Report Finds That Urgent Changes in Transport Financing Required to Enable More Sustainable Transportation Globally
23 August 2010
Changes in how transport is financed are essential if cities and nations are to deal effectively with the rapid growth in motor vehicle traffic and related environmental and health problems, including climate change, according to a new report by the Transport Research Laboratory released at Fifth Regional EST Forum in Asia by the Institute for Transportation and Development Policy (ITDP) and the Partnership for Sustainable Low Carbon Transport.
The report, A Paradigm Shift Towards Sustainable Low Carbon Transport, finds that more than $1.5 trillion is spent annually on transport globally, mostly in ways that exacerbate rather than solve the problems associated with traffic growth, including congestion, health-harming air pollution, accidents, energy insecurity, and climate change.
Transportation is central to the social and economic activity of people across the world. Yet current transport patterns, based primarily on private motorised vehicles, generates many social, environmental and economic costs, accounting for more than half of global liquid fossil fuel consumption and nearly a quarter of the world’s energy related carbon dioxide (CO2) emissions (IEA, 2009).
Transport is also typically responsible for around 80% of developing cities’ local air pollution and more than 1.3 million fatal traffic accidents worldwide, most of which occur in developing countries (WHO, 2009). Furthermore, the chronic traffic congestion caused by excessive motorisation leads to lower productivity and reduced levels of accessibility in many of the world’s urban areas.
These unsustainable patterns of transport are expected to worsen under the continuous and rapid trend of motorisation. There is a growing consensus by experts, policy makers and the general public that these trends cannot continue without seriously affecting the economic viability and environmental quality of their cities and countries.
What is required to reverse this trend is the “leapfrogging” of the paradigm, whereby developing countries fully use the opportunity to develop their transport systems in a sustainable, low-carbon manner, providing enhanced accessibility and communication without committing to the same level of motorisation seen in the developed world, and in particular North America.
A key change will need to take place in how the costs of transport are internalized, as the wider costs to society arising from road accidents, poor health, social impacts and environmental degradation, often described as the ‘external’ costs, are currently excluded from the price that transport users confront.—A Paradigm Shift Towards Sustainable Low Carbon Transport
The report assigns the blame for much of the observed failure in transport to the financial framework from which policies, programs and projects draw resources. While notable exceptions exist, the report says, the financing framework is often skewed towards supporting the motorization model:
- Domestic public finance is mainly used to build and maintain infrastructure to cater to increasing levels of motorized traffic.
- Official Development Assistance (ODA) flows are directed towards development based on the motorization model, reflecting both the requests of recipient countries as well as the menu of technical assistance provided by donor organizations.
- Private flows are also directed towards the development of goods, services and infrastructure that support the motorization model of transport development, e.g. motor vehicle manufacturing.
- Carbon finance is generally limited in scale and access to these resources is further reduced by the requirements placed upon the transport sector, i.e. a narrow approach to measuring the mitigation potential of policy actions (and the associated incremental costs), together with the lack of data to allow the measurement, reporting and verification of mitigation actions.
The report outlines key steps in financing reform:
- Analyze impacts;
- Shift existing resources towards a sustainable direction;
- Add funding where resources are still lacking; and
- restructure pricing incentives so users Pay for the full costs of transport consumption.
Implementing the requisite changes will require the collective action of various stakeholders, including, but not limited to:
Developing and developed country governments (national and local) that shift their domestic budgets towards a sustainable direction; shape the way in which international support for transport is provided; and provide market signals to the private sector to invest in sustainable ways by applying appropriate pricing mechanisms (such as fuel and vehicle taxes, road pricing, parking charges and distance-based insurance) as well as phasing out fuel subsidies.
Multilateral Development Banks and bilateral development agencies that evaluate the GHG impacts and/or carbon intensity of investments and technical assistance; direct their technical assistance to develop capacities, institutions and knowledge in support of sustainable transport; and align their grant support and lending criteria with sustainability objectives, and catalyze major changes in domestic priorities as a result.
Export credit agencies that shift their focus towards facilitating the diffusion of sustainable transport vehicles and promote sustainable infrastructure investments.
United Nations Framework Convention on Climate Change (UNFCCC) and other climate finance institutions/mechanisms that facilitate the development of a Post-2012 climate change architecture and mechanisms, including provisions for measurement, reporting and verification (MRV), that would fully allow the transport sector to contribute to mitigation efforts. Further, in coordination with development agencies, these institutions/mechanisms would direct current and future climate financing mechanisms towards capacity building, technology transfer and policy support, to leverage further investments from other sources.
The private sector, given the right market signals, that can invest in and create new technologies and services that support sustainable transport.
Non-government Organization (NGOs) / civil society and academia lead the development of new holistic methods to assess the costs and benefits of transport interventions, and act as advocates for sustainable transport through campaigning, research and public communication.
The Institute for Transportation and Development Policy is an international non-profit organization founded in 1985 that promotes environmentally sustainable and equitable transportation worldwide.
The Partnership for Sustainable, Low Carbon Transport is a voluntary, multi-stakeholder partnership of more than 50 organizations registered with the Commission on Sustainable Development and which have agreed to work together to advance sustainable, low carbon transport.
Members include the Asian Development Bank; InterAmerican Development Bank, African Development Bank, German Technical Cooperation/GTZ, UITP, ITDP, International Energy Agency, The Energy and Resources Institute, Clean Air Initiative for Asian Cities Center, UN Center for Regional Development, UN Department of Economic and Social Affairs, UN Environment Programme, Korean Transport Institute, Japanese Ministry of Land Infrastructure Transport and Tourism, Ahmedabad Centre for Environment Planning & Technology, Institute for Transport Policy Studies, Philippines National Center for Transportation Studies, and Rockefeller Foundation.
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