By Abbas Nazil
Transport is a major contributor to global carbon emissions, accounting for 24 percent of greenhouse gas emissions, with nearly 75 percent coming from road vehicles.
To achieve net-zero emissions by 2050, the International Energy Agency states that transport emissions must decrease by 50 percent by 2035.
This requires a significant increase in electric vehicles, particularly buses, and a fundamental shift in mobility patterns toward public transport, walking, and cycling.
However, these solutions come with high costs, especially for low- and middle-income countries, which host 82 percent of the global population and face financial constraints in adopting sustainable transport systems.
Climate finance has the potential to bridge this gap, but current funding levels are insufficient.
The transport sector presently receives $334 billion annually from public and private sources, yet this amount must increase to $2.7 trillion by 2050 to meet climate targets.
In developing countries, excluding China, an estimated $575 billion per year will be needed by 2030 to transition toward greener transport.
The recently agreed-upon climate finance target at COP29—$300 billion per year across all sectors—falls significantly short of the transport sector’s requirements.
Despite political and economic challenges, multilateral development banks have expanded their climate finance contributions, reaching $125 billion in 2023, with 16 percent of these funds allocated to transport.
Sustainable transport financing is taking various forms, including blended finance, green bonds, and concessional loans.
Blended finance, which combines private and development bank funding to lower risks, has been instrumental in projects such as Bogotá’s electric bus fleet expansion.
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Similarly, Tanzania’s Bus Rapid Transit (BRT) system in Dar es Salaam and Senegal’s all-electric BRT project have benefited from multilateral development bank investments and guarantees to attract private capital.
India is also making strides by procuring 10,000 electric buses with a payment security mechanism that mitigates financial risks.
Additionally, adaptation projects, such as Comoros’ road rehabilitation efforts to counter sea erosion, highlight the role of grant funding in climate resilience.
However, low- and middle-income countries face significant challenges in accessing climate finance.
Weak regulatory frameworks, lack of project preparation capacity, and high upfront costs for sustainable transport solutions make investment risky.
Informal public transport systems in many African nations lack organization, complicating access to credit.
Poor coordination among transport, finance, and climate ministries further hampers the development of bankable projects.
Additionally, high debt burdens make concessional loans and grants critical for these countries, as standard financing methods could worsen their financial situations.
Overcoming these barriers requires a multi-stakeholder approach.
Governments must implement policies supporting public transport expansion, electric vehicle adoption, and financial mechanisms that attract private sector investment.
Developing national payment security systems, improving regulatory frameworks, and facilitating pooled procurement of electric buses can make sustainable transport more financially viable.
Despite the COP29 climate finance shortfall and declining global political support, sectoral efforts must continue to ensure that climate investments drive not only emissions reductions but also economic growth, improved mobility, and greater social equity.
