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Implementing Clean

Energy Transitions

Focus on road transport in

emerging economies

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies that

will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

13 association

countries and beyond.

This publication and any

map included herein are

without prejudice to the

status of or sovereignty over

any territory, to the

delimitation of international

frontiers and boundaries and

to the name of any territory,

city or area.

Source: IEA.

International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

Argentina

Brazil

China

Egypt

India

Indonesia

Kenya

Morocco

Senegal

Singapore

South Africa

Thailand

Ukraine

INTERNATIONAL ENERGY

AGENCY

Implementing Clean Energy Transitions Abstract

Focus on road transport in emerging economies

PAGE | 3

I EA. CC BY 4.0.

Abstract

This report assesses the impact of the road transport sector on energy demand,

CO2 emissions and air pollution in several selected major emerging economies

over the coming decades under several IEA modelling scenarios. Most notably

the Announced Pledges Scenario (APS) aims to show to what extent announced

ambitions and targets, including the most recent ones, are on the path to deliver

emissions reductions required to achieve net zero emissions by 2050.

Bringing about a road transport decarbonisation pathway in line with the APS

in the selected major emerging economies - Brazil, People’s Republic of

China, India, Indonesia, Mexico and South Africa - will require significant

enhancement of existing policies and the introduction of new innovative policies

and measures in each of selected countries. Our report sets out six policy

areas critical to the achievement of the road transport transitions and a series of

recommendations for strengthening financing for the sector.

Importantly, the report provides detailed reference to a wide range of

policy measures and good practice already in place in many major emerging

economies elsewhere to facilitate knowledge sharing among countries. It also

places a special emphasis on the road transport sectors of India and Indonesia.

These countries are IEA partners in their respective regions and benefit

from an enhanced programme of work.

