Move comes as OECD body warns on rising global transport emissions under current policies.
A new public-private coalition has been launched to generate the increased investment levels needed to reduce greenhouse gas emissions from UK road use over the next decade.
Decarbonising road transport in the UK will require “huge capital investment”, said Rachel Maclean, the UK Minister Responsible for the Future of Transport. Speaking at the launch of the Green Finance Institute’s Coalition for the Decarbonisation of Road Transport (CDRT), she added that such financing would be possible only through private and public organisations working together.
Analysis undertaken by the Green Finance Institute, with support from KPMG’s Future Mobility Team, estimates that more than £150 billion of gross capital investment may be required to decarbonise the UK road transport sector between 2021 and 2030, requiring a significant acceleration in the rate of investment into zero-carbon transport solutions.
The figure is based on the investment needed to deliver the 11 million electric vehicles needed on UK roads by 2030 and install the more than 6 million charge points to enable electric vehicle adoption. However, it is not one single sum of money that is required, says Lauren Pamma, Programme Director at CDRT. “Instead, it’s a complex range of different investment opportunities and financial mechanisms across a number of different asset classes with varying risk and return characteristics that will appeal to different investors. Due to the scale of investment required, a significant amount will need to come from the private sector.”
The Coalition, which comprises representatives from finance, transport, energy and infrastructure organisations, aims to accelerate the deployment of capital to decarbonisation initiatives via the creation of innovative financing mechanisms. Member organisations include the Global Infrastructure Investor Alliance, Lloyds Banking Group, Lombard Odier and NatWest Group.
The Coalition is supported by HM Treasury, the Department for Business, Energy and Industrial Strategy and the City of London Corporation with the aim of identifying government policy, technology and financial pathways enabling the UK’s transition to a green economy.
Transport is the largest contributor to UK greenhouse gas emissions, responsible for 24% of total emissions in 2019, of which 19% can be attributed to road transport. The Coalition, also supported by the Future Mobility Team at KPMG and funded by Quadrature Climate Foundation, is initially focusing on a review of the barriers and enablers to investment across three core areas: purchase and leasing, charging infrastructure, and battery technology commercialisation.
It will co-design and ultimately launch a series of new financial products, non-financial enablers and policy recommendations to help channel investment across the piece.
“Financial innovation is absolutely critical and will help consumers to switch from the internal combustion engine to electric vehicles,” said Fiona Howarth, CEO of Octopus Electric Vehicles, a member of the Coalition. More than £20 billion investment in infrastructure is required for electric vehicle transition, added Kevin Chowings, Managing Director, Natwest Future Mobility Group.
Investment in transport decarbonisation would be an important post-Covid recovery opportunity, said Maclean.
Recovery from the pandemic offers “a unique opportunity to reshape the transport sector”, said Young Tae Kim, Secretary-General of the International Transport Forum (ITF), an OECD intergovernmental organisation. “Yet we must not lose sight of our vision for transport’s future: a transport system that is sustainable, and sustainable in a broad economic, social and environmental sense. For one thing, climate change will not be stopped without decarbonising transport, and that transformation must now happen.”
The ITF’s Transport Outlook 2021, released on 17 May, warns that global traffic emissions could rise by 16% by 2050, based on current policies. But it also said transport emissions can be reduced by more than 70% by 2050 through enabling policies, including better cross-sector collaboration with the energy, trade and tourism sectors and the setting by governments of ambitious new climate targets through Nationally Determined Contributions under the Paris Agreement.