The Trillion Dollar Question II: Tracking Investment Needs in Transport
This working paper seeks to elucidate the current estimates for transport infrastructure requirements, looking at a series of reports that consider projected global infrastructure needs in the coming few decades, and provide or quote a cost estimate for these needs.
- A low-carbon pathway for transport infrastructure development is likely to be more affordable than the current business-as-usual approach that prioritizes road infrastructure. The consolidated estimate for transport infrastructure annual investment needs is $2 trillion to achieve the 2 degree scenario and $2.3 trillion to achieve the 4 degree scenario. Pursuing a 4 degree scenario will end up costing much more if we take into account the external costs resulting from congestion, air quality, and urban sprawl.
- A low-carbon 2 degree scenario pathway falls within the existing financial resources invested in transport. This opens up an array of new options for prioritizing sustainable transport investment. Hence, a greener path toward transport infrastructure is not only attractive as a climate change mitigation strategy, but it is also feasible, that is, within the current financial flows invested in the transport sector. In addition, it has the potential to bring more overall prosperity through financial savings.
- Realizing a low-carbon scenario in the transport sector will thus be a matter of shifting portfolios of investments, projects, and policies toward sustainable options. Policymakers have a critical role to play in this effort. On a domestic level, policy leaders such as ministers of finance, ministers of transport, or directors of national development banks need to shift their involvement and portfolios in transport to support a low-carbon pathway. Multilateral development banks can do the same, setting trends on low-carbon portfolio allocation, incentivizing and supporting more sustainable decisions by national and local decision makers.
Investment in the transport sector has major economic and environmental impacts in both the developed and developing world. Currently, global capital investment in public and private transport is between $1.4 trillion and $2.1 trillion annually (Lefevre and Leipziger, 2014), but promoting a more sustainable low-carbon pathway for transport will depend on how future capital is invested.
This working paper seeks to elucidate the current estimates for transport infrastructure requirements, looking at a series of reports that consider projected global infrastructure needs in the coming few decades, and provide or quote a cost estimate for these needs. The reports we reviewed and analyzed come from the International Energy Agency, the Organisation for Economic Co-operation and Development, the World Economic Forum, the McKinsey Global Institute, the New Climate Economy, and the Institute for Transportation and Development Policy in association with the University of California, Davis. We evaluated the estimates under different climate scenarios and used the forecasts to assess a consolidated needs estimate, with up-to-date projections for every subsector for capital investment, at a global level.
The overall objective of this work is to compare “apples to apples” for current investment flows and investment needs, comparable to the global investment flows estimate of between $1.4 and $2.1 trillion annually. This paper projects a consolidated needs estimate of $2 trillion for a scenario of 2°C average global temperature increase by 2050 (2DS) and $2.3 trillion for a 4°C scenario (4DS). It concludes not only that there is a cost advantage in achieving the lower-carbon, 2°C scenario but also that a low-carbon pathway is attainable given current flows in transport investment.
If the world is to achieve a low-carbon pathway, local and national policymakers, who are able to frame the market around sustainable investment in transport, must play a pivotal role in diverting investment toward more sustainable modes of transport. Development banks can do the same, setting trends in low-carbon portfolio allocation, as well as incentivizing and supporting more sustainable decisions by national and local policymakers.