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Sustainable Transport Investment Could Save $300 Billion a Year—within Existing Financial Flows

Rio de Janeiro’s TransCarioca bus rapid transit (BRT) corridor. Photo by WRI Brasil Sustainable Cities/Flickr.

Investing in sustainable transport infrastructure is something national and local leaders want as a way to cut climate-warming emissions – 23 percent of the global total – generated by the world’s transportation systems. But it has become a daunting prospect due to the public perception that it’s prohibitively expensive. New research that compares both high-carbon and low-carbon paths for transportation shows that public perception is mistaken: a low-carbon investment strategy is actually more affordable than the carbon-intensive way. The potential savings could be $300 billion each year and is within existing financial flows.

How Much Investment?

The latest research from WRI projects that to stay on course to keep the planet from warming more than 2 degrees C (3.6 degrees F) above pre-industrial levels, we will need $2 trillion in annual global capital investment to building low-carbon transport, with a $300 billion annual saving compared to fossil-fueled business as usual, which would bring 4 degrees C (7.2 degreess F) of global warming. This figure is based on  reviews, analysis and consolidated estimates of near-term global infrastructure requirements from the International Energy Agency (IEA), the Organization for Economic Co-operation and Development (OECD), the World Economic Forum (WEF), the McKinsey Global Institute, the New Climate Economy (NCE) and the Institute of Transportation and Development Policy/University of California, Davis.

This consolidated global estimate of required capital investment in sustainable transport includes what’s needed for construction of new projects and upgrading old ones, taking in the projected cost of land transport – such as roads, parking, bus rapid transit and rail – and airports, seaports and inter-regional transportation systems.

The synthesis of estimates produced two different scenarios: a 2 degrees C pathway for transport costing $2 trillion per year and a business-as-usual scenario that would see 4 degrees C of warming at a cost of $2.3 trillion per year. That’s where the $300 billion in savings comes in for a low-carbon strategy.

Compared with current transport capital investment of $1.4 trillion to $2.1 trillion, the 2 degree C scenario is well within financial reach.

The benefits of low-carbon transport go beyond money, offering social, economic and environmental advantages over business as usual. Sustainable transport cuts down on road congestion, air pollution, urban sprawl and the use of motor vehicles. These problems can cost countries about 10 percent of their gross domestic product (GDP). The social costs of road transport in terms of degraded public health and loss of life totaled $3.5 trillion just in China and India. And road congestion can slice into a city’s GDP: 3.5 percent in Buenos Aires, 2.6 percent in Mexico City and 4 percent in Cairo.

Good urban policy can make a difference. For example, Brazil’s National Urban Mobility Law, which makes sustainable transport a priority, allows cities like Belo Horizonte to get public finance from the Brazilian government for comprehensive plans to enhance public transport, integrate transit fares and improve infrastructure for non-motorized forms of transportation.

Shifting Transport Investment

To shift from high-carbon to low-carbon transport investment, national and local policymakers need to influence markets and create policies that encourage the private investment in sustainable solutions. National decision makers — such as ministers of transport and finance – should focus on investment portfolios for sustainable transport. Multilateral Development Banks also play an influential role in offering incentives to make this investment switch by supporting national policies are in line with commitments to tackle the impacts of climate change and build low-carbon transport systems.

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