How can we explain the rise in transport emissions… and what can we do about it?

Greenhouse gas emissions from transport have more than doubled since 1970, and are now the second largest contributor to climate change. This trend shows no sign of abating: according to the Intergovernmental Panel on Climate Change (IPCC), without aggressive and sustained mitigation policies, transport emissions could increase at a faster rate than any other sector between now and 2050.

"Taking on transport-related carbon emissions has become an urgent priority in the race against climate change."

To improve our understanding of this issue, a new research paper from the Infrastructure Chief Economist's Office - Understanding Drivers of Decoupling of Global Transport CO2 Emissions from Economic Growth: Evidence from 145 Countries - addresses three important related policy questions.

Have any countries succeeded in growing their economy while stabilizing transport emissions?

Ideally, countries should be able to continue to grow while at the same time stabilizing and ultimately reducing transport CO2 emissions. This scenario is known as "decoupling". Of the 145 countries we studied, only 78 have successfully decoupled emissions and growth, and only 12 of them have seen a decrease in transport emissions.

The vast majority of countries that have achieved decoupling are in the high-income group. In fact, around 70% of high-income countries have achieved decoupling, whereas more than 70% of low- and middle-income countries have not yet done so. Among the countries that have been most successful in reducing transport-related carbon emissions are Finland, Germany, Japan, and Sweden.

In many developing countries, transport emissions are increasing at a much faster rate than GDP growth. Between 1990-2018, transport emissions grew six times as fast as GDP in Nepal, and twice as fast in Nigeria, Iran, Croatia, Guatemala, Iran, and Nigeria. and decoupling has only taken place as an unfortunate consequence of dire conflict situations. A few developing countries have observed a reduction in transport emissions, but that decline is typically the result of a conflict situation or other major shocks.

Is technology evolving fast enough to the soaring demand for transport?

Transport demand in developing countries is growing rapidly due to a combination of economic and demographic growth. In India, for instance, passenger traffic grew by 25% between 1990-2017, while freight volumes grew by 16%. The demand for transport is likely to keep rising as long as populations and economies continue to grow. Without taking into account any potential demand management policy, the main avenue for reducing emissions is innovation, which can help significantly reduce the climate impact of each passenger or ton of freight transported. But overall carbon emissions will only come down to the extent that technological change outpaces the growth in traffic flows.

Two types of technological change are relevant here. The first is that vehicles are switching from carbon-intensive fuels, like gasoline and diesel, to lower carbon forms of energy, like biofuels and electricity. The scale of this transition is still too modest to have any discernible impact in almost any country we studied. A notable exception is Sweden, where the share of non-fossil fuel in transport increased from 3% in 1990 to 24% in 2018. Albania, Finland, and Norway have also made significant strides in increasing the share of non-fossil fuels, going from less than 1% in 1990 to about 10% in 2018. Nevertheless, the bottom line is that gasoline and diesel are still the dominant fuels for transport, with renewable fuels and electricity accounting for no more than 10% of the global transport fuel mix as of 2018.

The second major development is that vehicle engines are becoming more fuel-efficient - thanks to governments tightening regulations and manufacturers improving engine design. This is having a more discernible impact, with the energy intensity of transport falling at an average of 1.4% per annum between 2000 and 2018 worldwide. Yet, despite this encouraging progress, innovation just cannot seem to keep up: improvements in the energy efficiency of vehicles at the global level have done no more than offset demographic growth, but has not been fast enough to offset the expansion in GDP per capita (see chart).

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Source: Understanding Drivers of Decoupling of Global Transport CO2 Emissions from Economic Growth: Evidence from 145 Countries

Why are some countries more successful than others at curbing transport emissions?

Statistical analysis can shed some light on which factors have the largest impact on emissions. Two types of drivers seem to be at play:

• Structural factors such as the degree of urbanization and the stage of economic development can significantly affect transport emissions. Curiously, as urbanization increases transport emissions intensity initially increases - perhaps due to rising motorization and congestion - but that beyond urbanization rates of around 60% carbon emissions intensity starts to fall - perhaps due to higher urban density and more efficient management of urban traffic systems. Transport emissions will also vary based on the nature of economic production. Transport emissions are also closely related to a country's economic vocation. In general, emissions are higher in countries that are focused on agriculture. Given that these structural factors are not under the immediate control of policy makers, they cannot be used as a lever to influence the trajectory of transport emissions.
  
• Transport policy is a significant driver, especially the price of transport fuels. As an example, a one-standard-deviation increase in diesel price is on average associated with a 3.8% reduction in per capita transport CO2 emissions. There is also evidence that efficient public transport systems and stricter regulations on fuel economy or tailpipe emissions can substantially reduce the climate footprint of transport.
  

In conclusion, while transport emission intensity has declined in most countries over the past three decades, economic and demographic growth have more than offset these reductions. If these patterns continue, technology alone will not be enough to address the steady rise in transport emissions and achieve the goals of the Paris Agreement. As powerful as it is, technology needs to be combined with more ambitious transport policies, including fuel pricing, fuel switching targets, energy efficiency regulations, and support for better public transport systems. Together, these tools will give countries significant leverage to decouple economic growth from transport emissions-and move toward a greener future.

#Infra4Dev is a blog series that showcase recent World Bank economic research to explore how Infrastructure is critical for development.

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Resources:

Research:Understanding Drivers of Decoupling of Global Transport CO2 Emissions from Economic Growth: Evidence from 145 Countries

Learn more at: World Bank Infrastructure

Video: WB Transport Decarbonization Investment Series