Report: Investing in resilient transport in low, middle-income countries yields $4.2 trln in net benefits
Investing in resilient transport in low- and middle-income countries (LMICs) requires $417 billion annually between ...
Report: Investing in resilient transport in low, middle-income countries yields $4.2 trln in net benefits
Investing in resilient transport in low- and middle-income countries (LMICs) requires $417 billion annually between 2015-2030 (1.3% of GDP), yet yields $4.2 trillion in net benefits, offering $4 return for every $1 invested, according to a report by the World Bank.
While global climate financing reaches $1.27 trillion annually, the transport sector only receives $336 billion, with just 3% allocated to least developed countries (LDCs) and 15% to other emerging markets and developing economies (EMDEs) excluding China, said the report entitled Financing Climate Action for Transportation in Developing Countries.
Low-carbon transport financing is predominantly private-sector-led, focusing mainly on vehicle electrification in developed nations, while development finance institutions (DFIs) play a key role in developing countries.
Challenges include a lack of bankable projects, limited demand in some markets, and governments’ reliance on DFIs due to limited access to commercial borrowing and risk management capacity.
Transitioning to low-carbon transport requires removing subsidies, ensuring users of private and air transport pay full social costs, and recycling tax revenues from transport pricing into green investments.
Blended financing, credit enhancements, and creating portfolios of bankable green projects are recommended to attract sustainable finance and scale up small urban projects.
Decoupling transport demand from GHG emissions requires moving away from road expansion and vehicle subsidies towards a holistic approach that integrates transport with economic and social considerations, particularly for LMICs.
The report advocated for an integrated financing that set out transport-specific climate action goals, establish green transport–specific regulation and institutional frameworks, and incorporate GHG analysis in transport planning to prioritize policies and investments.
The report also called for optimizing funding mechanisms to incentivize greening actions, ensuring public spending efficiency, putting a focus on research and development, and developing a financing strategy including blended financing and credit enhancements to leverage sustainable finance into the Paris Aligned transition.
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