UN: Climate Change Mitigation Could Require Additional US$88B Annual Investment in Global Transport Sector in 2030
|World transportation energy use under the mitigation scenario is still dominated by petroleum. Click to enlarge. Source: Greene (2007)|
The additional investment in the global transport sector required under a scenario for mitigating climate change by rolling back emissions in 2030 to current levels could reach US$88 billion annually by 2030, according to a new report issued this week by the Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC). Of the $88 billion, $9.2 billion is for biofuel production and the balance mainly for more costly hybrid electric vehicles.
The report estimates that total additional global investment and financial flows across all sectors required by the mitigation scenario will reach US$200–210 billion in 2030.
Overall, the report concludes that addressing climate change over the next 25 years will require significant changes in the patterns of investment and financial flows amounting to between 1.1 to 1.7% of global investment (or about 0.3-0.5% of estimated global GDP) by 2030.
Additional financial flows needed in 2030 for adapting to climate change impacts amount to several tens of billions of dollars, in particular in sectors and countries that are already highly dependent on external support such as the health sector in least developed countries or for coastal infrastructure in developing countries vulnerable to sea level rise.
The study shows us that a conscious effort to shift from traditional investment to more climate-friendly alternatives will require governments to adopt new policies and change the way they use their funds. The required shift in future investment and financial flows needs a combination of actions by the intergovernmental process under the UNFCCC and national governments.—UNFCCC Executive Secretary Yvo de Boer
Transportation. In 2004, transport consumed 1,969 Mtoe of energy—a quarter of the world’s final energy consumption—and was responsible for about 14% of global GHGs, 5.8 Gt CO2 eq in 2004 nearly all of which was CO2. Transport accounts for one-fifth of energy-related CO2 emissions.
Road transport, including passenger and freight, is responsible for almost three quarters (73%) of the sector’s energy use and CO2 emissions, followed by air transport (12%), marine transport (10%), rail (4%) and all other modes (1%).
The volume of road transport and its mode distribution varies widely across regions. In 2000, North America and Western Europe had 50% higher miles per vehicle of road travel than the rest of the world combined. This situation is changing rapidly, the authors note, as vehicle ownership increases in developing and transitional economies.
Under the business as usual scenario (the reference scenario), total energy consumption in the transport sector is projected to be 3,111 Mtoe in 2030, an increase of 58% in 25 years. Transport CO2 emissions increase from just over 5.5 Gt CO2 in 2005 to 8.7 Gt CO2 in 2030—also an increase of 58%.
Under the mitigation scenario, total transport energy consumption drops to 2,664 Mtoe in 2030—an increase of 35%—with CO2 emissions projected to be 6.7 Gt—an increase of 22%.
The mitigation scenario relies on increased use of hybrid electric vehicles and biofuels, and further vehicle efficiency improvements, including ongoing advances in the combustion engine. In a detailed background paper prepared for the analysis of this sector, David Greene (ORNL) pointed out that:
Substantial opportunity exists to improve the energy efficiency of conventional vehicle technology, based on internal combustion engines utilizing liquid hydrocarbon fuels. Engine efficiency improvements on the order of up to a 20% reduction in fuel consumption should be achievable over the next decade or so by taking advantage of a variety of proven or near market-ready technologies (e.g., direct injection, turbo-charging with engine downsizing, variable valve timing and lift, variable displacement, engine-off-at-idle, friction reduction, etc. See, e.g., EEA, 2006; NRC, 2002; WBCSD, 2004).
Near-term improvements to transmissions (e.g., 6-7 gear automatic transmissions, automated manual transmissions, continuously variable transmissions) have the potential to improve fuel economy by 5-10%. Making use of all conventional technologies EEA estimates a potential reduction in greenhouse gas emissions of 20-25%. The IEA (2006b) estimates that the fuel economy of gasoline vehicles could be improved by 40% by 2050.
Increased market penetration of hybrid vehicles is a key component of the Mitigation Scenario.
The market share for hybrid vehicles rises from 18% under the reference scenario to 60% under the mitigation scenario, along with a doubling of biofuel use and further improvement on efficiency of internal combustion engine.
Petroleum remains the projected dominant source of energy for transportation under the mitigation scenario, with an 83% share, according to the report.
Nearly all additional transport investment needed under the mitigation scenario is for the purchase of motor vehicles and production of transport fuels; most of this investment will be made by the private sector. There will be no significant change to large transport infrastructure investments between the reference and mitigation scenarios, such as roads, transport systems, airports, and ports, in which governments usually invest in.
Increased use of bio-fuels as blends with conventional fuels will need to be driven by policies. Biofuel, production and consumption are likely to be co-located, as a general rule.
The shift to hybrid vehicles projected under the mitigation scenario will require government policies such as vehicle efficiency standards or other policies to raise the market share of hybrid vehicles. Vehicle buyers are unlikely to voluntarily pay the added cost, about USD 1,000 per vehicle. Given the rapid growth of vehicle ownership in non-Annex I Parties, they will need to adopt such policies as well. Many developing economies will not have domestic capacity for vehicle production but will record increased spending on vehicle purchases under such policies. These countries will also require investment in physical and human capital for repairing and maintaining advanced technology vehicles.—Background Paper, pp. 66-67
In his background paper, Greene notes that in addition to vehicle efficiency and the use of lower-carbon fuels:
Significant other options exist for mitigating transport GHG emissions via pricing of transport, efficiently operating transport systems, influencing the level of demand and modal structure of transport via infrastructure investments and land use planning and regulation.
The report concludes that while efficiency improvements for vehicles and increased use of biofuels are likely to require government policies, the investment will come mostly from the private sector.
The analysis in the report does not provide for an estimate of total cost of climate change mitigation or of the total cost of adaptation to impacts of climate change. The analysis covers only the investment and financial flows needed in 2030, that being an appropriate time period for an analysis of investment flows, according to the authors. The level of detail available from published scenarios declines sharply as the time horizon is extended beyond 2030.
The report is designed to help delegates meeting for the United Nations Climate Change Conference in Bali (3 to 14 December) in assessing the financial architecture needed for a post-2012 agreement, for which negotiations are expected to be launched this year.
Background paper on Analysis of existing and planned investment and financial flows relevant to the development of effective and appropriate international response to climate change
David L. Greene (2007), “Opportunities for Greenhouse Gas Mitigation in Transport and Implications for Investment”