Is the World Bank effectively supporting transport decarbonization?

The World Bank has acknowledged that sustainable transportation, including transport decarbonization, is a key pillar for addressing climate change. BIC has conducted a review of transportation projects with mitigation co-benefits to better understand how the Bank is or is not supporting transport decarbonization.

Globally, transportation is responsible for around 25 percent of carbon emissions, and emissions are expected to continue rising. This requires more robust solutions, including transport decarbonization, to help reduce emissions. The Bank has established initiatives such as Sustainable Mobility for All and the Global Facility to Decarbonize Transport to promote transport decarbonization, but this has not corresponded to an increase in funding or projects that support zero emission vehicles (ZEVs). The World Bank should support transport decarbonization through climate finance, which “refers to the share of financing dedicated to climate change adaptation and mitigation in operations financed by the World Bank.” The Bank has committed to increase its share of climate finance to 35 percent over the next five years. With this in mind, we are reviewing 13 transportation projects that Bank has labeled as having mitigation co-benefits from Fiscal Years (FY) 2018 through 2021 to assess how and whether the Bank is supporting transport decarbonization and promoting a modal shift from internal combustion engines (ICE) to ZEVs. The projects selected are also those with Country Climate and Development Reports (CCDRs). CCDRs are a tool the Bank is using to demonstrate the compatibility between economic growth and climate action. Although the projects were prepared and approved before the release of CCDRs, these reports show where the Bank has pointed out opportunities for vehicle electrification and transport decarbonization. 

One of our first findings concerns the Bank’s lackluster investment in transport decarbonization. In fact, the Bank is primarily funding projects that support business as usual. Of the 13 projects, only one (Morocco Urban Transport Program PforR) promoted the use of electric buses, whereas we identified two projects (Lima Metropolitano BRT North Extension and Karachi Mobility Project) with financing for a natural gas and diesel-hybrid bus fleet. The Bank’s decision to finance natural gas and diesel-hybrid bus fleets will contribute to carbon lock-in. Unfortunately, this is in keeping with the Bank’s view as made apparent in the Paris Alignment Transport Sector Note, which says “the risk of carbon lock-in is generally low for ICE-vehicles given the limited lifetime of the assets.” However, according to the Intergovernmental Panel on Climate Change (IPCC), we only have 27 years to cut global emissions by 80 to 97 percent, so locking in ICE vehicles is a major problem.

Another concerning trend we identified pertains to projects which aim to widen roads and increase their capacity. For example, the Western Economic Corridor and Regional Enhancement Program will upgrade the Jashore-Jhenaidah road section from two lanes to four. The widening of roads is particularly concerning because capacity expansion is not considered Paris-aligned. This type of project does nothing to mitigate transportation emissions and will likely increase emissions due to the higher number of vehicles on the road. 

The example above leads into the next set of findings, which are broadly related to the Bank’s approach to climate co-benefits. According to the Bank, “the climate finance reported covers only elements or proportions of projects that directly contribute to or promote adaptation and/or mitigation.” However, there is no transparency on the financing for each component and subcomponent with mitigation co-benefits. This is particularly necessary for projects that will increase greenhouse gas (GHG) emissions, such as the Enhancing Niger Northeastern Connectivity Project. The Bank assessed this project as having mitigation co-benefits, but it will produce 13,075 tons of CO2  per year. The project documents did not include an analysis of the climate co-benefits, so it is difficult to understand how the project is contributing to mitigation.

The final trend identified in these projects is a flawed and inconsistent approach for estimating GHG emissions reductions. Many of the projects are rural and inter-urban roads projects, and a common assumption the Bank makes is that improved and expanded roads will improve fuel efficiency, reduce congestion, and allow vehicles to travel at higher speeds, thus reducing GHG emissions. However, the Bank is not consistently applying this calculation across all projects. For instance, the Nepal Strategic Road Connectivity and Trade Improvement Project indicates GHG reductions will result from “reduced travel time and reduced congestion” as “road improvement works will help increase vehicle speeds and enhance fuel efficiency.” However, the Enhancing Niger Northeastern Connectivity Project project acknowledges the increase in emissions can be “attributed to the increase in travel speeds with the project, which in turn is due to the improved road conditions created by the project.” 

Based on our research, we have developed a set of recommendations for improving the credibility and quality of the Bank’s mitigation investments in the transport sector:

  1. Align with current and future work. Transportation projects should be developed in partnership with local communities, and they should be aligned with countries’ Nationally Determined Contributions (NDCs), Long-Term Strategies (LTS), and the Bank’s own commitments and diagnostics (e.g. Country Climate and Development Reports, Climate Change Action Plan).
  2. Increase transparency on mitigation accounting. The Bank should disclose how climate co-benefits are measured for each project or investment, including an analysis on scope 1, 2, and 3 GHG emissions. They should also disclose related documents that support the climate co-benefits and detail the amount of climate finance per component and subcomponent.
  3. Prioritize transport decarbonization. Bank investments should result in increased modes of travel that support the modal shift away from private vehicles, such as public and active transportation. It should be apparent that the Bank is prioritizing zero emission vehicles, including by publicly commiting to end all support for ICE vehicles and infrastructure required only for ICE vehicles such as petrol stations
  4. More robust and rigorous alternatives analysis. The alternatives analysis should follow best practices and consider all viable alternatives, such as electrification, especially for projects that are likely to generate a significant amount of GHG emissions.