Financing Needs for Sustainable Transport Systems for the 21st Century

Around the world, and especially in Asia, current demographic, economic, climate change, health, and safety trends are creating opportunities and risks, particularly in rapidly growing urban areas. In the transport sector, resource allocation has perpetuated a longstanding emphasis on traditional private vehicle‐oriented transport projects and programs by domestic and international funders. Investment in sustainable transport, with priority to public and nonmotorized transport modes and integration of land use and transport planning, is essential to improving mobility and accessibility for the majority of people. Sustainable transport can save lives, reduce energy consumption and greenhouse gas emissions, boost economic growth, foster equitable urban communities, and improve overall quality of life. The Rio+20 commitment by eight multi‐lateral development banks (MDBs) to shift $175 billion to more sustainable transport programs over the next decade could catalyze investments in sustainable transport, but it must be aligned with domestic finance and national transport programs.

Moving in the Wrong Direction

In Asia, where the urban population is growing rapidly, the need for sustainable transport investments is particularly pronounced, as trends show increasing rates of car ownership and use, greenhouse gas emissions, and fatalities resulting from road accidents. For the first time in history, in 2011 more Chinese lived in urban centers than rural areas. A similar trend is underway in India, where the majority of the population is expected to be urban by 2041. Vehicle fleets across Asian countries are increasing exponentially owing to urbanization and rising incomes, doubling every 5‐7 years. Road congestion costs Asian economies 2‐5 percent of Gross Domestic Product (GDP) each year due to lost time and higher transport costs. The transport sector is also the fastest growing source of CO2 emissions in Asia. The Asian Development Bank (ADB) forecasts that the region’s share will rise to 31 percent of global transport sector CO2 emissions by 2030 at its current pace, with total regional emissions projected to triple by 2050. Asian cities now have among the highest air pollution levels.

Rethinking Transport Finance

Currently, national and international funding streams do not sufficiently recognize the importance of supporting sustainable transport projects and initiatives that will mitigate these negative trends. There are examples of national governments and MDBs that have begun to prioritize funding for sustainable transport projects, but the scale of the problem requires greater engagement from all parties. The Asian Development Bank’s 2010 launch of the Sustainable Transport Initiative and the initiation of national urban transport programs in China, India, and Indonesia that specify investment in sustainable transport are a step in the right direction. Yet, there is still much work to be done to develop national level urban transport programs and policies, clarify and track investments in sustainable transport at the MDB, national, and local government levels, and leverage domestic and private finance to satisfy the $2.5 trillion investment in transport that will be needed by 2020 in Asia alone, according to the ADB.

$175 Billion Shift towards Sustainable Transport is Only the Beginning

The commitment by the eight MDBs to invest $175 billion in sustainable transportation systems over the coming decade provides an opportunity to move forward on the key issues currently facing the transport sector. It is a key indicator of shifting priorities for the MDBs, as they consider the long‐term impacts of climate change and recognize the public health, environmental, and economic benefits and inclusiveness of sustainable transport. In order to realize the commitment to its fullest, the MDBs need to clearly define what constitutes sustainable transport and the key indicators to evaluate it, shift funding to sustainable transport projects, and transparently report allocations to sustainable transport on a frequent basis. At the national level, all countries should develop transport programs that build demand for sustainable transport funding and operationalize the MDB commitment in a strategic way, leveraging domestic and private financing opportunities.

National Governments Play Vital Role in Transport Finance

National governments can play a crucial role in financing and supporting sustainable transport systems that help meet the key challenges of the 21st century. The primary need is to bridge the gap between the supply of international MDB financing and demand from national and local governments for sustainable transport projects. National governments are vital for linking their national finance programs with international finance sources to promote a shift to more sustainable transport.

In this background paper, we identify two key areas where national governments play a core role in financing sustainable transport for the 21st Century: leveraging sustainable transport financing for greater impact and increasing the effectiveness of sustainable transport financing. Further, we articulate six fundamental actions that national governments should seek to fulfill (three for each area) to move sustainable transport financing forward.