The road transport sector is a linchpin of economic development, accounting for approximately 20% of global final energy consumption and a staggering 50% of oil demand in 2021, echoing numbers from 2000 despite growing transportation needs. As populations and incomes surge across a wider spectrum of nations, the demand for transport services is expected to climb, underscoring the necessity of decarbonization. The International Energy Agency’s (IEA) recent report delves into the trajectory of the road transport sector in major emerging economies—Brazil, China, India, Indonesia, Mexico, and South Africa. By 2021, these economies represented 27% of global road transport energy demand, with vehicle stocks escalating from 185 million in 2000 to nearly one billion in 2021, a fivefold increase compared to a 40% increase in the rest of the world during the same period.

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Road vehicle fleet, 2000-2021

In the IEA Stated Policies Scenario (STEPS), total road transport fuel consumption in these emerging economies is projected to reach 725 million tonnes of oil equivalent (Mtoe) by 2050, peaking around 2030 and then declining. However, in the Announced Pledges Scenario (APS), fuel consumption peaks at around 660 Mtoe by the end of this decade, with improvements in fuel economy, increased electricity use, and some hydrogen utilization driving consumption down to 500 Mtoe by 2050. Electricity constitutes over 40% of transport energy consumption as electric vehicle fleets grow, emphasizing the significance of decarbonizing power generation and modernizing grids. Globally, CO2 emissions from the road transport sector surged by nearly 40% between 2000 and 2021, with significant contributions from emerging economies, particularly India and China. In these nations, direct CO2 emissions from road transport exceeded 1.5 Gt CO2 in 2021, continuing to rise until the mid-2030s. The APS presents a more optimistic picture, with emissions peaking in the mid-2020s and dropping to under 0.6 Gt CO2 by 2050, propelled by carbon neutrality commitments from China and India. The ambitious APS policies could yield approximately 13 Gt CO2 in cumulative emissions savings in the road transport sector. By 2050, electric vehicles are poised to constitute over 70% of the total car stock in these economies, except Brazil, which will have a greater share of biofuel-powered vehicles. Direct emissions from cars could plummet to 140 Mt CO2 by 2050, an 80% reduction from 2021.

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Road transport fuel consumption by mode, 2021

However, the road freight sector confronts greater challenges in decarbonization, with demand surging due to economic expansion and population growth. Electric and fuel cell options aren’t universally available or cost-effective for freight. In both scenarios, emissions from trucks are expected to climb until the end of the decade, though the APS anticipates a decline from 565 Mt CO2 in 2021 to 400 Mt CO2 in 2050. Trucks remain the largest emitters in the transport sector, even in the more ambitious APS pathway.

Government intervention is critical in leading clean energy transitions in the road transport sector. Major emerging economies have a unique opportunity to leapfrog outdated transport models through specific policy interventions, enhanced decision-making processes, and empowering implementing agencies. The transition demands substantial national and international efforts to attract clean energy investments. In the STEPS, annual end-use investment in road transport should reach $110 billion in the second half of the 2020s and increase by 40% annually through 2050. The APS requires even greater investment, with annual figures reaching $150 billion between 2026 and 2030, rising to over $230 billion by 2050. This expansion necessitates significant national efforts to improve the investment environment for clean energy while increasing the availability of capital for low-carbon mobility in emerging economies.

The majority of APS investment occurs in China, but rapid growth is anticipated in India and Indonesia. Investments in electric vehicles need to reach $90 billion in 2026-2030 in the APS, with planned policies contributing to 80% of this investment. Energy efficiency spending needs to double toward 2030 in the APS but is unlikely to increase without further policy efforts. In the long term, electrification is poised to command an increasingly larger share of road transport investment as conventional internal combustion engine vehicles are phased out.

