Investment Implications of the Action Plan

1. Investment Implications of the Action Plan Cornie Huizenga CAI-Asia Climate Change Mitigation in the Transport Sector 24-25 May 2006 Manila, Philippines Sustainable Urban Mobility in Asia A CAI-Asia Program

2. Urban Development needs capital • Urban development and expansion of transport network systems require large amounts of funding • Additional required infrastructure for Asia for the next 5 years (2006-2010) need US$165 billion per annum, where US$37 billion is for roads and rail (ADB, JBIC, World Bank. 2005) • Investment implications of the Action Plan to be further detailed including costing of different components • In many cases investment needs can be realized by re-allocating already planned investments which would result in increased economic returns

3. Investing for sustainable development • Investments are required for short, medium and long-term. • Investments where GHG emissions are minimized, will also prevent economic damages through health impacts, congestion, and road accidents. • Key components of the policy to reduce GHG are also less costly to implement. Lloyd Wright Quito, Equador’s bus rapid transit system required only US$2 million/km for infrastructure costs.

4. Maximizing the economic benefits of transport investments toward reducing air pollution • Externalities of transport need to be understood and reflected in the incentives and disincentives used. • Limited financial returns often discourage the quick adoption of cleaner technologies (e.g. low sulfur fuels). • Promoting a willingness-to-pay attitude requires extensive awareness-raising that may increase consumer financing of policy measures and interventions. • Consider the use of market based instruments to pay for the measures required PRC recently modified its sales tax on light duty vehicles where cars with smaller engine displacement (and lower GHG emissions) are taxed lighter than those with larger engine displacements.

5. Au Ables, 2004 Need to address the informal transport sector • Informal sector services a large part of public transport • Time perspective of informal sector is limited • Internal cash flow is limited and informal transport sector does not have established links with external sources of capital • Absence of regulation and formal status of this sector make it difficult to develop integrated investment plans and strategies for the medium- and long-term

6. Develop dedicated funding • Availability of dedicated funds that support innovative policy approaches will facilitate additional investment generation. • Dedicated funds can address institutional, technological, and knowledge barriers and support pilot projects. • Dedicated funds may come from the following sources: • Earmarked special user charges (e.g. road user charge, fuel taxes, parking charges) • Linkages to GEF and CDM mechanisms • Adopting targets on urban development and transport improvement of development agencies (e.g. increasing modal share of public transport and NMT) as well as national and local governments • A dependency on dedicated funding can develop that prevents a wide-scale replication and dissemination of successful sustainable transport solutions

7. Asian Governments need to commit themselves financially • India’s recent National Urban Transport Policy formulated clear criteria for the support to be provided: • 50% of the cost of preparing comprehensive city transport plans and detailed project reports • Equity participation and/or viability gap funding up to 20% • 50% project development cost for those involving public-private partnerships (counterpart funds from city development authority) • Other Asian governments need to follow example of Indian governments and set out financing arrangements

8. Private sector contribution • Private sector will have a large share in providing implementation investments; • Public-private partnerships can be expected to increase with respect to providing urban public transport • Transparent regulations and long-term policies can make it more attractive for the private sector to engage and provide assurances that private sector projects get done on time and in the right manner

9. Role of development community • Contribute towards increased knowledge base for decision makers to properly evaluate the GHG implications of related projects • Funding for awareness raising, capacity building, technical expertise, and network building • Close monitoring and dissemination of results of pilot projects can allow developing countries and emerging Asia to optimize their funding and catalyze future investments on areas that are left behind • Policy dialogue with Asian countries and cities • Develop and implement additional funding modalities enabling local governments to borrow directly • Increase funding for implementation of Action Plan components, following requests from developing countries