one which demonstrates its low carbon impacts and achievements, yet it has the potential to take on this role. ICF is much smaller than ODA and the dedicated multilateral climate funds, such as the Global Environment Facility, the Climate Investment Funds, the Nationally Appropriate Mitigation Actions (NAMA) Facility and the newly operational Green Climate Fund (GCF) are not yet able to provide the amount of finance needed or the financial instruments that could assist such a transformation.
ICF must be used to leverage other funds, and the relevance of ICF for the transport sector must be increased, which requires orienting it to where the climate and co-benefits are highest often by com-plementing other sources of finance (domestic and private sector finance and ODA). ICF should be used more systematically to assist scaling-up ST by meeting the needs of communities, potential finan-ciers and other stakeholders.