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Road transport CO2 emissions, 2000-2021

The transition also requires investments in public charging infrastructure and associated grids. Average annual spending on private EV chargers in major emerging economies must rise to nearly $40 billion in 2026-2030, a significant increase from the less than $1 billion spent annually in 2016-2021. Limited financing presents a substantial barrier to major road transport investments in emerging economies, driven by strained public sector budgets, lack of household capital, shallow banking systems, limited loan availability, and high capital costs. Addressing these financial challenges necessitates strengthening domestic banks household finances, removing market distortions, and targeting the use of state-owned enterprises to create demand. To overcome these financial obstacles and channel investments effectively, international finance instruments such as overseas development aid, climate finance, multilateral finance, and blended finance models, like the Just Energy Transition Partnerships with South Africa and Indonesia, can provide crucial support.

The road transport sector’s transformation requires a comprehensive understanding of the challenges and opportunities at hand. As the report illuminates, the road transport sector’s significance within economic development is undeniable, but it also poses formidable challenges in terms of energy consumption, carbon emissions, and pollution. With the road transport sector accounting for a substantial portion of global energy consumption and CO2 emissions, addressing its environmental impact is a pressing necessity, especially in light of climate change concerns and the global shift towards sustainable practices.

One of the central takeaways from the report is the growing demand for transport services across major emerging economies, fueled by increasing populations and incomes. This upward trajectory inevitably intensifies the need for energy and, subsequently, the urgency to transition towards more sustainable and low-carbon transport solutions. The analysis of the road transport sector’s evolution in countries like Brazil, China, India, Indonesia, Mexico, and South Africa underlines the sector’s undeniable expansion, both in terms of vehicle stock and energy demand. This is particularly striking when juxtaposed with a relatively modest increase in the rest of the world. Moreover, the projection of total road transport fuel consumption reaching 725 million tonnes of oil equivalent by 2050 in the Stated Policies Scenario raises critical concerns about energy sustainability and the need for targeted interventions to curb emissions.

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Investment in road transport, 2014-2021

The scenarios presented—Stated Policies and Announced Pledges—shed light on the potential paths for emissions reduction in the road transport sector. The Stated Policies Scenario outlines a trajectory in which energy consumption peaks around 2030 and then declines. In contrast, the Announced Pledges Scenario offers a more optimistic outlook, with fuel consumption peaking earlier, around the end of the 2020s, and subsequently experiencing a downward trend. The emphasis on decarbonization and the substantial reduction in emissions underscores the potential of policy-driven interventions to steer the road transport sector towards more sustainable practices. The APS not only highlights a more rapid decline in emissions but also emphasizes the critical role of electric vehicles in achieving these ambitious goals.

However, the journey towards decarbonization isn’t without its complexities, particularly in the road freight sector. Economic expansion and population growth drive an increase in demand for goods transport, posing challenges in terms of carbon emissions. The report’s insights into the difficulties in decarbonizing the road freight sector underscore the need for targeted and innovative solutions to tackle this specific challenge. The scenarios’ projections of emissions continuing to rise in the near term reflect the need for immediate and impactful interventions to address the freight sector’s emissions footprint.

At the heart of the report’s findings lies the pivotal role of government action in steering clean energy transitions in the road transport sector. The emphasis on implementing specific policy interventions, clarifying decision-making processes, and empowering relevant agencies highlights the importance of a proactive and holistic approach to achieving sustainability goals. The discussion surrounding investments in the road transport sector illuminates the financial barriers that impede progress. By identifying these barriers and proposing strategies to address them—ranging from strengthening domestic financial institutions to leveraging international finance instruments—the report provides a comprehensive roadmap to navigate the financial challenges inherent in the transition.

The complex interplay between economic growth, energy consumption, carbon emissions, and policy interventions underscores the multifaceted challenges and opportunities that lie ahead. From the growing demand for transport services to the imperative of decarbonization, the report offers valuable insights into shaping the road transport sector’s sustainable future. By emphasizing government leadership, innovative policy interventions, and financial mechanisms, the report provides a blueprint for major emerging economies to transition towards cleaner and more sustainable road transport systems. Ultimately, the road to decarbonization in the transport sector is paved with both challenges and promising solutions that require collaborative efforts and forward-thinking strategies to pave the way for a more sustainable future.

Reporting by Emad Martin