The Top 5 Issues in LCFVs This Week: $3.6 Trillion in Opportunities for Climate-Smart Transport

Happy Thursday friends! Here’s my weekly take on the five most interesting developments in LCFV trends over the last week.

• The International Finance Corporation said this week that the Paris Agreement has opened up $23 trillion in opportunities for “climate-smart” investments in emerging markets between now and 2030, $3.6 trillion for transport alone.
• EPA released its annual fuel economy trends report, finding among other things that average new vehicle CO2 emissions are at a record low, and fuel economy is at a record high for model year (MY) 2015. The Agency says manufacturers are producing many vehicles today that can meet or exceed future CO2 emissions targets, which may militate against canceling or relaxing them.
• PricewaterhouseCoopers (PwC) said that in 2015, the world economy decarbonized at a record 2.8%. Carbon intensity between 2014-2015 decreased the most for China, U.S., UK, South Africa and Mexico. Will the U.S. stay on pace? I would say probably since natural gas for power generation was a huge driver for these decarbonization gains.
• In an effort to combat the worst smog seen in New Delhi in 17 years, authorities began revoking licenses for thousands of older diesel vehicles this week.
• And right in my very own backyard, traffic is getting bad in the Ft. Lauderdale-Miami metropolitan area. Government officials are going to keep letting it get bad in a bid to get people out of their cars. It’s called the “make them suffer” strategy.

1. International Finance Corporation (IFC): Climate Investment Opportunities Total $23 Trillion in Emerging Markets by 2030

A study released this week by IFC, a member of the World Bank Group, shows that Paris Agreement last year helped open up nearly $23 trillion in opportunities for climate-smart investments in emerging markets between now and 2030, including for renewable energy and transport. The bulk of growth in GHG emissions over the next 15 years is expected to come from emerging markets – which require $4 trillion per year to build and maintain critical infrastructure for development.

IFC notes how these rapidly growing middle-income nations respond to their infrastructure needs will directly affect whether the commitments in the Paris Agreement can be achieved. To explore how to unlock private sector finance for climate-smart investment, IFC assessed the national climate change  commitments and underlying policies in 21 emerging markets, representing almost 62% of the world’s population and 48% of global GHG emissions.

They identified sectors in each region where the potential for investment is greatest, shown in the figure below:

This includes:

• East Asia and the Pacific: green buildings—where China, Indonesia, the Philippines, and Vietnam show a climate-smart investment potential of $16 trillion.
• Latin America and the Caribbean offer the next largest opportunity—particularly in sustainable transportation, where the potential for investment in Argentina, Brazil, Colombia, and Mexico is about $2.6 trillion.
• South Asia: Opportunities are mostly seen in climate-resilient infrastructure, where $2.5 trillion of opportunities exist in India and Bangladesh.
• Sub-Saharan Africa represents a $783 billion opportunity—particularly for clean energy in Cote d’Ivoire, Kenya, Nigeria, and South Africa.
• Eastern Europe, with its biggest markets—Russia, Serbia, Turkey, and Ukraine—shows a combined investment potential of $665 billion, mostly in energy efficiency and new green buildings.
• Middle East and North Africa: the total climate-investment potential for Egypt, Jordan, and Morocco is estimated at $265 billion, over a third of which is for renewable-energy generation, while 55 percent ($146 billion) is for climate-smart buildings, transportation, and waste solutions.

2. EPA: CO2 and Fuel Economy Trends Report, 1975-2016

This past week, EPA released its annual fuel economy trends report, finding that average new vehicle CO2 emissions are at a record low, and fuel economy is at a record high for model year (MY) 2015. Read more about it here.

3. PricewaterhouseCoopers (PwC): The Low Carbon Economy Index 2016

In 2015, the world economy decarbonized at a record 2.8%. But, according to a report from PwC, this still falls far short of the rapid reductions needed to achieve the 2°C goal. PwC says 3% decarbonization is what’s required to meet Paris Agreement targets (1.5°C), and 6.5% to meet the 2°C goal (figure below).

In the lead up to the Paris Agreement in December 2015, PwC says carbon intensity fell by a record-breaking 2.8% (up from 2.7% in 2014). Some major emerging economies, including China, showed sharp reductions in carbon intensity last year. Moreover, global emissions were flat in 2015 while GDP grew by a respectable 3.1%. Coal consumption fell by 1.8%, with a switch to lower carbon gas (+1.7%) as well as oil (+1.9%). Wind and solar energy output grew at 17.4% and 32.6% last year, but are still tiny fractions of the whole energy system.

Governments have proposed a range of emissions targets with different baselines and target years. To gauge performance, PwC’s Low Carbon Economy Index (shown below) calculates the implied carbon intensity pathways and assesses their ambition on a comparable basis.

Most G20 countries’ targets will require a step change in effort to reduce their carbon intensity. However, only the EU, US and Japan are projected to be near the average intensity required by 2030 to limit warming to two degrees, according to PwC.

It will be interesting to see what the Index reflects next year. In a Trump world, will countries continue with their Paris Agreement commitments to decarbonize if the U.S. takes formal action to withdraw? For the countries already moving in that direction (some European countries, China), yes. But for laggards like Russia or Saudi Arabia? Questionable.

4. Reuters: New Delhi Targets Older Diesel Vehicles to Clear Up Choking Smog

In an effort to combat the worst smog seen in New Delhi in 17 years, authorities began revoking licenses for thousands of older diesel vehicles this week. The Delhi administration, according to Reuters, was ordered by India’s Supreme Court to report back with a plan to combat the pollution. Meantime, licenses given to diesel-powered vehicles more than 15 years old are being withdrawn, which would lead to the removal of 200,000 vehicles from the city’s roads, Delhi lieutenant governor Najeeb Jung’s office said.

Particulate matter (PM2.5) levels were above 700 in the city’s worst affected areas on Monday, according to the air quality index as monitored by the U.S. embassy. On Tuesday, the air quality index had dropped to 372 by around noon, but that was still in the highest alert “hazardous” zone which starts at 300, according to Reuters.

PM pollution is a huge and growing global problem (see post June 9, 2016 and see figure below), but also an opportunity for those companies producing cleaner fuels, biofuels, advanced alternative fuels, cleaner internal combustion engines and (eventually) zero emission vehicles.

Recall my comment on this issue last week: “The fact that air pollution is worsening, and that children will bear the brunt of those impacts, will no doubt put renewed energy and focus into policy measures to stop it. Some of those measures, as we have seen this year, have already focused on banning the car or limiting its use in city centers, improving walkability, increased support for public transport, etc.” (See posts e.g. Oct. 24, 2016; Oct. 13, 2016; Sept. 29, 2016; Sept. 27, 2016; Aug. 12, 2016.)

5. The Washington Post: One Way to Ease Traffic: Let It Get So Bad That Motorists Give Up

And right from my very own back yard here in south Florida comes a story I decided to include this week about the challenges faced by city governments responsible for managing traffic congestion, air pollution and how that intersects and conflicts with economic development. In this case, the story concerns the Ft. Lauderdale-Miami metropolitan area, where high-density housing is developing at a rapid pace without regard to the impact on traffic. Read more about it here.