The Real Cost of Decarbonizing Transport
Analysis of the International Transport Forum’s Transport Outlook 2023
June 28, 2023
As highlighted by panelist Måns Nilsson, Executive Director of the Stockholm Environment Institute, during the first Freedom of Mobility Forum debate held on March 29, 2023, greenhouse gas (GHG) emissions from the transport sector continue to grow at a rapid pace and have risen by a massive 78% since 1990.(1) The International Transport Forum’s (ITF) Transport Outlook 2023 explores actionable ways the sector can cut carbon emissions between now and 2050.
Changing existing beliefs about the cost of decarbonizing transport.
As an autonomous organization, the ITF works on transport policies for its 64 member countries(2) across the globe to “foster a deeper understanding of the role of transport in economic growth, environmental sustainability and social inclusion.”
Its Transport Outlook 2023 publication looks at the effect of national decarbonization efforts to date (policies, national contributions, etc.) and compares the business-as-usual or Current Ambition scenario going forward against more aggressive sustainability targets for the transport sector which it defines as the High Ambition scenario.
Figure depicts ITF modeled estimates. Current Ambition and High Ambition refer to the two main policy scenarios modeled, which represent two levels of ambition for decarbonizing transport.
The aggressive targets set in the High Ambition scenario include providing alternatives to private motorized vehicles, enhancing public transport services, improving infrastructure for walking and cycling, and upgrading the efficiency of goods transportation. The solutions evaluated in the report are:
- Technological developments to replace internal combustion engine vehicles (ICE)
- Improved freight operations to reduce carbon intensity through the use of sustainable transportation modes
- Ending new sales of ICE vehicles not only for passenger vehicles but also road freight transport fleets
- Rollout of sustainable aviation fuels and uptake of zero-emission fuels for maritime shipping
What are the financial implications?
Under the Current Ambition scenario, the infrastructure investment requirement is estimated at a minimum 1.7% of global gross domestic product (GDP) annually through to 2050. By contrast, under the High Ambition scenario the investment requirement would be marginally less at 1.6%!(3) So, clearly, when it comes to decarbonizing transport, the more ambitious we are, the more efficient and cheaper it can be.
Why is the faster-paced, high ambition scenario cheaper?
- Creating sustainable transport infrastructure is more affordable than maintaining the current one. Global funding required for road maintenance is 5.2% less under the High Ambition scenario.(4)
- Reorganizing road planning shortens private trip distances. Long-term views of urban planning, such as the implementation of 15-minute cities, a sustainable city planning model (as previously featured on the Freedom of Mobility Forum website), are good examples.
- Building transport strategies with long-term vision leads to long-lasting frameworks. Investment based purely on predicted demand would only amplify the problems that current urban planning has caused. This could lead to decisions that provide only short-term financial gains while having a negative impact on transport systems for decades. Under the High Ambition scenario, the long-term vision promotes a progressive limitation of most CO2 emitting transportation modes. By contrast, the Current Ambition scenario still allows development of carbon-intensive modes for short-term gains, while implementing countermeasures such as carbon pricing, and envisioning carbon allowances!
The graph shows, based on the High Ambition path, that decarbonizing transport requires much more investment in rail, metro/light rail transit and bus/bus rapid transit infrastructures than the current path.
Advanced planning and tax reform will ensure sustainable transport can support infrastructure investment needs.
Fuel-related taxes will reduce significantly with efficiencies in ICE vehicles and the growing uptake of electric vehicles (EVs), while still representing an important revenue stream for governments. In 2019, vehicle ownership and usage were the largest source of tax revenue for EU Member States.
Under the Current Ambition scenario, future tax revenues related to transport would nearly halve by 2050.(5) This reduction increases to more than two-thirds over the same period under the High Ambition scenario. Anticipating the future is key.
The ITF report shows that fuel tax reform should be implemented to prevent this significant loss in income: early convergence to sustainable transport through fuel tax reform is a good way to re-gain revenue. This would make transport decarbonization profitable for many countries, including the OECD member countries.
The ITF Report also highlights that the economic benefits from the High Ambition scenario can further support the affordability of mobility for end-users. The ability to implement findings will of course depend on the economic situation, on specific regional differences and other factors. Nevertheless, analysis of both scenarios strongly suggests that, in addition to delivering sooner on our environmental targets, a more ambitious and forward-looking approach to decarbonization is also likely to be less costly.