January 19, 2016

COP21 and rail’s role in a low-carbon future

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In 2016 governments from around the world will begin to outline their plans to achieve the ambitious carbon emissions reduction targets outlined in the COP21 Paris Agreement. Kevin Smith assesses what the agreement could mean for rail.

THE passage of the COP21 Paris agreement on December 12 2015, which commits 196 countries to limit global warming to well below 2°C, and ideally 1.5°C, was heralded around the world as a landmark achievement which may well secure the future of mankind. It is also set to have a major impact on future transport policy.

At current emissions levels, temperatures could rise by a devastating 5°C by the end of the century, which would result in many areas becoming uninhabitable. Transport is the second largest source of greenhouse gas emissions accounting for 23% of the world's CO2 emissions. And with this set to double by 2050 its share must be dramatically reduced to successfully combat climate change.

Sustainable transport infrastructure could then claim a major portion of the $US 100bn of annual finance that developed countries will provide to help developing countries achieve their emissions reductions targets.

With rail accounting for 9% of all transport and 3% of all transport greenhouse gas emissions, it has long been considered as a green mode of transport. Yet recognition at United Nations (UN) events of the role that rail can play in combating climate change has not always been forthcoming.

JPLoubinoux"At COP15 we were not recognised at all, at Rio+20 we found favour, and at COP21 we are seen as part of the solution, which is reflected in my role on a 12-member high-level advisory group on sustainable transport to the UN secretary general," says Mr Jean-Pierre Loubinoux, director general of the International Union of Railways (UIC). "Slowly but surely we have got there. Recognition comes from the UN, but also comes from financial institutions like the World Bank, the Asian Development Bank (ADB), and the European Investment Bank because they are supporting rail as a sustainable transport solution. From a policy standpoint and a financial standpoint, we have more clout than if we were just on our own."

Loubinoux refers to the figure of 2 billion to explain much of the current trends relating to climate change. He says that 2 billion people will move into urban areas in the next 20 years, including 1 billion in China, while he says 2 billion people currently have no access to accessible transport, 2 billion live on less than $US 1 a day, and the world's population is set to grow by 2 billion people in the next 20 years.

"Mobility is key to the development of economies and is set to increase as the world becomes more urbanised and globalised," he says. "It is critical then that we develop new modes that provide widespread access but do not increase emissions."

The UIC held a variety of events to highlight the role rail can play in delivering this low-carbon future in the run-up to the congress and during the event itself. Among them was the Train to Paris, a series of trains which carried COP21 delegates to Paris to highlight the use of sustainable transport, including one train which travelled to Paris from Beijing via Mongolia and Russia.

The UIC also held a ceremony on November 28 to mark the signing of the "Railway Climate Responsibility Pledge" by 66 railways from around the world. The pledge refers to the "Low Carbon Rail Transport Challenge" approved by UIC members at its 2014 general assembly, which calls for reducing current emissions by 50% and energy consumption by 50% by 2030 relative to a 1990 baseline, and energy consumption by 60% and emissions by 75% by 2050.

To achieve this goal, rather than competing with other modes, Loubinoux says transport modes should complement each other through a new approach known as the compliance optimal model.

"This is a new transport mix where every mode has a role to play," Loubinoux says. "We understand that rail is expensive and that it is not possible to deliver it everywhere. It also does not make sense when it only serves a few people. Instead it is based on smart and sustainable transport in cities using electric cars, with rail the backbone of inter-city and inter-regional transport of both people and goods. This is the best example to reduce carbon emissions and is designed to optimise the flow of people and freight, with road remaining important for close proximity journeys."

Loubinoux says rail's potential importance following COP21 is evident in the Organisation for Economic Cooperation and Development (OECD) projections that freight transport will increase by four times in the next 20 years, while there will be a 50% increase in public transport patronage. To deliver the infrastructure required to support this demand while reducing emissions in line with the less than
2°C pledge, the OECD envisages investments of around $US 11 trillion in transport, of which $US 5 trillion, or 40%, should be for rail. This compares with typically less than 5% of past budgets, which for Loubinoux is hugely encouraging for the rail industry.

