Global South’s green mobility shift needs urgent funding support

Transportation, the second biggest contributor to greenhouse gas emissions with a 23% share at 8 gigatons in 2022, drew special attention when the world’s top leaders converged in Dubai for the 28th Conference of Parties climate summit (COP28) earlier this month.

Carbon emissions in the transport sector, which grew at an annual average rate of 1.7% between 1990-2022, must drop by over 3% each year till 2030 to align with the net zero emissions target by 2050, the International Energy Agency has noted.

Key ingredients for achieving this transition include stringent regulations, fiscal incentives, and substantial investment in infrastructure to enable low- and zero-emission vehicle operations. It is important to strategize on ways to tackle surface transport, which constitutes an overwhelming majority of the sector’s emissions. While all options are to be placed on the table, the emerging consensus is the large role that electric mobility can play in reducing transport emissions, complemented by renewable energy-driven charging infrastructure. 

However, the cost for this transition is colossal. Bloomberg New Energy Finance estimates that a staggering $194 trillion, or $7 trillion per annum, investment is needed to achieve net zero by 2050. The estimates suggest electric vehicles (EVs) alone need 47%, or $3.2 trillion a year, of this allocation. 

The Global South, standing at the cusp of a significant energy transition, is facing a massive challenge. With growing infrastructural needs, the transport sector is seeing rapid growth. The sector, however, faces a critical choice in its developmental pathways adopted toward addressing such infrastructural needs. 

For instance, India, where transport contributes to about 10% of total emissions, requires a $276 billion investment (8% of GDP) to achieve net zero by 2050 in transport emissions. Nigeria, a growing sub-Saharan economy, faces a similar challenge. The country where the transport sector contributes about 15% of total emissions needs a $21 billion cumulative investment (4% of GDP) to achieve a net zero target by 2060. This is along with investment needed in other sectors as the countries also have several development priorities to address simultaneously. 

Despite these challenges, the Global South has undertaken bold policy measures to address climate challenges. This is evident by fuel subsidy rollbacks seen in India in 2014 and in Nigeria in July 2023. Simultaneously, the two countries have tightened emission standards and have promoted EV manufacturing through targeted programs such as aggressive tax breaks and production-linked incentives. 

Such steps can open doors to becoming regional hubs for EV manufacturing, empowering neighboring countries to seek aggressive EV adoption targets. This also creates the perfect pathway for implementation of Article 10 of the Paris Agreement, which focuses on strengthening cooperative action on technology development and transfer to reduce emissions. 

However, constraints exist in adopting demand-side incentives due to limited funds and higher vehicle costs, demanding innovative financing solutions. This is evident in the limited fund allocation in India to encourage adoption (around $500 per vehicle on average) and the complete lack of such subsidies in Nigeria. Significant intervention is needed to overcome the challenge of high EV costs that go beyond nominal subsidies. Innovative financing that helps address multiple problems—particularly research to lower technology costs and funds to reduce lending and insurance risks—will have to be brought in. 

Here, market-based mechanisms, loss and damage funds, aided by international funding, can prove helpful but they rely on technical and financial support from the Global North. However, past experience has shown that such efforts have not been very successful in providing help to developing countries. This was particularly seen in the case of the Green Climate Fund, which drew flak for its slow and burdensome processes, eventually impacting the most vulnerable countries. 

Implementing Article 6 of the Paris Agreement could address some of these barriers by providing a framework for international cooperation in climate change mitigation and offering an opportunity for countries to work together towards more ambitious reduction targets and sustainable development goals.

It can help nations reduce the total cost of implementing nationally determined contributions by $250 billion a year in 2030, while facilitating the removal of around 5 gigatons of CO2 every year by 2030.

The challenge for decarbonization of transport lies not in finding solutions but in implementing them in the Global South without compromising their specific developmental needs. About 200 countries resolved to start reducing fossil fuel consumption at COP28, but it is essential to acknowledge the Global South’s needs and demonstrate the necessary commitment and support for a climate-friendly transition.

This article is published in collaboration with the OMI Foundation, established by Ola as an independent Trust in 2022 to foster sustainable, resilient, and equitable mobility systems.