After a year under development, the Low Carbon Transport Technical Working Group has released the world’s first Low Carbon Transport Standard for climate bonds. The proposed standard will only certify investments in transport infrastructure that is compatible with a 2°C warming outcome. The Technical Working Group is convened under the auspices of the Climate Bonds Initiative and comprises 12 internationally recognized academics and experts.
The standard has now opened a 60-day period of public consultation, investor and industry comment. All interested parties are invited to submit comments to Justine Leigh-Bell
Transport is the second largest contributor to global GHG emissions. Istanbul, Jakarta, Mexico City, Rio de Janeiro and Los Angeles are amongst cities experiencing a traffic congestion crisis. In Mexico City, you can expect a 30-minute commute to take at least double that because of urban congestion. A further example…in Jakarta it takes 3 hours to get into the city from the airport, a trip that should only take 45 minutes by car.
Responsible for 23% of all energy-related CO2 emissions globally and 14% of total GHG emissions, transport systems have to change if low carbon climate economies are to emerge. We need to get people out of cars and freight off roads via low carbon climate resilient transport systems.
Heather Allen, Technical Working Group Member, Transport Research Laboratory, in forecasting future growth put forward this view:
“Transport demand world-wide is expected to more than double between now and 2050. Led by growth in Asia, in particular China and India, road and rail freight volumes alone are expected to increase by 230 per cent and 420 per cent, respectively”.
“It is crucial that low carbon transport, rather than fossil fuel based transport, is prioritised while recognising the special nature of the transport sector and the complexity of players across modes and functions. Green bonds can play a huge role in financing this growth – which is why it is really important to ensure that there are standard approaches for issuing green bonds for low carbon transport.”
According to the IEA, $15.7 trn in additional transport related investment will be required to 2050 to achieve the necessary decarbonisation of our transport systems. On average that’s $450bn per year, or a third of current annual global investments in land transport.
Current investment flows are insufficient to meet low carbon transport infrastructure needs. In addition, the choices made today will lock in governments to either high or low carbon transport futures. Investment must be scaled up and shifted towards low carbon transport infrastructure. Only ambitious mitigation will decouple transport emissions from economic growth.
The proposed criteria uses universal GHG emission thresholds defined on a per passenger-km (PPKM) for passenger transport, or a per tonne-km (PTKM) for freight transport basis. This allows all modes of transport to be compared and common thresholds to be set. The objective is to ensure that qualifying assets meet an emissions trajectory consistent with limiting global temperature rises to 2°C.
Cornie Huizenga, Technical Working Group Member and joint convener of SLoCaT Partnership, points to the significance of the new standard:
“There is an urgent need to cut global emissions and the transport sector presents one of the biggest opportunities to have an impact. But, how do we get momentum going on transport and climate change?”
“The Low Carbon Transport Climate Bonds Standard provides clear eligibility criteria for low carbon and climate resilient transport projects and it works as a mechanism to bring stakeholders together; it is exactly what’s needed to build momentum, increase and encourage investment in the low carbon transport sector”.
The basic requirement for a project to be certified under the Low Carbon Transport Climate Bonds Standard is that it meets the per passenger-km or the per tonne-km GHG emission thresholds. Projects likely to be eligible include:
The draft Low Carbon Transport criteria can be downloaded here.
The Low Carbon Land Transport discussion paper sets out the scale of the challenge, the role of climate bonds, key issues in developing criteria for low carbon transport and the suggested eligibility criteria. It can be downloaded here.