However, he says the importance of financial institutions to rail's ultimate success cannot be understated. While the $US 100bn annual commitment may provide a boost in some developing areas, it cannot be relied on to deliver the level of sustainable transport required.

Ms Martha Lawrence, senior transport specialist with the World Bank's Transport and ICT Global Practice, says there is currently an infrastructure financing and funding gap in many countries that governments are not likely to meet, which is increasing the importance of institutions like the World Bank to identify solutions.

Lawrence refers to India where the Moving India to 2032 strategy forecasts that passenger demand will increase from 10 to 169 trillion passenger-km and freight demand will increase from 2 to 13 trillion tonne-km by 2032. Moving India to 2032 envisages increasing rail's share of freight from 33 to 50%. But with key corridors already choked with passenger trains, huge capacity expansion is needed.

The Dedicated Freight Corridor project, which the World Bank is supporting, is a step in the right direction. However, Lawrence argues that to achieve the desired level of success an expansion of the sources of funding and financing is required.

One solution for India that the World Bank is working on with the Ministry of Railways is establishing a Railways of India Development Fund which can attract financing from the private sector. In addition, the bank recently completed a study for China Railway on how to attract equity investment in the rail sector.

"This study demonstrated that a railway has to have a sufficient long-term revenue stream to be financially sustainable and attractive to outside investors," Lawrence says. "Adequate government policies, regulation and an enabling environment to encourage private investment are also important."

Equally ADB says that Asian governments are typically operating with budget deficits and are under pressure to allocate funds to a range of development areas for the country. As a result it expects governments to turn to three main financing models to support rail infrastructure, particularly new urban projects:

  • rail-property development model: which relies on transferring the increase in property value following the addition of transport access to finance further infrastructure development.
  • ring-fenced taxes: where the collected revenues are used for a particular purpose rather than going to central government, and
  • public-private partnerships (PPPs).

Specific plans

In light of the Paris agreement the impetus for governments to explore these funding methods to deliver sustainable transport will grow. 90% of governments identified public transport as an area to address in their Intended Nationally Declared Contributions (INDC) submitted ahead of the conference, with many including specific plans. However, there is then work to do to ensure that rail is a centrepiece of their respective strategies as they are developed in the coming months and years.

The World Bank, ADB, other regional development banks, and government bodies' apparent high regard for rail will have a major influence on these plans. "Expanding and improving railways continues to be one of the key components for mitigating greenhouse gas emissions, and is a foundational aspect for meeting the World Bank's commitments to increased climate finance," Lawrence says.

Similarly ADB requires all projects to comply with its Safeguard Policy, a cornerstone of efforts to promote environmental and social sustainability under Strategy 2020, its long-term strategic framework.

The banks' commitment to sustainable transport is similarly apparent in their joint pledge with six other multilateral development banks to provide $US 175bn in funding for sustainable transport projects at the Rio+20 conference in 2012. Of this $US 65bn has been committed so far, with the World Bank contributing $US 17bn, including $US 3.1bn for railways.

In addition, ADB says it will increase transport lending to 25% of its total by 2020, which coupled with plans to increase total annual lending to $US 20bn, means rail could account for $US 1.5bn per year by 2020. Other banks and lenders may now follow suit in light of the COP21 agreement.

But the banks alone are not enough to convince governments to follow a rail-based strategy. As a result Loubinoux also argues that it is critical that the rail industry remains active in promoting itself as a sustainable transport mode.

He says the UIC will do this by highlighting its benefits and the work that is going on to improve performance through clear examples - reducing energy consumption, improving braking technologies, or developing new engines - "to let everyone know that we mean business." 2016 then may be the year where rail's green credentials really come to the fore.

"This is not something where you wake up in the morning and can find a solution," Loubinoux says. "It is a long-term process of convincing people of your case. COP21 and the Paris agreement is an important step in that process."

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