How to finance sustainable mobility in the Global South?

The image is from Dar Es Salaam, Tanzania. It served as the icon for the 2024 edition of the Transforming Transportation (TT) conference, held in March each year at the World Bank in Washington DC, in collaboration with the World Resources Institute. TT brings together experts and decision-makers from around the world to join forces for the massive transformation of transportation and mobility in the Global South, which is essential to fulfill the Paris Climate Agreement and achieve the 17 Sustainable Development Goals by 2030.

A picture of 'development'

The image reflects several generations of post-war development efforts. The paved road people are crossing towards the market represents the first generation. Back then, development aid was understood as helping to replicate developed economies. And roads meant economic growth and progress. This mindset still thrives, albeit with some modifications. The bollards near the center can represent second generation. Roads create traffic that is all too often very dangerous. Traffic fatalities are now simply the leading cause of death for older children and adolescents in the global south, with over one million people killed per year (according to available figures). Donor countries began to recognize the downsides of 'development' and tried to patch them up. The latest generation is represented on the left. This is Dar Es Salaam's so-called Bus Rapid Transit (BRT) system. 

BRT and electric buses

BRT is modern buses in dedicated lanes with convenient stations for access and transfer, like tramlines without rails. BRT is currently gaining momentum in many cities in the Global South, often with support of international development banks and donors. Some BRT systems carry more people than rail lines and are much cheaper to build.

Unfortunately, however, progress is often very slow as projects run into problems. Among the most typical ones are funding challenges, failing local decision-making power, lack of coordination, and not least conflicts with the countless small private paratransit operators who provide most of the public transportation and who see their livelihoods threatened when BRT systems are squeezed in. Line 1 in Dar Es Salaam was conceived in 2002, but the first bus didn't start operating until 2016. Lines 5 and 6 are still in the planning stages and all buses are still running on traditional diesel for now. 

Meanwhile, there are other great initiatives in the Global South addressing the transition to electric buses. India is one of the lighthouses. The success story includes large-scale procurement of thousands of buses for several cities at once, which brought the price down significantly. Now the World Bank is trying to scale up this approach even further - across more low- and middle-income countries (LMICs) in the Global South. But will it succeed? Can the power for the buses be both stable and green? And will China take all the orders? These were some of the questions discussed at TT. 

Urbanization, CO2 emissions, and investment needs skyrocketing.

In any case, new smart buses can unfortunately only provide a limited part of the solution to the traffic challenges in the Global South. A city like Dar Es Salaam is growing by something like 360,000 people a year. Not to mention the approximately 900 million new inhabitants that Africa's cities are expected to house by 2050. Where will they live and how will they move around without polluting the air, escalating traffic accidents and building up more greenhouse gas emissions? And how will they connect when the often poor roads are flooded by downpours or storm surges? Similar challenges can be seen in Asia, Oceania and Latin America.  And in many places, there is a lack of strategies, plans and, not least, money to enable sustainable solutions.

Huge sums of money abound when various experts, development banks, etc. try to calculate how much is needed to invest in sustainable and climate-resilient transport systems in LMIC countries in the global south if the world's climate and sustainability goals are to be achieved. 'Trillions of US dollars' are needed, we hear many times at  TT. Far more than the LMIC country governments can raise on their own. But also far more than what can be leveraged through traditional development aid, of which transportation today only accounts for a small share. 

Climate control 

Some are pinning their hopes on the targeted climate finance of USD 100 billion per year that High-income countries promised LMICs in the Paris Agreement and which, with unfortunate delays, should be on their way now. Some of this funding could greatly benefit if invested in in efficient, decarbonized transport and climate-resilient infrastructure. However, it is quite clear that even those amounts would not suffice alone. Meanwhile, politicians from developing countries such as Patrick Achi, former Prime Minister of the Ivory Coast, politely raise their voices on TT when the concrete investment needs here and now are raised: "Where is the climate money? Where is the climate money? Where is the climate money?" Achi didn't really get a clear answer, no matter which terms of the question he stressed. 

Private and innovative financing

On the other hand, there was a strong consensus that the only thing that will really work is to raise private capital to implement the transition. This is where the really big funds are to be found. And one thing is certain: the market is enormous when it comes to providing 5-6 billion people with sustainable and climate-resilient mobility. Therefore, it simply has to be made into a good business case for capital owners in both the South and the North to invest and innovate in green mobility in LMICs.

This could be in areas such as electrification of trucks, minibuses, motorcycles, tuk-tuks, jeepneys, etc. but also efficient public transport systems such as BRT and metro, safe bicycle routes, carpooling and sharing solutions, modern logistics, climate-resilient and sustainable infrastructure, as well as smart IT platforms that can integrate the many different transportation solutions that today are often completely uncoordinated. Of course, much of this will require both a transparent and stable investment environment and effective coherent public planning across sectors in both urban and rural areas. Both are in distinct short supply in the Global South. So, will the private money stay away?

'Blended sweets'

Well, maybe not. Some private investors are already active, and a few of them attended TT to share their ambitions and readiness for the green mobility field, which is a good sign. Moreover, there are several ways forward through so-called innovative and blended finance, i.e. combinations of several new cash flows. A striking proposal of the former kind was presented by the conference's only Danish speaker, Camilla Jain Holtse from Maersk: A global CO2 tax on shipping. In addition to paying for shipping's own green transition, the tax could raise significant funds for climate efforts in LMIC countries. Best of all, the proposal has the support of the global maritime sector itself.   

Perhaps the most important point made at the TT conference was that both development aid and loans should be seen more as levers that help hedge risks for private investors, rather than as the solution itself.  If High-Income countries, development banks and local funders lead the way with support for planning, institution building and initial investments that remove some of the uncertainty that prevents the private sector from investing in green transportation solutions, then hopefully the billions (and perhaps trillions) can come into play faster. Perhaps in time to curb the worst climate and sustainability impacts of the rampant and predominantly fossil-fueled motorization that many MLIC’s are about to enter or already experiencing in these critical years.