The transportation sector accounts for 25% of global greenhouse gas emissions, yet receives a mere 3% of climate financing – a gap that will have increasingly grave consequences for developing countries. To generate comprehensive, sustainable solutions, the MobiliseYourCity initiative aims to support policy development and facilitate access to increased financing. AFD is a principal partner in backing urban planning bodies develop sustainable urban mobility policies.
In an interview for AFD, Sasank Vemuri, Global Coordinator at MYC Partnership, unpacks this innovative program to mobilize climate finance for urban mobility.
Can you give us an overview of the state of urban transport in South Asia, and the need for climate financing in the current context?
As with everything else, when we talk about this region, the state of urban transport in South Asia is a story of incredible scale, dynamism and diversity. A big part of the story is also about the challenges that accompany these generally positive attributes.
South Asia comprises about a quarter of the world’s population, or nearly two billion people, living together on about 3% of the earth’s landmass. It has a massive and growing population and comprises some of the world’s largest mega cities such as Karachi, Delhi and Dhaka, which also belong to the fastest growing conurbations in the world. The region is also home to a huge variety of cities, from the alpine Abbottabad in Pakistan to tropical Trincomalee in Sri Lanka.
Large cities, dense populations and rapid growth – regional GDP has been growing by 6% - demand efficient, safe and sustainable transport systems. But the prevailing transport systems struggle to keep up with immense demand. Many proposed solutions still fail to alleviate the pressing issues of transport such as congestion and air pollution, with the latter being responsible for more than 5 million deaths in the region in 2012 alone. Transport sector-related emissions in Asia are expected to strongly increase, and the continent is expected to account for 31% of global transport-related CO2 emissions.
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To keep up with the high demand of this rapidly growing region and tackle high levels of air pollution and congestion in urban areas, we need to propose sustainable alternatives to private vehicles. So, there is an immense need for investment in sustainable transport, and this is reflected in the Climate Finance portfolio. Transport plays a leading role in cutting CO2 emissions and improving air quality in cities and thus low-carbon transport is the second biggest sector, after energy. To address these challenges, we need to tap into every available source of funding, including climate finance.
What are the obstacles to securing these funds?
First, let’s define climate finance, a term which is often used but is nevertheless ambiguous. Narrowly defined, climate finance refers to all new or additional financial resources which support developing countries to keep up with the increasing costs of coping with climate change and to ensure that countries can make a sustainable transition.
More broadly defined, climate finance includes all resources that support either mitigation or adaptation. This includes financing from the European Investment Bank for example. By 2025, it says 50% of its finance will be dedicated to climate action. It also includes financing from Standard Chartered Bank, which states, “We recognize the role of the financial sector in achieving the 2015 Paris Agreement goals”, and finances solar plans or lends me money for an electric vehicle.
In the case of South Asia, cities will need to make the most of both the narrowly defined and the broadly defined versions of climate finance to bridge the large investment gap. There are three main challenges: a shortage of human capital with the knowledge of what’s available and how to access it; a lack of funding for the studies and proposals required; and institutional structures that stand in the way of cities gaining access to these funds.
How does MobiliseYourCity respond to these challenges? What sets it apart as a climate fund?
We work on building capacities and developing tools for cities. We are also funding Sustainable Urban Mobility Plans (SUMPs), National Urban Mobility Policies, and Investment Programmes (NUMPs) that can be used to prepare projects for finance. And we are increasingly working on the third topic. In general, climate finance can be delivered through local, national, regional, and international channels from a variety of sources. Public, private or blended funds can be loans, grants, equity or guarantees.
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Contrary to some beliefs, grant financing is only 5% of climate finance globally (with multilateral climate financing accounting for only 0.5%), and private investment constitutes 56% of the bulk of climate related finance. This shows how important it is for cities to create financially feasible projects that are based on sound financial and economic analysis and rigorous appraisal criteria in the preparation phase.
It can be difficult for local institutions to get an overview of the whole process and bear with the long, time consuming, complex and tedious process of application and project appraisal. Regarding the broad definition of climate finance, which mainly concerns the private sector, the big challenge lies in the typical risk profile of turning transport projects bankable and attracting climate finance. The MobiliseYourCity Secretariat is aiming at encouraging and equipping its member cities for these complicated processes with trainings, matchmaking and material on our knowledge platform. We also try to inform our member cities and the whole community about new opportunities and special tenders, as, for instance, the newly created City Climate Finance Gap Fund by the European Investment Bank, that was introduced in one of our latest trainings.
What's the future for MYC - and for financing sustainable transport?
The development of Sustainable Urban Mobility Plans (SUMPs), National Urban Mobility Policies and Investment Programmes (NUMPs) with our member cities, allows us to identify bankable, qualified and scalable projects for investment. The recently completed Philippian NUMP established that the implementation of its measures would lead to a saving of 15.01 - 27.13 MtCO2 over ten years. These are the kinds of numbers we look for to leverage investment.
The unique feature of MobiliseYourCity is the combination of our partners’ different strengths. AFD is very experienced in transport modelling and implementation of large-scale transport projects, whereas the GIZ is a pioneer in capacity building, reinforcing participatory processes and developing tool kits for local and regional governments. Another great advantage of our partnership is the global reach: our member cities span from Antofagasta to Abbottabad, and include partners in 32 countries in Asia, Latin America, Africa and East Europe. This allows us to connect cities and national governments to donors and financiers across a large network, and bring cities onto the radar of donors and banks or organizations that have the resources to support our members.
So, the future is an interesting one! Banks, funds and cities that announce commitments to a climate action compliant portfolio are shooting up like mushrooms – look at the Ville de Paris, the EBRD, the EIB and rapidly growing funds like the Green Climate Fund and the like. Gradually, the lines between finance, sustainable finance and climate finance will blur, with the trend going towards a more long-term-oriented, sustainable and ecological vision of our cities in general. In future, investors’ motivation will overlap with sustainable development goals, as they will become an essential part of project appraisal for all types of sectors, until a point where there will only be climate-compatible finance. Of course, this requires a high degree of political engagement.
At COP21, MobiliseYourCity started off with 15 partners. Five years later, we are at nearly 100. Only last month, our donors approved an extended strategy that will help cities implement selected pilot projects to deepen cooperation, knowledge exchange and expertise on sound and auspicious sustainable transport planning.
This project is carried out with the support of the European Union