At a Transforming Transportation session organised by ADB, BMZ and HVT, panellists highlighted the financial gap for transport infrastructure and the need to create bankable projects if this gap is to be addressed.
Policymakers, experts and leaders in transport gathered at the World Bank Headquarters in Washington DC on 14th and 15th March for the 20th edition of Transforming Transportation, to explore how to ‘accelerate towards green and inclusive mobility’.
The session, entitled ‘Win-Win: Envisioning the Future of Development Financing in Transport’, was moderated by Maruxa Cardama, Secretary General of the Partnership on Sustainable, Low Carbon Transport (SLOCAT), who began by pointing out that, while the conference centred around sustainable transport’s crucial role in overcoming the ‘interconnected challenges’ that we are living with today, investment in transport is lagging.
“It is estimated that governments globally are facing something like a 40 trillion US dollar financial gap for transport infrastructure until 2040,” she said. “That’s more than the energy and telecom sectors combined.”
Essential to overcome these gaps is to boost bankable projects that help us leverage synergies between transport, energy, health and employment towards a just transition from the carbon intensive infrastructures we’ve seen so far.
Ben Simmons of the International Institute for Sustainable Development (IISD) suggested there are two challenges facing global think tanks like IISD: firstly, a lack of such good bankable projects, partly due to a lack of information to make the case for investment. Secondly, a disconnect between the commitments from governments and institutions at the global level, and the values reflected in the economic and financial documents used when making decisions about transport infrastructure projects. That’s why, he said, the IISD’s work is focused on trying to look at different ways of doing cost benefit analysis and financial modelling.
By developing nine case studies, looking at various types of sustainable transport projects in low-income countries around the world, IISD are trying out an integrated cost benefit analysis that looks at the indirect costs and benefits such as the health benefits from shifting to non motorized transport.
He cited one project in India as an example. “When we run the traditional cost benefit analysis, that project did not look like it was economically viable, it had a benefit to cost ratio of around 0.47,” he said. “However, when you begin to incorporate the other costs and benefits and other externalities, we found that it was nearly 4.75 benefit to cost ratio, so nearly 10 times the benefit.”
Lise Weidner, Head of Road Division, European Investment Bank (EID), said
climate finance in transport has increased to 80% of the EID’s portfolio. In 2020, EID approved the climate bank roadmap, aligning all its financing activities to the principles and goals of the Paris Agreement and last year it approved the new transport lending policy which prioritises sustainable mobility. The bank has developed a system it calls SASHE, (safe, secure, green, resilient and efficient system.)
“With these priorities, we aim to find the best transport investments that are addressing the multiple challenges we’re facing in the sector,” she said.
Maruxa then asked Anne Joselin, Infrastructure Advisor at the Research and Evidence Directorate of the Foreign Commonwealth and Development Office how the HVT programme aims to equip the sector with the knowledge to fill the information gaps in transport investment planning. Anne spoke of the importance of research that is relevant and easily communicated to policymakers and decision makers.
She highlighted HVT’s work on transit oriented development (TOD), and the work to update the Highway Development and Management Model (HDMM) – or the current HDM4 – which has for many years been the primary tool, used by governments and development banks, for the appraisal of major road networks of low- and middle-income countries and is a prerequisite for the provision of funding.
“We’re looking to upgrade that tool to bring it into the 21st century,” she said. “Some of the key functional needs that we are bringing into it include climate change, resilience, estimates of greenhouse gas emissions and road safety benefits.”
Updates to Road Notes, most recently Road Note 31: A Guide to the Structural Design of Surfaced Roads in Tropical and Sub-tropical Regions, are also ‘bringing climate change resilience into road surface construction’ she said.
Jamie Leather, Chief of Transport Sector Group, Asian Development Bank (ADB) reminded those attending that within two years, all multilateral development, including banks, must be aligned with the Paris Agreement, both on mitigation and adaptation.
“We’ve set a target of $100 billion climate related financial support by 2030 and transport is a critical part of that,” he said. “Last year transport accounted for 41% of ADB’s climate finance, primarily through more efficient urban public transport, rail systems, and maritime systems. So being able to move more people and freight with fewer emissions.”
On the adaptation side, he referred to HDM4, asking: “Can we manage road systems better, so they become climate resilient?”
Transport is an enabler of development, Jamie stated, but between poor rural access and poor urban access to transport, two billion people are cut off.
“Two billion people in Asia and the Pacific are not getting those accessibility options, to education, to employment, to health services. That’s what’s important, and the money to support the right types of investments, under a more programmatic approach, enables transport to give them that access,” he explained.
Binyam Reja, Global Practice Manager, World Bank outlined the World Bank’s three or five year Climate Change Action Plan, CCAP. There are five key transition areas in the CCAP: energy, transport, industry, agriculture and water.
Within these are three main elements:
- All World Bank operations, including both investment and policy loans, are to be allied to the Paris Agreement by July 2023.
- The World Bank is to produce a country climate and development report (CCDR) looking at the trade offs between development and climate in every country which receives funding, specifically LICs
- 35% of World Bank financing is to be put towards climate action.
In the transport sector, he said, the bank is already at 56%.
“We’re developing guidance notes and methods to screen or appraise projects to make sure they not only comply to the Paris Agreement, but also accelerate decarbonisation of the transport sector and make it more resilient.
In answer to a question from the audience about communicating research to support decision making most effectively, Anne Joselin explained that it’s a question of translation.
“We try to apply our research and to communicate it as tools and guidelines like the road notes,” she said. “We translate things into much more usable, small bites, out of academic language into everyday language that’s more accessible for policymakers.”
Ben Simmons summed up the discussion in response to a question about assessing projects, to ensure that they will work in the future and also meet the climate goals:
“The tools exist,” he said. “And the benefits seem to definitely outweigh the costs in terms of how to plan for future financing.”