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ImplementingCleanEnergyTransitionsFocusonroadtransportinemergingeconomiesINTERNATIONALENERGYAGENCYTheIEAexaminestheIEAmemberIEAassociationfullspectrumcountries:countries:ofenergyissuesincludingoil,gasandAustraliaArgentinacoalsupplyandAustriaBrazildemand,renewableBelgiumChinaenergytechnologies,CanadaEgyptelectricitymarkets,CzechRepublicIndiaenergyefficiency,DenmarkIndonesiaaccesstoenergy,EstoniaKenyademandsideFinlandMoroccomanagementandFranceSenegalmuchmore.ThroughGermanySingaporeitswork,theIEAGreeceSouthAfricaadvocatespoliciesthatHungaryThailandwillenhancetheIrelandUkrainereliability,affordabilityItalyandsustainabilityofJapanenergyinitsKorea31membercountries,Lithuania13associationLuxembourgcountriesandbeyond.MexicoNetherlandsThispublicationandanyNewZealandmapincludedhereinareNorwaywithoutprejudicetothePolandstatusoforsovereigntyoverPortugalanyterritory,totheSlovakRepublicdelimitationofinternationalSpainfrontiersandboundariesandSwedentothenameofanyterritory,Switzerlandcityorarea.RepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEASource:IEA.InternationalEnergyAgencyWebsite:www.iea.orgImplementingCleanEnergyTransitionsAbstractFocusonroadtransportinemergingeconomiesAbstractThisreportassessestheimpactoftheroadtransportsectoronenergydemand,CO2emissionsandairpollutioninseveralselectedmajoremergingeconomiesoverthecomingdecadesunderseveralIEAmodellingscenarios.MostnotablytheAnnouncedPledgesScenario(APS)aimstoshowtowhatextentannouncedambitionsandtargets,includingthemostrecentones,areonthepathtodeliveremissionsreductionsrequiredtoachievenetzeroemissionsby2050.BringingaboutaroadtransportdecarbonisationpathwayinlinewiththeAPSintheselectedmajoremergingeconomies-Brazil,People’sRepublicofChina,India,Indonesia,MexicoandSouthAfrica-willrequiresignificantenhancementofexistingpoliciesandtheintroductionofnewinnovativepoliciesandmeasuresineachofselectedcountries.Ourreportsetsoutsixpolicyareascriticaltotheachievementoftheroadtransporttransitionsandaseriesofrecommendationsforstrengtheningfinancingforthesector.Importantly,thereportprovidesdetailedreferencetoawiderangeofpolicymeasuresandgoodpracticealreadyinplaceinmanymajoremergingeconomieselsewheretofacilitateknowledgesharingamongcountries.ItalsoplacesaspecialemphasisontheroadtransportsectorsofIndiaandIndonesia.ThesecountriesareIEApartnersintheirrespectiveregionsandbenefitfromanenhancedprogrammeofwork.PAGE3IEA.CCBY4.0.ImplementingCleanEnergyTransitionsAcknowledgementsFocusonroadtransportinemergingeconomiesAcknowledgementsImplementingCleanEnergyTransitions:FocusonroadtransportinemergingeconomiesisareportpreparedbytheEnergyandEnvironmentDivisionoftheInternationalEnergyAgency(IEA).DavidFischer,ProjectCo-ordinatorandClimatePolicyAnalyst,andKieranMcNamara,ActingHeadoftheEnvironmentandClimateChangeUnit,ledandco-ordinatedthepublication.TheauthorsareDavidFischer,KieranMcNamara,GabrielSaive,XiushanChen,InsaHandschuch,BrittaLabuhn,TheresaGebhardtandBihterGülsoy.TomHowesandSaraMoarifprovidedvaluablefeedback,supportandoverallguidancetotheproject.ThereportbenefitedfromawealthofdataandinsightsprovidedfromacrosstheIEA,inparticulartheEnergyDemandOutlookDivision,theEnergyTechnologyPolicyDivision,theEnergySupplyandInvestmentOutlookDivision,theEnergyEfficiencyDivisionandtheRenewableEnergyDivision.TheauthorswouldliketothankespeciallythefollowingcurrentandformerIEAcolleagues:OskarasAlsauskas,StéphanieBouckaert,ElizabethConnelly,LauraCozzi,DavideD’Ambrosio,TanguydeBienassis,AraceliFernandezPales,EmmaGordon,TimurGuel,MathildeHuismans,MartinKueppers,ShaneMcDonagh,JeremyMoorhouse,LeonardoPaoli,ApostolosPetropoulos,RyszardPospiech,AlisonPridmore,AdityaRamjiandJacobTeter.TheauthorswouldalsoliketothanktheInternationalInstituteforAppliedSystemsAnalysis,inparticularJensBorken-Kleefeld,forprovidingdataonairqualityandhealthco-benefitsofroadtransporttransitions.SincerethanksalsotoJean-ChristianBrunkeforexpertadviceandfeedbackonthemarginalabatementcostcurves.ValuablecontributionstoandfeedbackonthereportwerealsoprovidedbyotherIEAcolleagues:EdithBayer,AlejandraBernal,NatalieKauf,RebeccaMcKimm,HugoSalamancaandCorneliaSchenk.Theauthorsarealsogratefulforvaluablecommentsandfeedbackfromexternalexperts,including:KoichiroAikawa(Honda),PierpaoloCazzola(UniversityofCalifornia,Davis),NikolasHill(Ricardo),WangMeng(Sina),HidenoriMoriya(Toyota),AndiNovianto(GovernmentofIndonesia),KentaroOe(JapanMinistryofForeignAffairs),RizkyAdityaPutra(ASEANCentreforEnergy),SaonRay(IndianCouncilforResearchonInternationalEconomicRelations),SimonPAGE4IEA.CCBY4.0.ImplementingCleanEnergyTransitionsAcknowledgementsFocusonroadtransportinemergingeconomiesRoberts(C40Cities),YinLe(EnergyFoundationChina)andLuluXue(WorldResourcesInstitute).SincerethanksgotoCarenBrown,whoeditedthereport.TheauthorswouldalsoliketothanktheIEACommunicationsandDigitalOffice,particularlyCurtisBrainard,JonCuster,AstridDumond,IsabelleNonain-Semelin,ClaraVallois,GregoryViscusi,andThereseWalsh,forprovidingvaluableeditorialandpublishingsupport.ThisanalysiswascarriedoutaspartoftheIEACleanEnergyTransitionsProgramme.Theindividualsandorganisationsthatcontributedtothisreportarenotresponsibleforanyopinionorjudgementitcontains.AnyerrororomissionisthesoleresponsibilityoftheIEA.Forquestionsandcomments,pleasecontacttheEnergyandEnvironmentDivisionatclimate.change@iea.org.PAGE5IEA.CCBY4.0.ImplementingCleanEnergyTransitionsTableofcontentsFocusonroadtransportinemergingeconomiesTableofcontentsExecutivesummary.................................................................................................................8Chapter1.Roadtransporttoday..........................................................................................14Compositionofroadtransport..................................................................................................15Structuraldriversofchange.....................................................................................................18DevelopmentofCO2emissions..............................................................................................20Roadtransportinvestment.......................................................................................................23IEAscenarios...........................................................................................................................25Chapter2.Roadtransportatacrossroads.........................................................................27Changesinfleetsandfuels......................................................................................................27CO2emissionspathways.........................................................................................................31Policiesforroadtransportdecarbonisation..............................................................................38Cost-effectiveabatementsolutions..........................................................................................43Additionalairqualityco-benefitsofaroadtransporttransition...............................................51Chapter3.Implementingroadtransporttransitions.............................................................53Structuralbarrierstoenhancedpolicyambition.......................................................................53Financingthetransition...........................................................................................................55Keyroadtransportpolicyinterventions....................................................................................64RecommendationsforIndiaandIndonesia............................................................................80Annex....................................................................................................................................85Abbreviationsandacronyms....................................................................................................85Units.........................................................................................................................................85ListoffiguresFigure1.1Roadvehiclefleet,2000-2021.................................................................................15Figure1.2Roadvehiclefleetbymodeandshareofelectricvehiclesinselectedmajoremergingeconomies,2000-2021.............................................................................16Figure1.3Ageprofileandgeographicdistributionofroadtransportvehicles,2021................17Figure1.4Roadtransportfuelconsumptionbymode,2021....................................................18Figure1.5GDPpercapitaandgrowthrate,2021.....................................................................19Figure1.6Annualpopulationgrowthandurbanisationrate,2000-2021..................................20Figure1.7EvolutionofroadtransportCO2emissionsbymode,2000-2021............................21Figure1.8RoadtransportCO2emissions,2000-2021.............................................................22Figure1.9GrowthofCO2emissionsincertainenergysectorsfortheselectedmajoremergingeconomies,2000-2021.............................................................................................22Figure1.10Investmentinroadtransport,2014-2021.................................................................24PAGE6IEA.CCBY4.0.ImplementingCleanEnergyTransitionsTableofcontentsFocusonroadtransportinemergingeconomiesFigure2.1RoadvehiclefleetandshareofEVsintotalroadvehiclefleetintheselectedmajoremergingeconomies,intheStatedPoliciesScenarioandtheAnnouncedPledgesFigure2.2Scenario,2021-2050................................................................................................29Figure2.3Figure2.4RoadtransportfuelconsumptionintheselectedmajoremergingeconomiesintheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2000-2050.........30Figure2.5Figure2.6RoadtransportCO2emissionsintheAnnouncedPledgesScenarioversustheFigure2.7StatedPoliciesScenario,2000-2050.......................................................................31Figure2.8Figure2.9RoadtransportCO2emissionsintheselectedmajoremergingeconomiesbymodeFigure2.10intheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2000-2050................................................................................................33Figure2.11Figure3.1RoadtransportCO2emissionsinIndiaandIndonesiabymodeintheAnnouncedPledgesScenario,2021-2050..................................................................................35Figure3.2EnablersofroadtransportdecarbonisationinIndia,AnnouncedPledgesScenarioversusStatedPoliciesScenario,2010-2050...........................................................35Effectivecarbonratesinroadtransport,2021.........................................................41SelectedCO2abatementcostsinIndia’sroadtransportsectorintheAnnouncedPledgesScenario,2022-2050..................................................................................45SelectedCO2abatementcostsinIndonesia’sroadtransportsectorintheAnnouncedPledgesScenario,2022-2050...............................................................47MarginalabatementcostfortheswitchofoneconventionalcartoabatteryelectricpowertrainovertimeinIndiaandIndonesiaintheAnnouncedPledgesScenario,2022-2050................................................................................................................50ChangeinNOxemissionsrelatedtoroadtransportby2050intheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,relativeto2021...........................52Roadtransportinvestmentcomparedtotheiraverageannualinvestmentneeds,2016-2021,andintheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2026-2030................................................................................................56Indicatorsofcostofcapitalfordebt(left)andequity(right),2016and2020...........61ListofboxesBox1.1Fossilfuelsubsidiesandenergytransitions.............................................................24Box2.1Powersectordecarbonisationintheselectedemergingeconomies.......................33Box2.2TransportemissionsinIndonesia............................................................................36Box2.3CriticalmineralsandtheEVsupplychain................................................................48Box3.1MobilisingfinanceforpublictransportinfrastructureinEMDEs...............................68Box3.2Fueleconomystandardsfortwo-andthree-wheelers.............................................74ListoftablesTable2.1Roadtransportpolicylandscapeintheselectedmajoremergingeconomies.........39Table2.2Fueleconomystandardsintheselectedmajoremergingeconomies.....................40Table3.1Summaryofkeyroadtransportinterventionareasandmeasuresfortheselectedmajoremergingeconomies......................................................................................64PAGE7IEA.CCBY4.0.ImplementingCleanEnergyTransitionsExecutivesummaryFocusonroadtransportinemergingeconomiesExecutivesummaryTheroadtransportsectorisacornerstoneofrobusteconomicdevelopment.ItIEA.CCBY4.0.accountedforaround20%ofglobalfinalenergyconsumptionandabout50%ofoildemandin2021,asimilarshareto2000,despiterisingdemandfortransportservices.Factorssuchastransportactivity,shiftsbetweentransportmodes,energyefficiency,andthecarboncontentoffuelsshapeenergydemandandCO2emissionsandpollutionfromthesector.Aspopulationsandincomesgrowacrossawiderrangeofcountries,demandfortransportservicesisprojectedtorise,alongwiththeneedtodecarbonise.Oneoftheobjectivesofthisreportistobroadenunderstandingofwheretheroadtransportsectorisheadinginmajoremergingeconomies,particularlyinlightofrecentnetzeropledges.Themajoremergingeconomiesanalysedinthisreport–Brazil,People’sRepublicofChina,India,Indonesia,MexicoandSouthAfrica–representedaround14%ofglobalroadtransportenergydemandin2000;by2021,thissharewas27%.Theirtotalvehiclestockwasaround185millionin2000;atend-2021itwasaboutonebillion,afivefoldincrease.Thiscomparestoanincreaseofaround40%intherestoftheworldoverthesameperiod.Totalroadtransportfuelconsumptionintheseemergingeconomiesisprojectedtoriseto725milliontonnesofoilequivalent(Mtoe)by2050intheIEA’sStatedPoliciesScenario(STEPS),withfossilfuelusepeakingaround2030anddecliningthereafter.Bycontrast,intheAnnouncedPledgesScenario(APS),fuelconsumptionintheroadtransportsectorinmajoremergingeconomiespeaksataround660Mtoebytheendofthisdecade.Fueleconomyimprovements,alongwithgreaterelectricityuse,andtoamuchlesserextenthydrogenuse,seesfuelconsumptiondeclineto500Mtoeby2050,despiterisingvehiclefleetnumbers.Electricityaccountsformorethan40%oftransportenergyconsumptionastheelectricvehiclesfleetexpands,highlightingtheimportanceofdecarbonisinggenerationandmodernisingelectricitygrids.GlobalCO2emissionsintheroadtransportsectorincreasedbyalmost40%between2000and2021toalmost6GtCO2.Greateremissionsfromlight-dutyvehiclesandtrucksintheselectedemergingeconomiesaccountedforaround60%ofthisincrease,withIndiaandChinamakingupforthelargestshare.Inthesecountries,directCO2emissionsfromtheroadtransportsectorreachedmorethan1.5GtCO2in2021andcontinuetoriseuntilmid-2030toapeakofaround1.8GtCO2intheSTEPS,decreasingthereafterto1.6GtCO2.1InIndiaand1AllCO2numbersquotedinthisreportaredirectCO2emissionsexceptwhereotherwisestated.PAGE8ImplementingCleanEnergyTransitionsExecutivesummaryFocusonroadtransportinemergingeconomiesBrazil,emissionsdecreaseonlyafter2040,whileothercountrieseitherseetheirroadtransport-relatedemissionsstabilisingcloserto2050,inthecaseofIndonesia,orcontinuingtorise,inthecasesofMexicoandSouthAfrica.Incontrast,intheAPS,emissionsfromroadtransportintheselectedemergingeconomiespeakbythemid-2020sanddroptolessthan0.6GtCO2by2050.Two-thirdsofthisdecreasecomesfromChinaandIndia,whichaimtoachievecarbonneutralitybeforeorby2060and2070respectively.TheambitiouspoliciesintheAPScouldgeneratearound13GtCO2incumulativeemissionssavingsintheroadtransportsector.IntheAPS,atleast70%ofthetotalcarstockiselectricinallmajoremergingeconomiesby2050,exceptforBrazilwithitsgreatershareofbiofuels-poweredvehicles.Directemissionsfromcarsinselectedmajoremergingeconomiescoulddropto140MtCO2by2050,downabout80%from2021.Theroadfreightsectorfacesmoredifficultydecarbonising.Notonlywilleconomicexpansionandpopulationgrowthboostdemandforgoodstransport,butelectricorfuelcelloptionsarenotalwaysavailableorcost-effective.InbothIEAscenarios,emissionsfromtrucksareprojectedtocontinueupwardsuntiltheendofthisdecade.IntheAPS,however,themajoremergingeconomiesseeafallfrom565MtCO2in2021to400MtCO2in2050.Eveninthismoreambitiouspathway,trucksremainbyfarthelargestemitterinthetransportsector.Governmentsplayavitalroleinleadingcleanenergytransitionsintheroadtransportsector.Majoremergingeconomieshaveanopportunitytoleap-frogoutdatedexistingroadtransportmodelsbyimplementingspecifictransportpolicyinterventions,bybringinggreaterclaritytothepolicydecision-makingprocessandbyempoweringimplementingagencies.TheinvestmentandfinancechallengeIntheSTEPS,averageannualend-useinvestmentinroadtransportneedstoreachUSD110billioninthesecondhalfofthe2020swithanadditional40%neededannuallythrough2050.IntheAPS,annualinvestmentwillneedtoreachUSD150billionbetween2026and2030,risingtooverUSD230billionintheperiodto2050.Thisexpansionrequiressubstantialnationaleffortstoimprovetheenvironmentforcleanenergyinvestment,aswellasinternationaleffortstoincreaseavailabilityofcapitalforlow-carbonmobilityinemergingeconomies.MostoftheinvestmentintheAPSoccursinChina,butinvestmentissettogrowmorerapidlyinothermajoremergingeconomies,notablyinIndiaandIndonesia.AnnualspendingonEVsinthemajoremergingeconomiesneedstoincreasetoUSD90billionin2026-2030intheAPS,andplannedpolicies–iffullyimplemented–woulddeliver80%ofthisinvestment.Awidergapexistsinenergyefficiencyspending,whichneedstodoubletowards2030intheAPS,butlooksPAGE9IEA.CCBY4.0.ImplementingCleanEnergyTransitionsExecutivesummaryFocusonroadtransportinemergingeconomiessettoremainatcurrentlevelswithoutfurtherpolicyefforts.Inthelongterm,spendingonelectrificationissettoaccountforanincreasinglylargershareofinvestmentinroadtransport,whileinvestmentinenergyefficiencydeclinesintheAPSasconventionalinternalcombustionenginevehiclesareprogressivelysubstitutedwithelectric.Theroadtransporttransitionalsorequiresinvestmentinpubliccharginginfrastructureandassociatedgrids.Inaddition,averageannualspendingonprivateEVchargersintheselectedemergingeconomiesneedstoincreasetonearlyUSD40billionin2026-2030intheAPS,comparedtolessthanUSD1.0billionannuallyin2016-2021.Limitedfinancingpresentsasignificantbarrierformajorroadtransportinvestmentsinemergingeconomies.Strainedpublicsectorbudgets,lackofhouseholdcapital,shallowbankingsystems,limitedavailabilityofloans,andhighcapitalcostsallhamperdevelopmentofthesector.Strengtheningdomesticbanksandhouseholdfinances,removingmarketdistortions,andtargeteduseofstate-ownedenterprisestocreatedemandarekeyelementstoaddressfinancialobstaclesandtochannelinvestments.Internationalfinanceinstrumentssuchasoverseasdevelopmentaid,climatefinance,multilateralfinance,aswellasblendedfinance(suchastheJustEnergyTransitionPartnershipswithSouthAfricaandIndonesia),canalsohelpovercomefinancingbarriers.ConclusionandrecommendationsGovernmentshavealargepotentialtoolboxathandtodecarbonisetheroadtransportsector,andamixoftargets,policiesandregulationswillbeneededtoalignroadtransportinmajoremergingeconomiesalonganAPSpathway.Thesepolicieswillshapethetechnologicaldevelopmentofdifferentpowertrainsandtransportmodesandwillinfluenceconsumerpurchasingdecisions.Strengthentransportpolicymaking:Arobustroadtransporttransitionrequiresanoverarchingtransportdecarbonisationstrategywithinanationaltransportplan.Developingacomprehensivenationaltransportplanshouldinvolveallkeystakeholderstogarneracceptance.SouthAfrica'sGreenTransportStrategy,forexample,aimstobuildasafe,efficient,reliable,andaffordabletransportsystemthatsupportssustainablesocio-economicdevelopment.Inmanymajoremergingeconomies,severalinstitutionsandagencieshaverolesinthetransportsector.Transitionsintheroadtransportsectorcouldalsobereinforcedbyintroducingcarbonpricing,complementedbytargetedsupportforvulnerableandlow-incomehouseholds.PAGE10IEA.CCBY4.0.ImplementingCleanEnergyTransitionsExecutivesummaryFocusonroadtransportinemergingeconomiesPromotepublictransportanddemandmanagement:Policiesthatincentiviseshiftsfromprivatelyownedvehiclestopublictransport,inbothurbanandruralareas,areneededtoreducedemandforcarusewhileencouragingsafermobilityandreducingcongestion.TheCuritibabusrapidtransitsysteminBrazilandtheTransJakartabusrapidtransitsysteminIndonesiaaresuccessfulexamples.Electrificationofbusesandtrainsacceleratesthedecarbonisationofpublictransportwhilereducingairpollution.Publicprocurementrequirementsforzero-emissionvehicles,subsidiesforthepurchaseofelectricbuses,andCO2standardscansupportthisshift.Publictransportmeasuresshouldbesupportedwithinitiativestoencourageandenableactivemobilitysuchascycling,walkingorotherinnovativemeasurestolimituseofprivatecartransportforshort-distancetrips.Colombia,forexample,adoptedalawin2016thatstronglyincentivisesemployeestocycletoworkwhileMexicoCityaddedaround50kmofbikelanesduringthepandemicandplanstoincreasethelengthofitsbikelanesto600kmby2024.Acceleratetheelectrificationofcarsandtwo-/three-wheelers:WhileEVandbatterycostshavedeclined,EVsremainmuchmoreexpensivethancomparableinternalcombustionsengine(ICE)models.Agrowingnumberofmajoremergingeconomiesareintroducingorexpandingpurchasesubsidies:IndiaextendeditsflagshipFAMEprogrammein2019,whileChinaandIndonesiareducedpurchasetaxesforEVs.Measuressuchasspeciallanes,parkingspaces,andzero-emissionszoneshavebeenintroducedinChinaandpartsofIndiatobolsterdemandforEVswithoutimposingsignificantcostonthestate.FleetmandatescanstimulatedemandforEVs:theGovernmentofDelhiproposedadraftregulationinJuly2022requiringdeliveryandtransportationbusinessestoelectrifysomeoftheirfleet,withrequiredsharesincreasingovertime.Prioritisinganearlytransitionoffleetvehiclescanalsohelpestablishasecond-handmarketforEVs,whichinturnwouldmakeelectriccarsmoreaffordableformuchofthepopulation.Policymakersneedtoensurethatsufficient,reliable,andeasy-to-usechargingisavailable.Mostchargingtakesplaceathomeandatworkplaces,andmanycountriesoffersubsidiesortaxincentivestoencourageprivateinvestment.India,forexample,integratedatargetofupto20%ofparkingspaceforEVchargingfacilitiesinitsElectricVehicleSupplyEquipmentbuildingcode.Inmanyemergingeconomies,batteryswappingallowsthesaleofEVswithoutbatteries,loweringupfrontpurchasecosts.Enhancefueleconomystandards:Fueleconomystandards,ifsetatsufficientlystringentlevelsandregularlyupdated,canpushmanufacturerstoproducezero-andlow-emissionsvehiclesinsteadoffocusingonimprovingthefuelefficiencyofICEs.StandardsmustbePAGE11IEA.CCBY4.0.ImplementingCleanEnergyTransitionsExecutivesummaryFocusonroadtransportinemergingeconomiesdevelopedandappliedwithinarobustregulatoryframework,ideallybasedontestingproceduresthatreflectsreal-worlddrivingconditions,suchastheWorldwideHarmonisedLightVehicleTestProcedure.Zero-emissionstruckregulationsandstandardscanalsoincentivisemarketdemandforelectricandfuelcelltrucks,whilebindingtargetssuchasCalifornia'sAdvancedCleanTruckRegulationcanprovideimportantsignalstothemarket.Publicandprivatesectorresearchanddevelopment(R&D)investmentandmarketregulationscanbecombinedwithdomestic,regional,orglobalpartnershipprogrammestocreateanecosystemofregulators,manufacturers,andresearchorganisationstoaccelerateinnovationinthetruckingsector.MeasurestoimproveflowandlogisticscanoptimiseroadfreighttransportusageandmitigatesomeofitsCO2emissions.BrazilusesitsPortoLogsystemtocoordinatethearrivalofshipsandtrucksatterminals,minimisingwaitingtimesforboth.Boosttheuptakeofsustainablebiofuels:Blendingmandatesremaintheprincipalpolicyinstrumenttoacceleratebiofueluse.Indonesiasupportsitsblendingmandateswithsubsidiestooffsetpricedifferencesbetweenbiodieselandconventionaldiesel.Governmentprogrammesandindustryinnovationwillbeneededtostrengthensupplychains,seekoutnewsourcesofsupply,anddevelopnewproductiontechniques.FinanceandinvestmentEmergingmarketanddevelopingeconomiesrelytoalargeextentonpublicfinancetofundthetransition.Thesesourcesincludepublicinstitutions,suchasdevelopmentbanksandinfrastructurefunds,whichplayimportantrolesbyextendingcreditlinesandguaranteestofinancialinstitutionsandcompanies,reducingrisksandimprovingthebankabilityofprojects.Inthetransportsector,mostfutureinvestmentsinend-usesby2030,notablyEVsandEV-relatedenergyefficiency,areexpectedtocomefromprivatesources.Publicfinancingcontinuestohelpde-riskinvestmentandattractprivateinvestment.Italsosupportsmarketuptakethroughpublicprocurementandprovisionofgrantsorguaranteestoconsumersandinfrastructure,suchasEVchargingstationsandmasstransit.Indonesia,forexample,hasidentifiedpublic-privatepartnershipsasakeymechanismtoencourageprivateinvestmenttomeetsomeofitsfundingneedstoaddressinfrastructuregaps.Thecountryhasestablishedacomprehensivepolicyframeworkandgovernancestructure,supportedbyseveralpublicfinancinginstruments,aswellasadedicatedunitforpublic-privatepartnershipmanagementwithintheMinistryofFinance.PAGE12IEA.CCBY4.0.ImplementingCleanEnergyTransitionsExecutivesummaryFocusonroadtransportinemergingeconomiesTaxonomiescanstrengthensustainablefinanceframeworks.China,forexample,issuedaGreenBondEndorsedProjectsCataloguetoguidefinancialinstitutionsandcorporateinstitutionsontheissuanceofgreenbonds.Developingcorporatebondmarketstomakedebtfinancemoreaccessibletotheprivatesectorcanplayanimportantroleinreducingthecostofcapitalforcleanenergytransitionprojects.Measuressuchasconsumercarloanstopurchasezero-emissionvehiclesalsomakeadifference.SouthAfricaestablishedtheClimateFinanceFacility,whichisaspecialisedlendingfacilitytoincreaseprivateinvestmentinclimate-relatedinfrastructureprojects.Strategicmandatesoncleanenergytransitionsforinternationalfinancialinstitutions(e.g.,multilateraldevelopmentbanks)andgreateruseofblendedfinancetoleverageprivatecapitalcanbeusedtolowercostsandsupportavailabilityoflonger-termcapital.TheSouthAfricaandIndonesiaJustEnergyTransitionPartnershipsareexamplesofinternationalco-operationinfinancingcleanenergytransitionsinemergingeconomieswhichcouldbeextendedtothetransportsector.PAGE13IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesChapter1.RoadtransporttodayRoadtransportaccountedforaround20%ofglobalfinalenergyconsumptionandabout50%ofglobaloildemandin2021.Thisisasimilarshareto2000,despiterisingdemandfortransportservicesandvehiclenumbers.Theselectedmajoremergingeconomiesanalysedinthisreport–Brazil,People’sRepublicofChina(“China”hereafter),India,Indonesia,MexicoandSouthAfrica2–representedaround14%ofglobalroadtransportenergydemandin2000.In2021,thisshareincreasedto27%.Demandforthetransportofpeopleandgoodsincreasedsignificantlyfrom2000to2021owingtopopulationgrowthandeconomicexpansion.Thistrendwasmorepronouncedinsomeoftheselectedemergingeconomies,notablyChina,IndiaandIndonesia.In2021,Covid-19pandemicrestrictionswereliftedandpassengerandgoodsmovementsrecoveredfollowingadeclinein2020.Asaresult,globaldirectCO2emissionsowingtofossilfuelcombustioninthetransportsectorincreasedby8%,tonearly7.7GtCO2,comparedto7.1GtCO2in2020.Transportdemandisprojectedtoclimbincomingyearsasdemandforgoodsandmovementincreases.MeetingtheIEAAnnouncedPledgesScenario(APS)however,willrequiretransportsectoremissionstofallbyalmost50%,toabout4GtCO2inannualemissionsby2030.Morethan95%ofCO2emissionsintheroadtransportsectorin2021wereattributabletooilconsumption.Roadtransportisthelargestconsumeroffossilfuelsofanysector.Itaccountsforaround30%ofglobalCO2emissionsfromend‐usesectors.TheselectedemergingeconomiesmadeuparoundaquarterofglobalCO2emissionsfromroadtransportin2021comparedto14%in2000.Inabsoluteterms,directCO2emissionsfromroadtransportinthesemajoremergingeconomiesalmosttripledfrom2000to2021,whereasglobalCO2emissionsfromthesectorincreasedbyaround38%.WhilepercapitaCO2emissionsfromroadtransportarerisinginthesemajoremergingeconomies,theyremainwellbelowthoseofadvancedeconomies,forexample:0.6tCO2inChina,0.2tCO2inIndiaand0.7tCO2inSouthAfricacomparedto2.1tCO2percapitainadvancedeconomies.32Whenthisreportreferstoselectedmajoremergingeconomiesorselectedemergingeconomies,italwayspertainstotheIEA.CCBY4.0.analysedcountriesofBrazil,China,India,Indonesia,MexicoandSouthAfrica.3AdvancedeconomiesrefertotheOrganisationforEconomicCo-operationandDevelopmentregionalgroupingandBulgaria,Croatia,Cyprus,MaltaandRomania.PAGE14ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesProjectedgrowthinpopulation,economicactivityandtransportdemanddemonstratesthatenergytransitionsintheroadtransportsectorwillrequirearangeofgovernmentdecisionsbefore2030tosimultaneouslymeettransportdemandandcleanenergyobjectives.Thischaptersetsoutthestatusoftheroadtransportsectorintheselectedemergingeconomies.Itassessestrendsintermsofthecompositionofthevehiclefleet,thestructuralfactorsunderlyingthosechanges,theimplicationsofgrowthinvehiclenumbersintermsofCO2emissionsandhowthesectorhasevolvedintermsofinvestmentsince2000.ThechaptercloseswithabriefdescriptionoftheIEAWorldEnergyOutlookscenariosutilisedinthereport.CompositionofroadtransportIn2021,therewerearound2.3billionvehicles(includingtwo-andthree-wheelers)ontheworld’sroads.Cars4accountedforthebulkoftheglobalvehiclestock,witharound1.4billionvehiclescomparedtoaround800milliontwodecadespreviously.Incontrast,intheselectedemergingeconomies,two-andthree-wheelersoutnumberedcars.Figure1.1Roadvehiclefleet,2000-20211200Roadvehiclefleet(millions)1000SouthIEA.CCBY4.0.Africa800MexicoIndonesia600IndiaChina400Brazil200IEA.CCBY4.0.020052010201520212000Thenumberofvehiclesinthesemajoremergingeconomieshasincreasedsubstantiallyoverthelasttwodecades.In2000,theirtotalvehiclestockwasaround185million.Attheendof2021,itwasabout1billion,oranearfivefoldincrease.Thiscomparestoanincreaseof42%intherestoftheworldoverthe4Exceptwhereotherwiseindicated,inthisreport,thecategory“cars”consistsofpersonallight-dutyvehiclesandlightcommercialvehicles,while“trucks”consistsofmedium-freighttrucksandheavy-freighttrucks.PAGE15ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiessameperiod.Chinaaccountedfor52%oftheincrease,followedbyIndia(29%)andIndonesia(11%).In2000,thevehiclestockper1000inhabitantsinadvancedeconomieswasaround460vehicles;by2021ithadincreasedto480vehiclesper1000inhabitants.InChina,thevehiclestockper1000inhabitantswasaround65vehiclesin2000;in2021,ithadincreasedtomorethan350vehiclesper1000inhabitants.Thisisabovetheglobalaverageofaround290vehiclesper1000inhabitants,butbelowthatofadvancedeconomies.Figure1.2Roadvehiclefleetbymodeandshareofelectricvehiclesinselectedmajoremergingeconomies,2000-2021Roadvehiclefleet(millions)12002005201020156%2/3-wheelers10005%BusesIEA.CCBY4.0.4%Trucks8003%Cars6002%ShareofEVs4001%2000%IEA.CCBY4.0.202102000Therateofincreaseinvehiclenumbersvariedacrossmodesofroadtransportandamongtheselectedemergingeconomiessince2000.Cars(almostsevenfoldincrease)andtwo-andthree-wheelers(morethanthreefoldincrease)hadthegreatestratesofincreaseinnumbers,supportedbystrongeconomicgrowthandtheresultantincreaseindemandformobility.Thenumberoftruckshasalsorosesignificantly,byalmost300%,asincomesroseanddemandforgoodsincreasedamongthesemajoremergingeconomies.In2000,thetwo-andthree-wheelers(61%)andcars(32%)subsectorsaccountedformostofthevehiclesonroads.Whiletheycontinuetorepresentthebulkofvehicles,in2021,theirshareschanged.Theshareoftwo-andthree-wheelersdeclinedto50%ofallvehicles,andtheshareofcarsto45%,reflectingincreasedincomeandrelatedchangesinconsumerpreferences.TheshareofEVsinthevehiclefleetincreasedgreatlyoverthepasttwodecades.In2010,thesharewaslessthan1%.Theshareincreasedto5%in2021andtoalmost50millionvehiclesintheselectedemergingeconomies.However,thisPAGE16ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesincreaseishighlyconcentrated:ChinaaccountedforthehighestshareofEVs(48millionvehiclesin2021),over80%ofwhichweretwo-andthree-wheelers.Figure1.3Ageprofileandgeographicdistributionofroadtransportvehicles,2021Roadvehiclefleet(millions)CarsTrucks2/3-wheelers800606005050060040400400303002020020010100000Brazil<10<1010-20>20years10-20>20<1010-20>20yearsyearsyearsyearsyearsyearsyearsyearsIndonesiaChinaIndiaMexicoSouthAfricaRestoftheworldIEA.CCBY4.0.Source:AdaptedandupdatedfromIEA(2020),EnergyTechnologyPerspectives2020.Bytheendof2021,theglobalpassengercarfleetwasabout1.2billionvehicles,withadvancedeconomiesaccountingforalmost70%ofthetotal.Broadlyspeaking,thefleetsintheselectedemergingeconomiesareyoungerthaninmanyothercountries,inparticularadvancedeconomies.Since2010,therehasbeenadramaticshiftinthelocationofwherenewcarsaresold.ChinaovertooktheEuropeanandNorthAmericanmarketsintheearly2010s.Theresultisthatthecarfleetintheselectedemergingeconomiesisnewerthaninadvancedones.Around70%ofthecarsonChina’sroadsarelessthanadecadeold.Trucksandbusesfollowthesamegeneralpattern.However,theshiftsinnewsalesofthesemodesareevenstarker.Mosttruckssoldinthepastdecadewereinthesemajoremergingeconomies,asweretwo-thirdsofbuses.PAGE17IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesFigure1.4Roadtransportfuelconsumptionbymode,2021100%9%FinalfuelconsumptionAnnualgrowth90%8%80%7%2/3-wheelersBuses70%6%TrucksCars60%Annualgrowth5%(2000-2021,rightaxis)50%4%IEA.CCBY4.0.40%30%3%20%2%10%1%0%BrazilChinaIndiaIndonesia0%WorldMexicoSouthAfricaFuelconsumptionpatternsvarysignificantlyamongtheselectedemergingeconomies.Thisreflectsthevariousstructuraldifferencesandgeographiesandtheresultantdemandfortransportservices.Thosecountriesthatexperiencethehighestlevelsofeconomicgrowthalsohavethegreatestincreasesindemandfortransportservices.InBrazil,China,MexicoandSouthAfrica,thecarssubsectoraccountedforthelargestshareoffuelconsumption;inIndiaandIndonesia,thetruckssubsectorconsumesmostfuel.StructuraldriversofchangeTheevolutionoftransportenergydemandandgreenhousegas(GHG)emissionsdependsonfactorssuchaschangesintransportactivity,sharesofactivityindifferenttransportmodes,theenergyefficiencyofeachmodeandthecarboncontentoffuels.Differingcharacteristicsofurbanandnon-urbanmobilityalsoshapethetrajectoryofshapethetrajectoryofenergyandemissionsfromtransportfromtransport.Inmanyselectedemergingeconomies,whereaverageincomeandcarownershiplevelsarelowerthaninadvancedeconomieswhilealargershareoftraveloccursbypublictransport(busandrail).Transportactivityvariesgreatly;forexample,inIndonesiaandSouthAfrica,bustravelistheprimarymodeoftransport,whereasrailtravelismorewidespreadinChinaandIndia.Incontrast,Mexicohasahighshareofpassengeractivityincarsandhighownershipoflargecars.ThismaybeinfluencedbythecountrybeinganoilproducerandanimporterofusedcarsfromtheUnitedStates.Worldgrossdomesticproduct(GDP)percapitaincreasedatanannualaveragerateof2%ayearfrom2000to2021.Growthamongtheselectedemergingeconomiesvariedsignificantlyoverthesameperiod.PopulationsandPAGE18IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesurbanisationrateshavealsoincreased,which,togetherwitheconomicgrowth,affecttransportandenergyuse.Figure1.5GDPpercapitaandgrowthrate,20219%8%250007%GDPpercapita(USD2021,PPP)6%200005%GDPper4%capita150003%2%Annualgrowth100001%(2000-2021)5000MexicoSouthAfricaIEA.CCBY4.0.0BrazilChinaIndiaIndonesiaWorldGrowingeconomiesgeneratedemandforgoodsandservices;therefore,demandfortransporttendstoincreaseaseconomiesgrow.Dataforthepast20yearssuggestthishasbeenthecasefortheselectedemergingeconomies.China,IndiaandIndonesiahaveallexperiencedrapideconomicgrowthoverthepasttwodecades.InthecaseofChina,theeconomyexpandedatanannualaveragerateofalmost8%ayearonapercapitabasisfrom2000to2021.InIndia,ithasbeen5%andinIndonesiaaround3.5%.EconomicgrowthhasbeenlesspronouncedoverthesameperiodinBrazil,MexicoandSouthAfrica,wheretheeconomiesexpandedbyaround0.5-1%onapercapitabasis.PAGE19IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesFigure1.6Annualpopulationgrowthandurbanisationrate,2000-20213.5%3.0%Annualpopulation2.5%growth2.0%Annualurbanization1.5%rate1.0%IEA.CCBY4.0.0.5%0.0%WorldBrazilChinaIndiaIndonesiaMexicoSouthAfricaIndia,ChinaandIndonesiahaveexperiencedthelargestpopulationincreases,mostnotablyIndia,wherethepopulationincreasedbyaround335millionoverthepasttwodecades.China’spopulationgrewataslowerpaceandincreasedbyaround150millionpeople,whileIndonesia’spopulationexpandedby65million.Together,thesethreecountriesaccountedforathirdoftheincreaseintheworld’spopulationoverthepast20years.Globally,abouthalfoftotalpassengertransportactivity(measuredinpassengerkilometres)nowtakesplaceinurbanenvironments.Risingincomeshavedrivendemandformoremobility,aswellasthegreatercomfortandstatusaffordedbypersonalvehicles.Thisdemandisexpectedtocontinueasincomesriseacrossawiderrangeofcountriesandabroaderbaseofpopulations.Alltheselectedemergingeconomieshaveexperiencedgrowthinurbanisationrates,reflectingaglobaltrendoverthepast20yearsasmorepeoplemovetocitiesforbetteropportunities,jobsandincome.Continuedrapidurbanisationandindustrialisationpushesupdemandforservicessuchastransport.In2000,lessthanhalfoftheworld’spopulationlivedinurbanareas;in2021,thisratehadincreasedto57%.InChina,therateofurbanisationincreasedfrom36%to62%overthesameperiod,andinIndonesia,itgrewfrom42%to57%.BrazilandMexicoareamongthemosturbanisedcountriesintheworld,whichexplainstheirlowerannualurbanisationrates.DevelopmentofCO2emissionsGlobalCO2emissionsintheroadtransportsectorincreasedby38%from2000to2021,fromaround4250MtCO2to5860MtCO2.TheselectedemergingPAGE20IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomieseconomiesaccountedforaround60%ofthisincrease,withincreasedemissionsfromcars,vansandtrucks.ChinaandIndiaaccountedforthelargestsharesoftheincreases.Figure1.7EvolutionofroadtransportCO2emissionsbymode,2000-2021WorldSelectedmajoremergingeconomiesMtCO260002000500040001500300020001000100050002000ΔMajorΔRestofthe20210emergingworldTrucks20002005201020152021economiesCarsBuses2/3-wheelersIEA.CCBY4.0.Thecarssubsectoraccountedforabout13%ofglobaldirectCO2emissionsin2021.Thespecificfuelconsumptionofnewvehicleshasdeclined,owingtoimprovementsinengine,powertrainandvehicletechnology.However,along-termtrendofincreasingvehiclesizeandpowerhasslowedprogress.ToremainontrackwiththepathwayintheAPS,muchmorerapidimprovementsinthefueleconomyofnewconventional(ICE)vehiclesareneeded,evenastheshareofEVsalescontinuestogrow.CO2emissionsfromroadtransportintheselectedemergingeconomiesincreasedsignificantlyfrom2000to2021.In2000,directCO2emissionsfromthesectorwere583MtCO2;in2021,thishadmorethandoubled,toaround1540MtCO2.However,therateofincreaseinemissionswaslowerthanthatofthenumberofvehiclesontheroad.Trucks(40%)andcars(35%)accountedforthree-quartersofroadtransportCO2emissionsin2000inselectedemergingeconomies.In2021,theircombinedsharehadincreasedto86%.Incontrast,theshareofsectoremissionsfromtwo-andthree-wheelersdeclinedfrom9%in2000to7%in2021,despitemorethanquadruplinginnumber.ThisdeclinereflectsincreasingelectrificationratesinChina.Heavy-freighttrucks,whichaccountedforlessthan2%ofallvehiclesontheroadin2021intheselectedemergingeconomies,contributed25%ofallCO2emissionsinthesector.PAGE21IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesFigure1.8RoadtransportCO2emissions,2000-2021Index(100=2000)450400China350India300250Indonesia200Brazil150SouthAfrica10050Mexico02003200620092012201520182021Restofthe2000worldIEA.CCBY4.0.HistoricaltrendsofCO2emissionsvarynotablyamongselectedemergingeconomies.Chinahasexperiencedthelargestincreaseinrelativeterms,withemissionsfromroadtransportmorethanquadruplingfrom2000to2021.Overthesameperiod,China’sGDPpercapitaincreasedfivefold,triggeringincreaseddemandfortransportservices,with290millioncarsontheroadin2021comparedto8.2millionin2000.IndiaandIndonesiaalsoexperiencedrobustgrowthoverthesameperiod,withemissionsfromroadtransporttriplinginIndiaandmorethandoublinginIndonesia.InIndia,thetotalstockofroadvehiclesgrewfromaroundanestimated45millionin2000tomorethan275millionin2021.InIndonesia,thenumberofvehiclesonroadsincreasedfrom16millionin2000toaround105millionin2021,notablydrivenbythetwo-andthree-wheelerssubsector.Figure1.9GrowthofCO2emissionsincertainenergysectorsfortheselectedmajoremergingeconomies,2000-2021Power50%100%150%200%250%300%Heavyindustry2/3-wheelersCarsTrucksAviationandshipping0%IEA.CCBY4.0.PAGE22IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesTotaldirectCO2emissionsoftheselectedemergingeconomiesincreasedby180%from2000to2021.Powergeneration,heavyindustryandroadtransportwerethemaindriversofthisincrease.Thecarssubsectoraccountedforaround6%oftheincreaseasemissionsrosebyalmost275%overthesameperiod.Thetrucksandtwo-andthree-wheelerssubsectorsaccountedforanother4%oftheincrease.Anotablefeatureofthemarketforcarsisthegrowthinsportsutilityvehicle(SUV)sales.SUVsareheavierandconsumearound20%moreoilthanaveragemedium-sizedcars.IncreasedsalesofSUVisslowingprogressinfueleconomyimprovementsforvehiclespoweredbyfossilfuels,whichstillaccountformostvehiclessold(electriccarsalesaccountedfor9%oftheglobalcarmarketin2021).Accordingly,SUVsrankamongthetopcausesofthegrowthinenergy-relatedCO2emissionssince2010.In2021alone,theglobalfleetofSUVsincreasedbyover35million,drivingupannualemissionsbynearly1GtCO2.InIndia,SUVsalesarelowerthaninChina,ataround40%,butconsumerpreferencesarechangingwithincreasingincomelevelsandwithmorepeoplebeingablemorepeopletocanaffordSUVs.Atthesametime,originalequipmentmanufacturersaremarketingtowardsthissegment.RoadtransportinvestmentEnd-useinvestmentinroadtransport5intheselectedemergingeconomieswasaroundUSD60billionin2021.Energyefficiencyaccountedforalittleoverhalf,andelectrificationfortheremainder.Since2017,investmentinelectrificationhasincreasedsignificantly,fromalmostUSD5billiontoaroundUSD55billionin2021.GrowthinEVsalesisdrivinginvestmentinelectrification,whichrepresentedmorethan45%ofoverallend-useinvestmentintheglobaltransportsectorin2021.GlobalEVsalesmorethandoubledin2021comparedtoin2020,withmostofthegrowthinChinaandEurope,where,forthefirsttime,EVsurpasseddieselvehiclesales.InChina,themedianpriceofanEVin2021wasonly10%abovethatoftheoverallfleet.Incontrast,modelavailabilityintheotherselectedemergingeconomies(outsideChina)in2021waslimitedandpriceshigh.5Thisincludesinvestmentinenergyefficiencyandelectrification.EnergyefficiencypertainstoinvestmentsinvehicleIEA.CCBY4.0.efficiency,andelectrificationtoinvestmentinEVs.PAGE23ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesFigure1.10Investmentinroadtransport,2014-2021140BillionUSD1201008060ElectrificationEnergyefficiency40IEA.CCBY4.0.200201420152016201720182019202020212021SelectedmajoremergingeconomiesWorldSustainablebiofuelsplayanimportantroleindecarbonisingroadtransport.Theyprovidealow-carbonsolutionforexistingtechnologies,suchasforcarsintheneartermandfortrucksandbusesinthelongterm.Globalinvestmentinliquidbiofuels(bio-gasolineandbiodiesel)morethandoubledin2021,reachingjustoverUSD8billion.Two-thirdsofthisgrowthwasinbio-baseddiesel,spurredbyrisinginvestmentinhydrotreatedvegetableoilrenewablediesel,althoughethanolinvestmentalsonearlydoubled.Brazilcontributedaround30%toglobalinvestmentinliquidbiofuelsin2021.Box1.1FossilfuelsubsidiesandenergytransitionsSomeemergingmarketanddevelopingeconomiescontinuetosupporttheproductionandconsumptionofcoal,oilandnaturalgas.Thisisdespitea2009pledgebyG20countriestograduallyphaseoutinefficientfossilfuelsubsidies.Priceinterventionssuchasfossilfuelsubsidiesarerarelywelldesignedortargetedtothemostvulnerable.Thesesubsidiesdiminishorremovetheincentivestoshifttomoreefficientandelectrifiedtransportandtendtodisproportionatelybenefitwealthierhouseholdsandbusinesses.Theyalsoburdengovernmentfinancesatatimewhenfiscalleewayisimportanttoacceleratecleanenergytransitions.Sustainableenergyinvestmentsfaceanuphillstruggleinmanyemergingmarketsanddevelopingeconomies(EMDEs).Thisisbecauseregulatedpricesortaxesfavourfossilfuels.In2020,thefallinfossilfueldemandandpricesduetotheCovid-19pandemicdrovethevalueoffossilfuelconsumptionsubsidiesdowntoarecordlow.TheIEAestimatedthattheeconomicvalueofglobalfossilfuelsubsidieswasmorePAGE24IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesthanUSD215billionin2020,50%below2019levelsandthelowestannualfiguresincetheIEAbegantrackingthesesubsidiesin2007.Manycountriesthereforetookadvantageofthelowpricesandworlddemandtoreformpricing.Forexample,Indonesiacutthesubsidyfordieselby50%toIDR500/litre,whileinIndia,thegovernmentraisedexcisedutiesongasolineanddieselinresponsetothedropininternationalprices.In2022,theglobaleconomicrecoveryandenergycrisisincreasedoilprices,andtheIEAestimatesfossilfuelsubsidiesreachedanall-timehighofall-timehighofUSD1trillion.Somecountriesintroducedtemporarymeasurestocushiontheeffectofrisingoilpricesonconsumers(e.g.,SouthAfricareducedexcisetaxesongasolineanddieseluntilFebruary2023).Amongtheselectedemergingeconomies,onlyIndonesiaretainssubsidiesfortransportoilconsumption,spendingmorethanUSD13billionin2021comparedtoUSD2.5billionin2020andUSD15billionin2019.Indiaendeddirectsubsidiesfortransportoilconsumptionin2015,whileMexicodidsoin2014.IEAmethodologyusesaprice-gapanalysistoestimatesubsidies.Thisisanapproachthattriestoidentifythegapbycomparingreferencepriceswithend-userpricesforconsumers.Source:IEA(2023),EnergySubsidies:Trackingtheimpactoffossil-fuelsubsidies.IEAWorldEnergyOutlookscenariosMuchofthequantitativeanalysiscontainedinthisreportisbasedonscenariosdevelopedfortheIEAWorldEnergyOutlook(WEO).TheWEOexploresvariousscenarios,eachofwhichisbuiltonadifferentsetofunderlyingassumptionsabouthowtheenergysystemmightevolve.Thesescenariosarenotpredictions,andtheIEAdoesnothaveasingleviewaboutwhatthelong-termfuturemighthold.Instead,theWEOscenariosseektocomparedifferentpossibleversionsofthefutureandexplorewhichleversandactionsshapethem,withtheaimofstimulatinginsightsaboutthefutureofglobalenergy.Thescenarioshighlighttheimportanceofgovernmentpoliciesindeterminingthefutureoftheglobalenergysystem.DecisionsmadebygovernmentsarethemaindifferentiatingfactorexplainingthevariationsinoutcomesacrosstheIEAscenarios.TheIEAalsoconsidersotherelementsandinfluences,notablytheeconomicanddemographiccontext,technologycostsandlearning,energypricesandaffordability,corporatesustainabilitycommitments,andsocialandbehaviouralfactors.PAGE25IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter1.RoadtransporttodayFocusonroadtransportinemergingeconomiesThisreportutilisestwoofthemainWorldEnergyOutlook2022scenarios.Thetwoscenariosareexploratory,inthattheydefineasetofstartingconditionsandthenexplorewheretheylead.ThefirstoftheseistheStatedPoliciesScenario(STEPS),whichtheIEAusesasareferenceagainstwhichtoexploretheimplicationsoftheAPS.TheSTEPStakesamoreconservativeapproachovertheimplementationofpoliciesthantheAPS,integratingsector‐by‐sectoranalysisoftheimpactsofestablishedandannouncedpoliciesandregulations.Outsideofthesepolicies,theevolutionoftheenergysystemintheSTEPSisdrivenbyinfrastructureandequipmentlifetimes,energytechnologycosts,fuelpricesandconsumerpreferences.ThesecondscenarioutilisedinthisreportistheAPS,whichwasfirstintroducedintotheIEAscenarioframeworkin2021,toreflectthegrowingnumberofcountrieswithannouncednetzeroemissionstargets.TheAPSassumesgovernmentsachievetheirtargetsontimeandinfull,regardlessofwhethertheyarebackedbydetailedimplementinglaws,policiesandregulations.Italsoconsidershowcountriesenvisagedifferentsectors,suchasenergyandagriculture,forestryandotherlanduse,contributingtothegoalofnetzeroemissions.66Themitigationpotentialofagriculture,forestryandotherlanduseisderivedfromremovalsofGHGsandemissionsIEA.CCBY4.0.reductionsthroughmanagementoflandandlivestock.PAGE26ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesChapter2.RoadtransportatacrossroadsItisimportanttounderstandwheretheroadtransportsectorcouldbeheadinginthefuture,giventhetriplingofroadtransportCO2emissionsintheselectedemergingeconomiesoverthepasttwodecades.Inlightofnetzeropledges,7itisalsoimportanttounderstandwhereitcouldbeheadingwithenhancedpolicyambition.Roadtransportisatacrossroads.DespiteariseinthenumberEVs,roadtransportcouldremainasectorlargelydependentonoilconsumption,emittingsignificantquantitiesofCO2emissionsandcontributingtoclimatechange.Alternatively,thesectorcouldbecomeahuboftransformationthatdeliverstheincreasedneedsformobilityandfreighttransport,withafleetthatismoreefficient,andwhichrunsmainlyonelectricity–consequentlywithsignificantlylowerCO2emissions.Thischapterdiscussesthedevelopmentofroadtransportintheselectedemergingeconomiesuntil2050inboththeStatedPoliciesScenario(STEPS)andtheAnnouncedPledgesScenario(APS)pathways,whilepresentingthepolicypackagesinplacetodrivechangesinthissector.Itidentifiesthemostcost-effectiveabatementsolutionstoshiftfromaSTEPStoanAPSpathwayandfinishesbyexaminingtheairqualityandhealthco-benefitsofdoingso.ItfocusesonIndiaandIndonesia,giventheirexpectedfuturegrowthtrajectoriesinroadtransport.ChangesinfleetsandfuelsInadditiontothegrowthinthenumberofvehiclesontheroadintheselectedemergingeconomiesinthepasttwodecades(seeChapter1),thesecountriesarelikelytoexperienceaneardoublingofthesenumbersby2050.Thestockofvehiclescouldincreaseto1.7billionintheSTEPSandto1.8billionintheAPS,drivenbyeconomicandpopulationgrowth.Personalvehiclessuchascars,aswellastwo-andthree-wheelersforpersonalandcommercialuse,particularlydrivetheincreaseinabsolutenumbers.Therecouldbeabout50millionfewercarsontheroadsofthesecountriesintheAPScomparedtointheSTEPSby2050.However,thisdeclineinnumbersis7Oftheselectedmajoremergingeconomies,thefollowingnetzeropledgeshavebeenmade:Brazil,by2060;China,beforeIEA.CCBY4.0.2060;India,by2070;Indonesia,by2060;andSouthAfrica,by2050.PAGE27ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesmorethancompensatedforbyalmost200millionmoretwo-andthree-wheelers.Modalshiftscouldreducetheuseofpersonalcarsinfavourofothermodesoftransportsuchaspublictransportandmoreflexibletwo-andthree-wheelers,especiallyinurbansettings.Incontrasttothedevelopmentofthepasttwodecades,India–followedbyChinaatsomedistance–isprojectedtobecomethemajordriverofcontinuedgrowthinthestockofvehicles,contributingaroundhalfofthetotalgrowthintheselectedemergingeconomies.India’sstockcouldincreasefrom280millionvehiclesin2021toaround650millionby2050.Itsfleetofpersonalcarsisprojectedtogrowsixfoldfrom40millionin2021to250million,whilethenumberoftwo-andthree-wheelersalmostdoubles.Thesenumbersoutpaceanyoftheotherselectedemergingeconomiesinbothvehiclecategories.India’scomparativelyhigherprojectedrateofeconomicandpopulationgrowthistheunderlyingdriver.Itwillmakethepurchaseofapersonalvehiclemoreaffordabletomorehouseholds.Thegrowthofelectrificationisanotherpronouncedtrendinthefleetcompositionofselectedemergingeconomies.In2021,theshareofEVsinthetotalroadvehiclestockwasaround5%inthosecountries,butthiswillsurgeinboththeSTEPSandtheAPSby2050.IntheSTEPS,ChinawillexperienceasignificantgrowthofEVs,notablycarsandtwo-andthree-wheelers,reachingaround550millionEVsby2050.Indiafollows,reaching330millionEVs–notablytwo-andthree-wheelers.AllselectedemergingeconomiesseeasignificantaccelerationinthedeploymentofEVsduetoanincreasedfocusonroadtransportelectrificationandcorrespondingpolicysupport.ComparedtotheSTEPS,inascenariowherecountriesmeettheirannouncedpledges(theAPS),MexicoandSouthAfricaincreasetheirstockofEVsbyfactorsof4and5,respectively,by2050.BrazilandIndonesiamorethandoubletheirs,whileIndia’salmostdoubles.ChinaexperiencesonlyamoderateboostintheAPScomparedtotheSTEPS.MarketdynamicshelptoexceedChina’sstatedtargets,withtheexistingpolicyframeworkandtargetsto2030alreadytakenintoaccountintheSTEPS,designedtomeetthecountry’slong-termcarbonneutralitytargets.PAGE28IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesFigure2.1RoadvehiclefleetandshareofEVsintotalroadvehiclefleetintheselectedmajoremergingeconomies,intheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2021-2050Roadvehiclefleet(million)2000100%2/3-wheelers180090%160080%Buses140070%120060%Trucks100050%40%Cars80030%60020%ShareofEVsin40010%totalroadfleet2000%(rightaxis)0202120502050STEPSAPSIEA.CCBY4.0.Fuelconsumptionintheroadtransportsectorofselectedemergingeconomiesisespeciallyfromfossilfuels.In2021,gasolineanddiesel,andtoasmallextentnaturalgas,servedmorethan90%oftotalfueldemand(560Mtoe)inthesector,withelectricityaccountingforlessthan1%.Biofuelstrategieshavehelpedtodriveuptheconsumptionofbiofuels–from6Mtoein2000to30Mtoein2021–withBrazilandIndonesiarepresentingalmost85%ofconsumptionintheselectedemergingeconomies.IntheSTEPS,totalroadtransportfuelconsumptionofselectedemergingeconomiesisprojectedtoriseto725Mtoeby2050.Consumptionoffossilfuelsisexpectedtopeakaround2030,slowlydecliningthereaftertoaround540Mtoebymid-century.Biofuelscontinuetheirincrease,albeitataslowerrate.Electricityispoisedtobecomethesecondmostdominantfuelafterfossilfuels,supportedbyanincreaseinEVuse,notablyinChinaandIndia.ElectricityandbiofueluserisesinBrazil,IndiaandIndonesia,butwouldaccountforaroundonly25%ofthe2050fuelconsumption.Theincreaseinelectrictwo-andthree-wheelersandcarswithelectricpowertrainsexplainsthehighshareofEVsinthetotalroadfleetintheSTEPS.However,mostcarsandtrucksintheselectedemergingeconomieswouldstillbepoweredbyfossilfuels.IntheAPS,theselectedemergingeconomiescouldseetotalfuelconsumptionintheroadtransportsectorpeakataround660Mtoeby2030.Fueleconomyimprovementscoulddrivefuelconsumptiondownto500Mtoeby2050(lowerthan2021levels),despitecontinuedgrowthinthenumberofvehicles.IntheAPS,roadPAGE29IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiestransportfuelconsumptioninthosecountriescouldexperienceadramaticshifttoelectricityand,toalesserextent,tohydrogen,comparedtotheSTEPS.By2050,intheAPS,electricitycouldbecomethemostusedformofenergyintheselectedemergingeconomies.Itcouldrepresentmorethan40%ofconsumption,drivenbyanaggressiveexpansionofEVsacrossthecars,trucks,andtwo-andthree-wheelerssubsectors.ThisexpansionoftheEVfleetillustratestheimportanceoftheparalleldecarbonisationoftheelectricitysystemandmodernisationoftheelectricitygrid.However,largedifferenceswouldexistamongcountries.ElectricityconsumptioncouldbemorethandoublethatoffossilfuelsinChina’sroadtransportsector.ButinothercountriessuchasIndiaorIndonesia,fossilfuelsratherthanelectricitywouldremainthedominantsourcetopowervehiclesontheirroads.IntheAPS,intermsofoverallroadtransportconsumptionby2050intheselectedemergingeconomies,electricityiscloselyfollowedbyfossilfuels(mainlyoil)ataround190Mtoe.Thisisalevellastseenin2000.BiofuelscouldachievesimilarlevelsintheAPStotheSTEPS.Hydrogenisexpectedtoplayalimitedroleintheroadtransportsectoroverall,althoughthenumberoffuelcellelectriccars,trucksandbusescouldstarttogrowinthe2040s.Totalhydrogenconsumptionforroadtransportreachesmorethan25MtoeintheAPSby2050.Figure2.2RoadtransportfuelconsumptionintheselectedmajoremergingeconomiesintheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2000-2050100%Hydrogen90%Biofuels80%70%Electricity60%50%Fossil40%fuels30%20%10%0%202120302050203020502000STEPSAPSIEA.CCBY4.0.PAGE30IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesCO2emissionspathwaysDirectCO2emissionsfromroadtransportreachedmorethan1.5GtCO2intheselectedemergingeconomiesin2021.ThisincreasewasinlinewiththeglobalreboundafterCovid-19.IntheSTEPS,suchemissionscontinuetoriseuntilmid-2030,thereafterdecreasingslowlyto1.6GtCO2by2050.ThisisthefirsttimethattheIEA’sSTEPSprojectsaplateauingandreductionofCO2emissionsfromtheroadtransportsectorintheselectedemergingeconomiesbymid-century.ThisdevelopmentisattributabletodecliningemissionsinChinaafter2025,withitsemissionsdroppingbymorethan40%comparedtoin2021.InBrazilandIndia,emissionsstartdecreasingafter2040.Indonesia’semissionsstabilisetowards2050,whilethoseofMexicoandSouthAfricacontinuetoincreaseslowly.IntheAPS,emissionsfromroadtransportintheselectedemergingeconomiespeakin2025anddroptolessthan0.6GtCO2by2050.ChinaandIndiaaccountfortwo-thirdsofthisdecrease,duetothesizeoftheirfleets.Chinaaimstoachievecarbonneutralitybeforeorby2060andIndiaby2070.Incumulativeterms,ambitiouspoliciesintheAPSinthesemajoremergingeconomiescouldgeneratearound13GtCO2incumulativeemissionssavingsintheroadtransportsectorby2050,withthecarsandtruckssubsectorsaccountingfor95%ofthisreductionpotential.Figure2.3RoadtransportCO2emissionsintheAnnouncedPledgesScenarioversustheStatedPoliciesScenario,2000-20502000MtCO2SouthAfrica1800IEA.CCBY4.0.1600Mexico1400Indonesia12001000India800China600400BrazilSTEPS2002010202020302040205002000IEA.CCBY4.0.Note:ThescopeofemissionsisdirectCO2emissions.ToachievetheCO2emissionsreductionsillustrated,theAPSassumesarapiddecarbonisationofthepowersector.Pleaseseetheboxbelowonpowersectordecarbonisationformoreinformation.PAGE31ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesBy2030,thecarsandtruckssubsectorsareprojectedtodrivetheincreaseinemissionsinselectedemergingeconomiesinbothscenarios.Aspopulationsandhouseholdincomesgrow,thepurchaseofaprivatecarbecomesaviableoptionformorepeople,withthenumberofcarsrisingaccordingly.By2030,emissionsduetocarswillincreaseby15%above2021levelsintheSTEPS(anincreaseofaround120MtCO2),withabouthalftheincreaseinCO2emissionsrelatedtoroadtransport.IntheAPS,almost90MtCO2ofthisrisecouldbeshavedoffaspoliciesacceleratetheadoptionofEVs.Forexample,theshareofelectriccarsintotalcarsalesisprojectedtojumpfromaround1%in2021to31%inIndiaand21%inIndonesiaby2030,comparedto13%and7%,respectively,intheSTEPS.By2050,emissionsduetocarsintheselectedemergingeconomiescouldfallbelow2021levelsintheSTEPSwhilecontinuingtoemitsignificantquantitiesofCO2intotheatmosphere.ThisoutlookchangessignificantlyintheAPSascarsrealisetheirpotentialasthemainabatementlever.TheshareofEVscouldreachatleast70%ofthetotalcarstockinalltheselectedemergingeconomiesexceptBrazil,whichisprojectedtorelyonacombinationofelectricandbiofuel-poweredvehiclestoachieveitsdecarbonisationanddevelopmentgoals.Thismeansdirectemissionsfromthecarfleetinthesemajoremergingeconomiescoulddropto140MtCO2by2050,around80%lowerthanin2021.Withemissionsduetotruckshavingalreadydoubledinthepasttwodecadesintheselectedemergingeconomies,itfacesamoredifficultdecarbonisationpathway.Thisisbecauseeconomicandpopulationgrowthdriveasurgeinthedemandforfreighttransportwhileemissionsreductionmeasuressuchasdirectelectrificationorfuelcellelectricvehicles(FCEVs)arenotalwaysreadilyavailableorcost-effective.Inbothscenarios,CO2emissionsduetotrucksareprojectedtocontinuewithanupwardtrenduntil2030.Beyond2030,theyremainhardtoabate.theSTEPSprojectsanalmostlinearupwardtrendfrom2030to2050.However,intheAPS,thetruckemissionscurveisbentinthistimeframe,loweringemissionsfrom565MtCO2in2021to400MtCO2by2050intheselectedemergingeconomies.Thisisdespiteasurgeinfreightactivityandtheresultingincreaseinthenumberoftrucksontheroad.Thisreductionisachievedbymeansofaggressivefueleconomyimprovements,aswellasbyswitchingpowertrainsfromdieseltoelectricandfuelcellelectric.Thetruckssubsectorhasbyfarthehighestroadtransportemissionsoutofallthesubsectors,eveninthemoreambitiousAPSpathway.PAGE32IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesFigure2.4RoadtransportCO2emissionsintheselectedmajoremergingeconomiesbymodeintheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2000-2050MtCO220001800160020002010202120302050203020502/3-wheelers1400Buses1200Trucks1000Cars800IEA.CCBY4.0.6004002000STEPSAPSBox2.1PowersectordecarbonisationintheselectedemergingeconomiesPowersectordecarbonisationintheselectedmajoremergingeconomiesisacriticalelementinrealisingthefullCO2emissionsreductionpotentialofEVs.Thisisbecausevehiclechargingcancauseindirectemissionsinelectricitygrids,withahighcarbonintensity.Globally,theelectricitysectoremitted13GtCO2in2021,withtheselectedemergingeconomiesaccountingfor60%,giventhebasicneedtoprovideelectricityto3.5billionpeopleandthepresenceoflargecoal-firedpowerplantfleetsinChina,India,IndonesiaandSouthAfrica.However,inallscenarios,electricitysectorCO2emissionspeaksoon,withsteepreductionsof35%intheSTEPSandover80%intheAPSby2050forthesemajoremergingeconomies.IntheAPS,China,whichisthemaincontributortothisoveralldrop,seesitsannualCO2emissionsdeclineto1GtCO2by2050.Intheothercountries,theybecomealmostinsignificantorclosetozero.Asurgeofrenewablesourcesofenergyinelectricitygenerationandasignificantreductionoftheroleofunabatedcoal-firedpowermostlydrivethisdevelopment.Higherinvestmentintheelectricitysectorenablesthesereductions,risingfromanannualaverageofUSD350billionin2017-2021intheselectedemergingeconomiestoanannualaverageofUSD600billionin2022-2050intheAPS,or30%higherthanintheSTEPS.PAGE33IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesPowersectorCO2emissionsintheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2021-2050GtCO29SouthAfrica8Mexico7Indonesia6India5China4Brazil322030STEPS205020302050102021APSIEA.CCBY4.0.Source:IEA(2022),WorldEnergyOutlook2022.WhilepowersectordecarbonisationisessentialtofullyrealisetheemissionsreductionpotentialofEVs,thenetimpactofEVuseonemissionscanbepositivewithcurrentcarbonintensitiesofelectricitygeneration.WhenEVdeploymentdisplacestheuseofconventionalvehiclespoweredbyfossilfuels,electricitycarbonintensityneedstobelowerthan700-750gCO2/kWh(aroundthecurrentlevelofIndia’selectricitygeneration)forthenetimpactofEVdeploymenttobepositive.Sources:IEA(2022),WorldEnergyOutlook2022;IEA(2021),AirQualityandClimatePolicyIntegrationinIndia.RoadtransportemissionsinIndiaandIndonesiaTogetherwithChina,IndiaandIndonesiadecreasetheirCO2emissionsintheroadtransportsectorsignificantlyby2050,inlinewiththeirnetzeropledges,asmodelledintheAPS.However,bothcountrieswillhavetosignificantlybuildouttheircurrentpolicyframeworkstoachievetheirnetzeropledgesandtheresultingemissionspathways.Whenimplementingthepoliciestoachievetheirpledges,bothcountriesareexpectedtoreachapeakintheirroadtransportemissionsinthemid-2030s.PAGE34IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesFigure2.5RoadtransportCO2emissionsinIndiaandIndonesiabymodeintheAnnouncedPledgesScenario,2021-2050400MtCO2India180Indonesia350MtCO216030020301402030250205012020212050200CarsTrucks1002/3-wheelers1501008060504002020210BusesIEA.CCBY4.0.InIndia,carscouldbethemainemissionsreductiondriverintheAPS,followedbytwo-andthree-wheelersandbuses,owingtofleetelectrification.Costsforelectriccarsandespeciallyelectrictwo-andthree-wheelersarenow,orsoonwillbe,cost-competitive(seethesectiononcost-effectiveabatementsolutionsforfurtherdetails).TruckemissionsinIndiaremainhardtoabateuntilmid-century,asprojectedeconomicgrowthdrivesdemandforfreighttransportandelectric,whilefuelcellelectrictrucksarelikelytobecomecost-effectiveonlyinthe2040s.Figure2.6EnablersofroadtransportdecarbonisationinIndia,AnnouncedPledgesScenarioversusStatedPoliciesScenario,2010-2050600MtCO2500STEPSIEA.CCBY4.0.4004GtCO2(2022-50)300APS200ElectrificationEnergyefficiency100HydrogenuptakeBiofueluse0201020152020202520302035204020452050IEA.CCBY4.0.Note:IncludesdirectandindirectCO2emissions.Source:IEA(2023),TransitioningIndia’sRoadTransportSector:RealisingClimateandAirQualityBenefits.PAGE35ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesElectrificationenablesthe4GtCO2incumulativeemissionssavingsfrom2022to2050inIndia’sroadtransportdecarbonisationintheAPS.Energyefficiency–orfueleconomy–improvementsfollow,withtheannualsavingscontributiondecreasingwithtimeasefficiencyimprovementsincreasinglymeettechnicalandphysicallimits.Blendinggasolineanddieselfuelswithbiofuelsenablesadditionalannualsavingcontributionsonacontinuousbasisthroughthistimeframe,whilehydrogenuptakecompletesthepicturemostnotablyafter2040.Inrelativeterms,Indonesiacouldhaveahigherdecarbonisationrate,withemissionsdecreasingby70%intheAPScomparedtointheSTEPS.Thecarsandtwo-andthree-wheelerssubsectorsaccountformostofthedecrease.Thetwo-andthree-wheelerssubsectorcouldexperiencerapidlyreducingemissionsfrom2025.Thecarssubsectorcouldreachpeakemissionsinmid-2030,witharapiddeclinethereafterowingtothepenetrationofEVsinthemarketandasalesbanforconventionalorICEcarsby2050.Emissionsduetotruckscouldhaveamuchslowerdecline,aselectricandfuelcellelectrictrucksremainrelativelyexpensiveuntilclosetomid-century.Box2.2TransportemissionsinIndonesiaIndonesia’stransportsector(includingroad,rail,shippingandaviation)accountedforone‐thirdofthecountry’sfinalenergyconsumptionandaround40%ofCO2emissionsfromfinalenergyconsumptionin2021.Almost90%ofCO2emissions(120MtCO2)inthetransportsector,aswellas90%ofoildemand,isfromroadtransport.Two-andthree-wheeledmotorbikesarethepreferredtransportmodeforIndonesians.At325motorbikesper1000inhabitants,theownershiprateisdoublethatinIndiaandmorethantripletheglobalaverage.CarownershipinIndonesiaissignificantlylower,withabout40carsper1000inhabitantsoraquarteroftheglobalaverage.IntheAPS,incomegrowthspursthepreferencefor,andaccessibilityof,carownershipovermotorbikes,inlinewithtrendsobservedinmanyemergingeconomies.Ownershipofmotorbikesandothertwo-/three‐wheelervehiclesincreasesbyalmost15%by2030,butpeaksjustbefore2040andthenbeginstodecline.However,carownershipjumpstoover75vehiclesper1000peopleby2030andalmost170carsper1000inhabitantsby2050,multiplyingthetotalstockofpassengercarsbymorethanfivefoldcomparedto2021levels.PAGE36IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesEnablersofdecarbonisationinIndonesia’swholetransportsectorbymeasure,AnnouncedPledgesScenarioversusStatedPoliciesScenario,2025-2050MtCO22025203020352040204520500Biofueluse-20-40-60Energyefficiency-80-100Electrification-120-140-160IEA.CCBY4.0.Note:Thefigurepertainstotheentiretransportsector,whichincludesroadtransportasasubsector.SomeadditionalCO2emissionsreductionsarealsogeneratedinthetransportsectorthroughavoideddemandformobilityandfreighttransportaswellasfuelswitchingtohydrogen.ThegraphshowsannualCO2emissionssavings.ItincludesdirectandindirectCO2emissions.Source:AdaptedfromIEA(2022),AnEnergySectorRoadmaptoNetZeroEmissionsinIndonesia.CO2emissionsduetopassengercarsriserapidlyuntilaround2035intheAPS,owingtotherebeingmorecarsontheroadandcontinuedsalesofICEvehicles.TheshareofEVsinpassengervehiclesalesrampsuponlyinthe2030s.By2050,salesofnewICEvehicleswillbecomingtoanend.Thecombinationofenergyefficiencyimprovements,biofuelblendingandespeciallyincreasingpenetrationofEVsdrivesCO2emissionsdowninthepassengercarsegmentby2050intheAPS.Biodieselblendingrapidlyincreasesduetothetrucksubsector.ThisenablesplateauingofCO2emissionsaround2030.Beyond2030,thecombinedeffectofincreasingelectrificationofsmallertrucksandcontinuedincreasesinbiodieseluseisenoughtodrivedownemissionstoalmost20%comparedtoin2021,despiteanalmosttriplinginthenumberoftrucks.Intotal,Indonesia’sentiretransportsectorcansave140MtCO2annuallyby2050intheAPScomparedtotheSTEPS.Mostsavingscomefromtransportfleetelectrification.ThiselectrificationisboostedbytherisingpenetrationofEVsthathelpstocutemissions,buttheeffectbecomesmorevisibleafter2030owingtotheslowturnoverofthevehiclefleet.PAGE37IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesTotalannualfinalenergyconsumptionanddemandsavingsbymitigationmeasureinthetransportsectorinIndonesia,AnnouncedPledgesScenarioversusStatedPoliciesScenario,2021-20507EJ6APSdemandIEA.CCBY4.0.5Savingsdueto:Electrification4Fuelswitch3Energy2efficiency1Avoideddemand0203020502021IEA.CCBY4.0.Source:AdaptedfromIEA(2022),AnEnergySectorRoadmaptoNetZeroEmissionsinIndonesia.FinalenergyconsumptionofIndonesia’stransportsectorby2050wouldbealmostthreetimesashighwithoutincreasedenergyefficiencygains,electrification,avoideddemandandotherfuelswitchingrelativeto2021levels.Inthetransportsector,fueleconomystandardsintroducedby2025andacceleratingelectrificationcanavoidover0.35EJofoildemandby2030.By2050,efficiencygainsandelectrificationcansave2.4EJofannualenergydemand,whileincreaseduseofpublictransportcontributesanother0.4EJofsavings.Source:IEA(2022),AnEnergySectorRoadmaptoNetZeroEmissionsinIndonesia.ExistingpoliciesforroadtransportdecarbonisationTargets,policiesandregulationswillbeneededtoachieveanAPS-aligneddevelopmentofroadtransportintheselectedemergingeconomies.Thesepolicieswillshapethetechnologicaldevelopmentofdifferentpowertrainsandmodes.Theywillalsoinfluencethedecisionmakingofconsumersinthepurchaseofvehicles.AlargesetofpolicieshavealreadybeenimplementedinthosemajoremergingeconomiesthathelptolimitthegrowthofCO2emissions.Thesecanbegroupedintothreecategories:regulation(includingstandardsandmandates),incentivesandinformationalmeasures.PAGE38ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesThefirstcategoryincludes,forexample,regulationsthatmandateacertainshareofsustainablebiofuelssuchasbioethanolorbiodieselinthegasolineanddieselfuelmixorstandardsaroundthefueleconomyofavehicle.IncentivescanrangefromsubsidiesandtaxcreditsforthepurchaseofanEVtofuelexcisetaxesandpublicinvestmentinbiofuelsproduction.Informationalmeasuresfocusonprogrammesthateitherfacilitateco-operationandknowledgesharingamongcompaniesandresearchinstitutesorinformationcampaignssuchasspreadingawarenessonthebenefitsofe-mobility.Table2.1RoadtransportpolicylandscapeintheselectedmajoremergingeconomiesCategoryPolicyinstrumentBrazilChinaIndiaIndonesiaMexicoSouthAfricaBiomfuaenldbaletnedsingRegulations,includingstandardsandmandatesFueleconomystandardsEmissionsstandardsChargingstandardsZer(oZ-EeVm)ismsaionndvaetehsicleIncentivesFiscalincentivesforEVsFiscamloindcaelnsthivifetsforFueltapxreicsin/gcarbonPublicbiniovefusetmlentinFiscalincentivesforscrappingoldvehiclesInformationInfoerdmuacatiotionnandSomefiscalincentivesforscrappageschemesexistinChinabutaredeterminedandimplementedatprovincialandcitylevel.Nationalpolicyencourageslocalgovernmentstoputscrappageschemesinplaceiftheyhavethecapacity.Note:“”indicatesacountryhasatleastoneofficialpolicythatiseitherpartiallyorfullyimplementedinthiscategoryinthecurrentpolicylandscape(early2023).Aninteractiveversionofthetable,includingdetailsonallpoliciesineachcategory,canbefoundonline.GiventheprojectedenergydemandgrowthintheSTEPS(asillustratedintheprevioussection),energyefficiencyintheroadtransportsectorisakeyenablerfordecarbonisation.Fueleconomystandardsareimportantpolicyinstrumentsthatgovernmentsputinplacetopromotevehicleefficiencyimprovements.InadditiontoincreasingthefuelefficiencyofconventionalICEvehicles,suchstandardscanalsoacceleratetheadoptionofZEVs8,ifsetatsufficientlystringentlevels.Severaloftheselectedemergingeconomieshaveadoptedfueleconomystandardsforcarsandlightcommercialvehicles.ChinaandIndiadevelopedstandardsforheavy-dutyvehicles.Chinaimplementedastandardfortwo-and8AZEVisavehiclethatdoesnotemittailpipegasorotherpollutants.Itcanbe,forexample,abatteryorfuelcellelectricvehicle.PAGE39IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesthree-wheelers,whileIndiaannouncedtheapplicationoffuelconsumptionstandardsfortwo-andthree-wheelersfromApril2023.Nevertheless,thesestandardsarenotyethomogeneouslyimplementedacrosscountriesorsubsectors.Forexample,Indiahasimplementedfueleconomystandardsforcars,withtheCO2emissionstargetdecreasingfrom130gCO2/kmin2017to113gCO2/kmin2022.However,notighteningofthesestandardshassofarbeenannouncedorlegislated.Brazil,IndonesiaandSouthAfricahavenotimplementedanyfueleconomystandardsintheroadtransportsector.Thisisanimportantpolicygap.Table2.2FueleconomystandardsintheselectedmajoremergingeconomiesModeBrazilChinaIndiaIndonesiaMexicoSouthAfricaCarsTrucksTwo-andthree-wheelersSince2012,BrazilhasintroducedthepossibilityformanufacturerstoreceiveadiscountfromataxonindustrialisedproductsthroughtheInovar-Autoprogramme(nowreplacedbyRota2030),which,initsimpactandfunction,comesclosetoafueleconomystandard.India’sMinistryofRoadTransportandHighwayshasannouncedimplementationoffuelconsumptionstandardsalsofortwo-andthree-wheelers,applicablefrom1April2023.Note:“”indicatesacountryhasatleastoneofficialpolicythatiseitherpartiallyorfullyimplementedinthecurrentpolicylandscape(early2023).Fuelexcisetaxesandcarbonpricingarealsoinstrumentsestablishedandusedinthetransportsectorofalltheselectedemergingeconomies.Combinedwithmeasuressuchasrevenuegeneration,thesecanincentivisemoreefficientfuelconsumption.Takingthesetogetherwithexistingfossilfuelsubsidies,aneffectivecarbonrate(i.e.,aneffectivecostpertonneofCO2)canbeestimated.Indiahasthehighesteffectivecarbonrateinthetransportsectoramongtheselectedemergingeconomies.Thisisdrivenexclusivelybyfuelexcisetaxes.TheGovernmentofIndialeviestheBasicExciseDuty(BED)onsomeoilandgaseousproducts.Importantly,itcombinesthiswithaso-calledSpecialAdditionalExciseDuty(SAED)andanadditionalexcisedutyonroadandinfrastructure.Bothapplyinadditiontothebasicexcisedutyongasolineanddieselfuelsforroadtransport.Incombination,thesedutiesamounttoasignificantleveloftaxationincomparisontotheotherselectedemergingeconomiesandadvancedeconomies.SouthAfricaappliessimilardutylevelswithitsGeneralFuelLevy(GFL)andtheRoadAccidentFund(RAF)levy,bothofwhichapplytogasolineanddieseltransportfuels.Toillustratethescaleoftheselevies,therevenuesraisedbytheGeneralFuelLevyamountedtoabout6%oftotaltaxrevenuesin2019/20.PAGE40IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesIncontrast,whileIndonesiadoesapplyasetleveloffuelexcisetax,itseffectivecarbonrateisnegativegiventhehighleveloffossilfuelsubsidiesfortransportfuels.Figure2.7Effectivecarbonratesinroadtransport,2021Effectivecarbonrate(USD/tCO2)200150Fossilfuelsubsidy100Explicitcarbonprice50Fuelexcisetax0Neteffective-50carbonrateBrazilChinaIndiaIndonesiaMexicoSouthAfricaAdvancedeconomiesIEA.CCBY4.0.Source:ReproducedfromOECD(2022),PricingGreenhouseGasEmissions:TurningClimateTargetsintoClimateAction.Anotherapproachtoreducefossilfuelconsumptionintransportistheblendingofgasolineanddieselwithbiofuels.Originallypromotedtoreducecountries’oil(import)dependencyandenhancedomesticenergysecurity,biofuelsemergedasanimportantoptiontoreduceCO2emissionsofconventionalICEvehicles.Bioethanolandbiodieselarethetwomostcommonbiofuelsincommercialuse.Bioethanolactsasablendingagentwithgasolineandisderivedfromplantstarchesandsugars(e.g.,sugarcane).Biodieselisblendedwithconventionaldieselandproducedfromsourcessuchasneworusedvegetableoiloranimalfats.Brazil9andIndonesiahavedevelopedstrongincentivesbymeansofbiofuelprogrammesandmandates.Governmentsthatchoosetosupportintroducingbiofuelsintheirtransportsectorshouldactivelyaddresspossibletrade-offswithsustainabledevelopmentgoals,includingavoidingconflictsatlocallevelwithotherusesofland,notablyforfoodproductionandbiodiversityprotection.Advancedbiofuels,basedonnon-foodcropsandagriculturalresidues,canpresentanattractivealternativetoconventionalbiofuels(e.g.,bio-oilsfrompalmoil),andshouldbepromoted.9BrazilhasoneofthelongestexperiencesgloballywithbiofuelswithitsNationalProgrammeforBiodieselProductionandIEA.CCBY4.0.Use(PNPB)andRenovaBio.PAGE41ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesSince2019,Indonesiahassuccessfullyimplementeditsbiofuelblendingpolicy,with30%biodieseland20%bioethanolblendingtargetsby2020and2025,respectively.Planstoincreasethebiodieselblendingtargetto40%inmid-2021havebeendelayedto2025owingtofundingdifficulties.Inaddition,thebioethanoltargetmaybeoutofreach,astheuptakeofethanolblendingremainsmarginal.Financially,Indonesia’sbiofuelspolicyissupportedwithallocatedgovernmentfunding,aswellasthroughprovidinggovernmentloansatbelow-marketinterestratesforthedevelopmentofbiofuelpalmoilplantations.Supportshouldbesquaredwithstringentsustainabilitycriteriatoavoidtrade-offswithothersustainabledevelopmentgoals.WithitsRoadmapforEthanolBlendinganditsNationalPolicyonBiofuels,Indiahasalsolaidthegroundworkforincreasingitsblendingmandateto20%ethanolblendingby2025and5%biodieselblendingby2030.VehiclefleetelectrificationisarguablythemosteffectivewaytomitigateCO2emissionsintheroadtransportsector.AcomprehensivepolicyframeworkisthereforerequiredtosupportthesupplyofanddemandforEVs,aswellastoprovidethenecessarycharginginfrastructure.ThisincludesfiscalincentivessuchassubsidiesandtaxcreditstoproduceEVs,aswellasforEVpurchase,investmentsforthebuildoutofcharginginfrastructureandchargingstandards.Theselectedemergingeconomies,notablyChina,havedevelopedanddeployedfiscalincentives,butlimitedfiscalleewayhashampereddevelopmentinmanyoftheseselectedmajoreconomies.IndiahasimplementedstrongincentivesforEVproductionanduptake.So-calledproduction-linkedincentive(PLI)schemesputforwardUSD3.5billionfordomesticmanufacturingofEVsandanotherUSD2.5billionforlarge-scaleadvancedbatterymanufacturing.ThisiscombinedwiththeFasterAdoptionandManufacturingofHybridandElectricVehicles(FAME)IIprogramme,launchedin2019andnowextendedto2024.ThisprogrammeprovidesUSD1.4billionbymeansofdirectsubsidiesforEVuptake.Ithasbeenparticularlysuccessfulinincentivisingtheuptakeofelectrictwo-andthree-wheelersandbuses,thelatterbymeansofbulkprocurementprogrammespartiallyfinancedbyFAMEII.AnadditionalincentiveforbatteryEVsisprovidedthroughadecreasedGoodsandServicesTax(GST)of5%(insteadof18-25%)whenpurchasingsuchvehicles.Arangeofstate-levelsubsidiestolowerthepurchasecostofEVscomplementstheseincentives.InIndonesia,fiscalincentivesforEVuptakearenotasdevelopedasinIndiabuthaverecentlyreceivedgreaterattention.ToboostthedemandforEVs,thegovernmentrecentlydecidedtoexemptEVsfromtheluxurytax(normallyaround15-95%,dependingontheengine)whiledemandingalowertaxrateforhybridvehicles.DiscussionsaretakingplaceonintroducingfurtherincentivesorPAGE42IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiessubsidiesfortwo-wheelers.Indonesiahasalsorecentlylegalisedtheconversionofconventionaltwo-andthree-wheelerstoelectricpowertrainsinpublicrepairshops.Thiscouldbeanimportantenablerfortherapidelectrificationoftwo-andthree-wheelers.SlowuptakeofthisservicesofarismainlyrelatedtoarelativelyhighpriceforthepowertrainconversionataboutUSD1000(IDR15million).InadditiontofiscalincentivesforEVs,publicinvestmentintocharginginfrastructureandchargingstandardswithstandardisedguidelines,definitionsandbuildingcodesforthecharginginfrastructureofEVsisacrucialpreconditionforlarge-scalebuildoutofchargingstations.Forexample,theIndiangovernmentisallocatingUSD130millionforpubliccharginginfrastructurethroughitsFAMEIIprogrammeandaimstoinstallalmost3000chargingstationsthroughoutthecountry.Inaddition,italsopassedchargingstandardsin2019byintegratingthetargetofupto20%ofparkingspacesforEVchargingfacilitiesinitsbuildingcodeforElectricVehicleSupplyEquipment(EVSE)buildingcode.Inmanyoftheselectedemergingeconomies,publicinvestmentintocharginginfrastructureandstandardisingEVcharginglagbehind.Thisconstitutesanotherimportantpolicygapthatneedsaddressingifannouncedpledgesandnetzerotargetsaretobeachieved.Cost-effectiveabatementsolutionsIdentifyingthecheapestandmostpotentCO2reductionmeasuresisanimportantexerciseforpolicymakerstoadequatelyprioritisepolicysupportatagiventime.Thiswillalsokeepthecostsofcleanenergytransitionsaslowaspossible,especiallyintimesofexceptionallyhighenergyprices.Suchpolicysupportcantaketheformoftechnology-specificsupportsuchastaxcreditsorgrants,andbroaderinstrumentssuchasacarbonprice.ForIndiaandIndonesia,marginalabatementcostcurves(MACCs)10ofpowertrainswitchesincars,11trucks,andtwo-andthree-wheelersintheAPSfrom2022to2050havebeencreatedandcomparedtotheSTEPS.ComputingsuchMACCsenablespolicymakerstoidentifythelargestandcheapestCO2abatementleversthatpoliciesshouldfocusonforeffectivepolicyaction.Italsopointsoutthosemeasuresthatarenotyetcost-effectiveinanAPSpathwayandthereforerequireadditionalpolicysupporttoincentivisetheirdeploymentandresultingcostdecrease.10ThesecurvesshowthecostofreducingonemoremetrictonneofCO2withagivenabatementsolution.IEA.CCBY4.0.11Inthissectiononcost-effectiveabatementsolutions,thecategory“cars”referstopersonallight-dutyvehiclesonlyanddoesnotcontainlightcommercialvehiclesaselsewhereinthisreport.PAGE43ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesAsbecomesevidentintheMACCsbelow,duetoincrementalismandinertiainthesystem,somepowertrainswitchesarealsohappeningintheAPSdespitenotbeingcost-effective.Furthermore,bytakingtheentire2022-2050timeframeandcomparingittotheSTEPS,theMACCsconsiderfuturecostdevelopmentsandswitchesfromonepowertraintotheotherannually.Thisistodemonstratewhetheranabatementsolutioniscost-effectiveovertheentiretyofthistimeframe(ratherthanforasinglepointintime)whenimplementingannouncedpoliciesandambitions(APS)comparedtostatedpolicies.Moreover,itallowscomputingcumulativeemissionssavingsbyabatementleverwithoutdoublecounting,whichisimportantforunderstandingthescaleofagivenabatementlevertoachievetheAPSpathway.ThescopeofemissionsintheMACCsistailpipeemissions–inotherwords,directCO2emissions.ThisunderlinestheimportanceofaparallelandswiftpowersectordecarbonisationinlinewiththeAPS.OnlythencancertainabatementleverssuchasaswitchtoEVsfullyrealisetheirdecarbonisationpotentialasdepictedinthissection.IndiaTransitioningroadtransportinIndiaonanemissionsandfleetdevelopmentpathwayinlinewithitsannouncedpoliciesandambitions,asmodelledintheAPS,couldbeacost-effectiveundertaking.IthasatotalpotentialsavingofUSD200billionfrom2022to2050.Powertrainswitches–especiallyfromconventionalICEvehiclestoEVs–havethepotentialtosaveanadditional2.5GtCO2ofcumulativeemissions12atanaveragemarginalabatementcostof-USD80/tCO2intheAPScomparedtotheSTEPS.Theanalysedpowertrainswitchescouldberesponsibleformorethan60%ofcumulativeemissionssavingsinroadtransportinIndia,withelectrificationdrivingmostofthesavings.ThismajorroleforelectrificationindrivingCO2emissionsreductionsunderlinestheimportanceofarapiddecarbonisationofIndia’spowersector.OutsidethescopeoftheMACCanalysis,another1.5GtCO2inemissionssavingscouldbetriggeredthroughfueleconomyimprovementsintheremainingstockofvehicles,powertrainswitchestoEVsandFCEVsinvansandbuses,aswellasusingbiofuels.ByfarmostCO2emissionsinIndia’sroadtransportsectorcouldbeabatedthroughpowertrainswitchesincars,followedatsomedistancebytrucks,andtwo-andthree-wheelers.ThisisunsurprisinggiventheexistinglargestockandtheexpectedexplosivegrowthinthenumberofcarsonIndia’s12TheboundariesforemissionsintheMACCanalysesforIndiaandIndonesiaaretailpipeemissions,toensureequalIEA.CCBY4.0.treatmentamongpowertrains.PAGE44ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesroads,especiallyfrom2025.IntheAPS,thestockofcarsisprojectedtoincreasebyafactorof6by2050(relativeto2022),withthenumberoftrucksmorethandoubling,andthenumberoftwo-andthree-wheelersalmostdoubling.Figure2.8SelectedCO2abatementcostsinIndia’sroadtransportsectorintheAnnouncedPledgesScenario,2022-2050800Cost(USD/tCO2)600Cars400Switchtoelectric200SwitchtohybridSwitchtofuelcells0-200Trucks-400Switchtoelectric-600SwitchtohybridSwitchtofuelcells2/3-wheelersSwitchtoelectric5001000150020002500Potentialemissionssavings(MtCO2)IEA.CCBY4.0.Note:ThisMACCshowstheabatementcostsandcumulativeemissionssavingsoftheentirecar,truck,andtwo-andthree-wheelervehiclefleetinIndiaintheAPScomparedtotheSTEPSforthetimeframe2022-2050.Itisnotacomparisonof2050with2022butconsiderspowertrainswitchesandcostdevelopmentsannuallyfortheentiretimeframe.Itfocusesexclusivelyonpowertrainswitchesfromconventionalenginestohybrid,plug-inhybrid,batteryandfuelcellEVs.Switchestoplug-inhybridandbatteryelectricarebothallocatedto“Switchtoelectric”,whichexplainswhytherearetwodifferentcostsassociatedwitha“Switchtoelectric”.Powertrainswitcheswithanemissionssavingspotentialofbelow1MtCO2areexcluded.Thefigureshowsdirectcarbondioxideemissions.Hencetheemissionsdonotalignwiththe“well-to-wheel”frameworkforaccountingforfullfuel-cycleemissions,withimplicationsforallfuels.ArecentIEAreportanalysesthewell-to-wheelgreenhousegasemissions,demonstratingthatin2019batteryelectriclight-dutyvehicleshadthelowestwell-to-wheelgreenhousegasemissionsinallsegments.ForIndia,theelectricitycarbonintensityneedstobelowerthan700-750gCO2/kWhforthenetimpactofelectricvehicledeploymenttobepositive.ElectrificationcoulddrivemostoftheemissionssavingsintheAPS.Fortrucks,significantsavingscouldalsocomefromswitchingtofuelcells.SwitchingICEcarstobatteryelectricinIndiacouldabateanadditional1.7GtCO2comparedtotheSTEPSatanabatementcostofaround-USD120/tCO2,asbatteryEVsexperiencearapidreductionincostsandbecomecost-effectivequickly.ThiscouldleadtocostsavingsofUSD200billion,justforthispowertrainswitch.OtherswitchestoelectricinIndiainvolvecarswithhybridandcompressednaturalgasenginesswitchingtobatteryelectricpowertrains,whichcouldbeachievedatevenhighernegativeabatementcoststhanforconventionalengines.Whilemorethan200MtCO2inadditionalemissionssavingscouldalsocomefromICEcarsPAGE45IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesswitchingtohybridpowertrains13(combinationofanICEandasmallelectricpowertrain)duetotheslightlybettercarbonfootprint,thiscanberealisedonlyatasignificantabatementcostofmorethanUSD400/tCO2.Despitelowerrunningcosts,thishighcostreflectsthehigherinvestmentcostforhybridpowertrainsthanICEcars.ThisdoesnotdecreasesignificantlyintheAPSbutsavesonlyarelativelysmallamountofemissionscomparedtotheSTEPS.Inthetwo-andthree-wheelerssubsector,thealmost100MtCO2inadditionalemissionssavingscomparedtotheSTEPScouldbedeliveredatacostsavingofmorethanUSD450/tCO2,aselectrictwo-andthree-wheelersinIndiaarealreadycheaperthanthosepoweredbyICEsandwillcontinuetobecomecheaperinthefuture.Amongthetrucks(medium-andheavy-freighttrucks)subsector,electrification,followedbyfuelcelluse,couldbeasignificantabatementleverinIndia–albeittriggeredatalaterpointintimethanforcars.Assumingannouncedpoliciesandambitionsareimplementedinfullandontime,shiftingheavy-freighttrucksfromdieselICEstoelectricpowertrainscould,forexample,savearound140MtCO2atacostsavingofUSD40/tCO2overthetimeframeof2022-2050.Overall,mostoftheadditionalemissionsreductionsintheAPScomparedtotheSTEPSinIndia’struckssectorarebeingdrivenbyfueleconomyimprovementsandamodalshiftinfreight.IndonesiaInIndonesia,powertrainswitchesincars,trucksandtwo-andthree-wheelershavethepotentialtosaveanadditionalalmost1.2GtCO2ofcumulativeemissionsfrom2022to2050intheAPScomparedtotheSTEPS.ThisreflectsthesignificantlysmallerroadtransportstockandabsoluteemissionsfromthesectorcomparedtoinIndia.However,theadditionalsavingscouldberealisedonlyatanaveragemarginalabatementcostofUSD35/tCO2,translatingtoatotalcostofaboutUSD40billion.Especiallyforcars,additionalsupportforcertainpowertrainswitches–beyondthepolicysupportandcostreductionsalreadymodelledintheAPS–willberequiredtomaketheseswitchescost-effective.Subsidies,loanfacilitiesbelowmarketpricestolowertheupfrontinvestmentcost,orpricingofmorecarbon-intensivepowertrainscouldhelpinthisdirection(thefinancingsectioninChapter3laysoutthefinancingchallengesandopportunitiesinmoredetail).13Thisshouldnotbeconfusedwithaplug-inhybrid,whichisclassifiedinthisreportasanelectricpowertrain,asoutlinedinIEA.CCBY4.0.thenotesontheIndiaandIndonesiaMACCs.PAGE46ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesOverall,theanalysedpowertrainswitchescouldberesponsibleformostofthecumulativeemissionssavingsinroadtransportinIndonesiaintheAPS,withdirectelectrificationalonedrivingabout1GtCO2insavings.AlsooutsidethescopeoftheMACCanalysisforIndonesia,theremainingemissionssavingsintheAPSaredrivenbyfueleconomyimprovementsintheremainingfleetofvehicles,powertrainswitchesinvansandbuses,andtheuseofbiofuels.MostCO2emissionsinIndonesia’sroadtransportsectorcouldbeabatedthroughpowertrainswitchesincars.Thecarfleetisprojectedtoincreasefivefoldby2050,whilethenumberoftrucksisprojectedtodouble,andthenumberoftwo-andthree-wheelersisprojectedtogrowbyslightlymorethanathird.PopulationgrowthintheAPSinIndonesiaissimilarinrelativetermstothatinIndia.Therefore,thedifferenceinthetruckandtwo-andthree-wheelergrowthratesbetweenIndiaandIndonesiacanbeexplainedthroughgeographicdifferences.Indonesiareliesmoreonmaritimefreighttransportandahigherusageoflightcommercialvehiclesforlast-miledeliverycomparedtocommercialtwo-andthree-wheelersinIndia.AslightlylowereconomicgrowthrateinIndonesiaisanotherfactor.Figure2.9SelectedCO2abatementcostsinIndonesia’sroadtransportsectorintheAnnouncedPledgesScenario,2022-2050400Cost(USD/tCO2)300IEA.CCBY4.0.200Cars100SwitchtoelectricSwitchtohybrid0-100Trucks-200Switchtoelectric-300Switchtohybrid-400Switchtofuelcells2/3-wheelersSwitchtoelectric-50020040060080010001200Potentialemissionssavings(MtCO2)IEA.CCBY4.0.Note:ThisMACCshowstheabatementcostsandcumulativeemissionssavingsoftheentirecar,truck,andtwo-andthree-wheelervehiclefleetinIndonesiaintheAPScomparedtotheSTEPSforthetimeframe2022-2050.Itisnotacomparisonof2050with2022butconsiderspowertrainswitchesandcostdevelopmentsannuallyfortheentiretimeframe.Itfocusesexclusivelyonpowertrainswitchesfromconventionalenginestohybrid,plug-inhybrid,batteryandfuelcellEVs.Switchestoplug-inhybridandbatteryelectricarebothallocatedto“Switchtoelectric”,whichexplainswhytherearetwodifferentcostsassociatedwitha“Switchtoelectric”.Powertrainswitcheswithanemissionssavingspotentialofbelow1MtCO2areexcluded.Thefigureshowsdirectcarbondioxideemissions.Hencetheemissionsdonotalignwiththe“well-to-wheel”frameworkforaccountingforfullfuel-cycleemissions,withimplicationsforallfuels.ArecentIEAreportanalysesthewell-to-wheelgreenhousegasemissions,demonstratingthatin2019batteryelectriclight-dutyvehicleshadthelowestwell-to-wheelgreenhousegasemissionsinallsegments.PAGE47ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesSimilartoIndia,directelectrificationintheAPSisthemainemissionsreductionleveracrossallthreeanalysedsubsectors,withfuelcellpowertrainsfortrucksplayingalessimportantrole.Forthecarsubsector,anadditionalalmost1GtCO2couldbesavedby2050comparedtotheSTEPSatamarginalabatementcostofaroundUSD20/tCO2.BatteryelectricpersonalvehiclesexperiencearapidreductionincostsalsoinIndonesia.However,thisisnotassteepasinIndiaduetosignificantlyhigherrunningcosts,withhigherelectricitypricesinIndonesia,aslowerdeclineinthepurchasepriceofEVsandaslightlyhighercostofcapital.Anadditionalmorethan100MtCO2inemissionssavingsby2050intheAPScouldalsocomefromswitchingICEcarstoplug-inEVs(combinationofanICEwithabatteryelectricpowertrainthatneedstobecharged;intheMACCallocatedto“Switchtoelectric”)andtohybridpowertrains(combinationofanICEandasmallelectricpowertrainthatdoesnotneedtobechargedexternally).However,thiscouldberealisedonlyatsignificantabatementcostsofUSD200/tCO2andaroundUSD350/tCO2,respectively.Inthetwo-andthree-wheelerssubsector,onlyaround10MtCO2inadditionalemissionssavingsby2050intheAPScomparedtotheSTEPScouldberealised.However,thisisatahighlynegativeabatementcostduetoIndonesia’ssignificantlysmallerfleetoftwo-andthree-wheelersthanIndia’sandanalreadylargetransitionfromICEtwo-andthree-wheelerstoelectricpowertrainsintheSTEPS.TheadditionalemissionsreductionpotentialforthetrucksubsectorintheAPSisofsimilarmagnitudetoIndiawhentakingtheoverallsmallertruckfleetinIndonesiaintoaccount.Switchestoelectricandplug-inelectricpowertrainsdrivethispotential.Shiftingmedium-andheavy-freighttrucksfromdieselICEstoelectricpowertrainscouldsavearound60MtCO2atamarginalabatementcostof-USD20/tCO2overthetimeframe2022-2050.Onlyaminorshareinthetruck’ssubsectorisrealisedthroughFCEVsinIndonesia.Box2.3CriticalmineralsandtheEVsupplychainCleanenergytransitionsinroadtransportrequireastrongfocusonthesupplyofcriticalmineralssuchascopper,cobalt,nickel,lithium,rareearthelementsandaluminium.Ascleanenergytransitionsaccelerate,demandforcriticalmineralsissettosoar.IntheAPS,demandforcriticalmineralsforcleanenergytechnologiesis2.5timeshigherby2030thanin2021andquadruplesby2050,withdemandrisingespeciallyforlithium,cobalt,nickelandgraphite.EVsandbatterystoragearethebiggestdriversofthisfuturemineraldemand,followedbyelectricitynetworks.ForPAGE48IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesexample,EVsusearoundsixtimesmoremineralsthanconventionalvehicles,withthedifferencecomingparticularlyfrombatterypacks.Asthedependenceoftheroadtransportsectoroncriticalmineralsgrows,sotoowilltheimportanceofsecuringadequatesuppliesofsustainableandaffordableminerals.Withrisingmineralprices–ashashappenedinthepast2years–criticalmineralscontributetoanuptickinthetotalcostofcleanenergytechnologies,reversingalong-standingtrendofcostreductions.Inadditiontovolatilepricesforcriticalminerals,theglobalEVbatterysupplychainishighlyconcentrated,whichcanexacerbatesupplychainrisks.Theextractionofkeymineralsisoftendominatedbyasinglecountryorregion,forexample:graphite(China,79%),cobalt(Africa,76%),nickel(OtherAsiaPacific,66%),rareearthelements(China,57%)andlithium(OtherAsiaPacific,56%).Inthedownstreamsupplychain,thesituationisoftenevenmoreconcentratedgeographically,withChinadominating.GeographicdistributionoftheglobaldownstreamEVsupplychainMaterialprocessingCellcomponentsBatterycellsEVs100%75%50%25%0%CathodeAnodeBatteryproductionEVproductionLithiumNickelCobaltGraphiteChinaEuropeNorthAmericaOtherAsiaPacificCSAEurasiaAfricaUnspecifiedIEA.CCBY4.0.Note:CSA=CentralandSouthAmerica.Sources:IEA(2023),EnergyTechnologyPerspectives2023;IEA(2022),GlobalEVOutlook2022.Gettingthepricesforcriticalmineralsdownandensuringrobustandresilientmineralsupplieswillbecrucialforachievingcleanenergytransitionsinroadtransport.Greaterinvestmentinnewminesandrefineries,andcollaborationbetweenproducersandusers,willbecriticaltomeetthegrowingdemandforcriticalmineralswhilereducingcosts.Technologicalinnovationtosubstituteorreducethequantityofcertainmineralsinbatterieswillalsobeimportant.Reuseandrecyclingcanaddresssupplybottlenecksandreduceoverallmineraldemand,whilemitigatingsomeoftheadverseenvironmentalandsocialimpactsassociatedwithextractionandprocessingofcriticalminerals.Sources:IEA(2023),EnergyTechnologyPerspectives2023;IEA(2022),WorldEnergyOutlook2022;IEA(2022),WorldEnergyInvestment2022;IEA(2022),GlobalElectricVehicleOutlook2022;IEA(2021),TheRoleofCriticalMineralsinCleanEnergyTransitions2021.PAGE49IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesComparisonofmarginalabatementcostsIntheroadtransportsector,IndiaandIndonesiahavesignificantadditionalemissionsreductionpotentialintheAPScomparedtotheSTEPS,albeitatdifferentcosts.Realisingthe2.5GtCO2insavingsinIndiauntil2050couldcomeatcumulativesavingsofalmostUSD200billion.InIndonesia,itwouldcostmorethanUSD40billiontoabate1.2GtCO2.Inadditiontodifferencesintheexistingfleet,economicstructureandgeography,amainreasonforthisisthedifferenceinthedevelopmentofabatementcostsovertime–especiallyforpowertrainswitchesfromICEcarstoEVs,whichareresponsibleformostoftheemissionssavings.IndiaandIndonesiahavesimilarmarginalabatementcostsforthepowertrainswitchtoelectric.However,Indiacouldexperienceamorerapidfallintheabatementcostduetoafasterdecreaseinthepurchaseprice,drivenbythedevelopmentofdomesticmodelsforbatteryEVs.Thiscomesontopofslightlylowercostsofcapital(whichtranslateintocheaperloansforcarpurchases)inIndia(seeChapter3)andhigherrunningcostsforbatteryelectriccarsinIndonesiaduetohigherelectricityprices,especiallyforresidentialcharging.Figure2.10MarginalabatementcostfortheswitchofoneconventionalcartoabatteryelectricpowertrainovertimeinIndiaandIndonesiaintheAnnouncedPledgesScenario,2022-2050150USD/tCO2100IEA.CCBY4.0.500-50-100-150IndiaIndonesiaIndiaIndonesiaIndiaIndonesia202220302050IEA.CCBY4.0.Note:ThisgraphshowsthemarginalabatementcostofswitchingoneconventionalcartoabatteryelectricpowertrainovertimeintheAPS,comparedtotheSTEPS.IncontrasttotheMACCsabove,thisfigurefocusesonthepowertrainswitchforasinglevehicle.Theboundaryforemissionsistailpipeemissionstoensureequaltreatmentamongpowertrains.PAGE50ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesAdditionalairqualityco-benefitsofroadtransporttransitionsBeyondCO2emissionsreductions,roadtransporttransitionscanalsogeneratesignificantairpollutionandassociatedhealthco-benefits.Botharesignificantconcernsforemergingeconomies.In2021,ambientairpollutioncaused4.2millionprematuredeathsglobally.Almost2.5billionpeoplesufferedfromheavilypollutedair,inconcentrationlevelsoffineparticulatematter(PM2.5)ofmorethan35µg/m3.Ofthese,morethan60%livedinChina,IndiaandIndonesia.InChinaandIndia,morethan45%and60%oftherespectivecountry’spopulationswereexposedin2021,significantlyabovethegloballevelofone-third.Roadtransportcontributessignificantlytoairpollutionbyemittingsubstantialamountsoftailpipe-relatednitrogenoxides(NOx).Travellingthroughtheatmosphere,thesetransformintoPM2.5throughchemicalreactions.ThesectorfurthercausesPM2.5emissionsthroughtailpipe,abrasionoftyres,roadwearandroaddustsuspension.Reducingtailpipeemissionscanhavedirectpublichealthbenefits.Amajorshareofemissionsoccursinurbanareas,aswellasclosetotheground,thusdirectlyexposingmanypeopletosuchpollution.Intheselectedemergingeconomies,roadtransportemittedaround8MtNOx,whichwasone-thirdofthesector’sglobalemissions,in2021.Ofthis,thetruckssubsectorcausedtwo-thirds,followedbycars.Globally,NOxemissionsfromroadtransportaresettodecrease.IntheSTEPS,theyreduceby15%globallyby2050relativeto2021.MoreambitiousroadtransporttransitionsinlinewiththeAPSwouldallowareductionofnearly45%overthesameperiod.Importantpoliciesandtechnologydevelopmentincludevehicleelectrificationandmorestringentemissionsstandards.ChinaandIndiaareimportantdriversofthispositivedevelopment,decreasingNOxemissionsrelatedtoroadtransportuntil2050byatleast75%intheSTEPSandaround90%intheAPS.Bothcountries,aswellasBrazilandMexico,substantiallyreduceemissionsduetotrucksandbusesuntil2050,yieldingtheoverallreduction.PAGE51IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter2.RoadtransportatacrossroadsFocusonroadtransportinemergingeconomiesFigure2.11ChangeinNOxemissionsrelatedtoroadtransportby2050intheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,relativeto2021100%2/3-wheelers75%50%Buses25%0%Trucks-25%Cars-50%-75%Totalfleet-100%STEPSAPSSTEPSAPSSTEPSAPSSTEPSAPSSTEPSAPSSTEPSAPSSTEPSAPSWorldBrazilChinaIndiaIndonesiaMexicoSouthAfricaIEA.CCBY4.0.Incontrast,IndonesiaandSouthAfricashowastrongincreaseintruck-relatedNOxemissionsuntil2050intheSTEPS,outpacingreductioneffortsinothersegments.Moreambitiousroadtransporttransitionscouldsignificantlycurbthegrowthintruck-relatedemissionsinbothcountriesandachieveNOxreductionsfromthecarsubsectorinIndonesia.PAGE52IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesChapter3.ImplementingroadtransporttransitionsGovernmentsintheselectedmajoremergingeconomiesplayacriticalroleinachievingsuccessfulcleanenergytransitionsintheroadtransportsector.Whileallanalysedcountriesalreadyhaveestablishedroadtransportpolicies,additionalpotentialexistsforenhancedpolicyambitionandimplementation.Aseconomicandpopulationgrowthdrivesdemandformobilityandfreighttransport,theselectedemergingeconomieswillrequirefunctional,reliable,effective,andaffordabletransportsystems.Thereisanopportunitytoleap-frogthetransportmodelofadvancedeconomies,whichdependsonfossilfuelsandisoftendominatedbypersonalvehicles.However,thiswillrequireaddressingsomeformidablebarrierstoenhancedpolicyambitionandimplementingcertainkeytransportpolicyinterventions.Crucially,thiswillalsodependonthegovernanceoftheroadtransportsector,toensureequalopportunitiesandaccesstomobilityservicesforcitizenswhileaddressingthedecarbonisationchallenge.Thischapterdiscussesthemainbarrierstoenhancedpolicyambitionintheroadtransportsectorintheselectedemergingeconomiesanddeepdivesintothefinancingaspectsrelatedtothetransition.Itfinishesbylayingoutsixkeypolicyinterventionsthatcanhelpacceleratedecarbonisationanddevelopmentofroadtransportinthesemajoremergingeconomies.StructuralbarrierstoenhancedpolicyambitionAnimportantbarriertoenhancedpolicyambitionandimplementationinroadtransportsectordecarbonisationisitsgovernance.Theinexistenceof,oroutdated,nationwidemedium-andlong-termroadtransportstrategies,alackofclarityinthepolicydecision-makingprocessandlimitedcapacity,especiallyinimplementingagencies,canslowandrestraineffectivepolicymakingandimplementationthereof.Inthepasttwodecades,theselectedmajoreconomieshaveexperiencedremarkableeconomicandpopulationgrowthrates,whichnaturallyposesignificantchallengestoexistinginstitutionalframeworksforcriticalservices(e.g.,health,energyandtaxation).Inaddition,asroadtransportpolicymakingisanareawherejurisdictionsandcompetenciesaredispersedacrossdifferentPAGE53IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomieslevelsofgovernanceandauthorities.Alackofco-ordinationamongnational,regionalandlocalagencies,aswellasinsufficientcapacityatimplementingagencies(includingforenforcementofpolicies),cancreateabottleneckandunderminetheeffectivenessofpolicies.Alackofcentralisedandgood-qualitydataaggravatestheseproblems.Developingperiodic,solidandreliabledatacollectionprocessesincombinationwithbuildingcapacityfortheassessmentandmodellingofroadtransportdevelopmentscenariosarekeytosoundpolicymakingandthedevelopmentofambitious,yetrealistic,roadtransporttransformationstrategies.Publicsupportisalsoimportantinimplementingtransitionsintheroadtransportsector.Asmobilityandfreightdemandgrowsignificantly,designingintegratedstrategiesthatensuretheaffordabilityandequityoftransport,aswellastheacceptabilityofdifferenttransportmodes,iscrucial.Forexample,publictransportservicesneedtobeorganisedeffectivelyandprovideasafeenvironmentforcustomerswhilebeingaffordable.Thiswillenablethemtobecomeanacceptablesolutiontothepublicanddisincentivisetheunnecessaryuseofpersonalvehicles.Inaddition,toavoidsocialinequalities,removingfossilfuelsubsidiesorsettingacarbonpriceintheroadtransportsectorneedstobecombinedwithtargetedsupport(e.g.,lump-sumpayments,improvedaccesstocapital,subsidiesforEVsandpublictransport)tovulnerablehouseholds.Limitedfinancialcapacityformajorcapitalinvestmentsinroadtransportisanotherbarrier,particularlyinemergingeconomies.Thiscancomeindifferentforms:limitedpublicsectorbudgets,lackofcapitalbyhouseholds,shallowdomesticbankingsystemsandlimitedavailabilityofloans,orhighcapitalcostsforfinancingoftransportinfrastructureorvehiclepurchases.Forexample,EVstypicallyhaveasignificantlyhigherupfrontinvestmentcost(whilehavinglowerrunningcosts)thanconventionalcars.Theyarethereforemoredifficulttofinanceforhouseholdsthatdonothavethefinancialresourcesoraccesstocheapfinancing.Thestrengtheningofthedomesticbankingsectorandofhouseholds’financingconditions,theremovalofmarketdistortionsandthetargeteduseofmajorstate-ownedenterprisesfordemandcreationareimportantelementstoaddresssuchfinancialobstaclesandtochannelinvestmentsintherightdirection.Internationalfinanceinstrumentssuchasoverseasdevelopmentaid,climatefinance,multilateralfinanceandblendedfinance(includingintheformofthesuccessfullyagreedJustEnergyTransitionPartnershipswithIndonesiaandSouthAfrica)canalsobecrucialpillarstoovercomefinancingbarriers.PAGE54IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesEmergingeconomiescanfaceadditionalchallengesforenhancedpolicyambition.ExamplesincludeenergysecurityconcernssuchasthedomesticavailabilityofoilwhilehavingtorelyonimportsforEVsandfuelcellvehiclesorimportdependenciesforkeypartsofadomesticEVvaluechain.Suchconcernsdeservecarefulexaminationtoidentifymeanstoreducedependenciesandtoleverageinternationalcollaboration.Besides,exploitingopportunitiesintheemergingandgrowingEVandfuelcellvaluechainsdependingonthecountry’sresource,technologyandlabourcapabilitiesmustbetakenintoaccount.BymovingfasterthanothersinthemanufacturingofEVs,theselectedemergingeconomieshaveasignificantopportunitythatcanboostautomotiveexports,contributetoeconomicandindustrialdevelopment,andimproveproductivity.FinancingthetransitionsSuccessfullymobilisinginvestmentiscentraltoroadtransporttransitionsandtoputtingthesectorinlinewiththenetzeroandcarbonneutralitytargetsofmajoremergingeconomies.Annualend-useinvestmentinroadtransport–includinginEVsandvehicleefficiency–inthesemajoremergingeconomiesaveragedaroundUSD40billionovertheperiod2016-21.Itgrewstronglyinthelastfewyears,tonearlyUSD60billionin2021.Leadingthisinvestmentwasanalmosttriplingintransportelectrificationspendingin2019-21,withenergyefficiencyspendingremainingrelativelystable.However,moreinvestmentisneeded.IntheSTEPS,averageannualend-useinvestmentinroadtransportneedstoreachUSD110billioninthesecondhalfofthisdecade.Then,anadditional40%isneededannuallyto2050.Furthermore,tomeettheannouncedclimatetargetsbythemajorselectedemergingeconomies,annualinvestmentwillneedtoreachUSD150billionfrom2026to2030,andtooverUSD230billionannuallyby2050intheAPS.Suchasurgewouldrequiredomesticeffortstostrengthentheenvironmentforcleanenergyinvestment,aswellasinternationaleffortstoincreaseavailabilityofcapitalforlow-carbonmobilityintheselectedemergingeconomies.PAGE55IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesFigure3.1Roadtransportinvestmentcomparedtotheiraverageannualinvestmentneeds,2016-2021,andintheStatedPoliciesScenarioandtheAnnouncedPledgesScenario,2026-2030200200Annualaverageinvestment150150(billionUSD)1001005050002016-2021STEPSAPSSTEPSAPS2016-20212026-20302026-2030ChinaIndiaBrazilIndonesiaMexicoSouthAfricaElectrificationEnergyefficiencyIEA.CCBY4.0.Oftheanalysedcountries,mostoftheinvestmentcontinuestooccurinChina.Nevertheless,investmentissettogrowmorerapidlyinseveralotherselectedemergingeconomies,particularlyIndiaandIndonesia.IntheSTEPS,averageannualroadtransportinvestmentin2026-30growstoaroundUSD85billioninChina,USD15billioninIndia,andUSD2billiontoUSD5billioninBrazil,IndonesiaandMexico,whileremainingbelowUSD1billioninSouthAfrica.ThiscomparestoanannualaverageofaroundUSD35billioninChina,anduptoUSD3billioninotherselectedemergingeconomiesduring2016-21.ThefastestgrowthisexpectedinIndiaandIndonesia–tomorethanquadrupleinvestmentin2026-30comparedtotheiraverageannualin2016-21.However,toachievenationalclimategoals,countriesneedtorampuptheirannualinvestmentto2030intheAPS:20%inthecaseofChina(tooverUSD100billion),40%inMexico,50%inBrazil,80%inIndonesia,doublinginIndia(tooverUSD30billion)andalmosttriplinginSouthAfrica.Intermsofareaofinvestment,annualspendingonEVsfromthesixcountriesneedstogrowtoUSD90billionin2026-30intheAPS,comparedtoanannualaverageofUSD10billionin2016-21oraroundUSD30billionin2021.Plannedpoliciesareontracktoprovide80%ofthisinvestment,iffullyimplemented.Alargergapexistsinenergyefficiencyspending,whichneedstodoubletowards2030intheAPS,butissettoremainatthecurrentlevelwithoutfurtherpolicyefforts.Inthelongtermto2050,spendingonelectrificationissettoaccountforanincreasinglylargershareoftheinvestmentinroadtransporttransitions.However,investmentinenergyefficiencyfallsintheAPSasconventionalICEvehiclesareincreasinglysubstitutedwithEVs.Nevertheless,additionaleffortsareespeciallyPAGE56IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesrequiredtoincentivisetheelectrificationinvestmentneededoverthelongterm.Withoutsuchefforts,mostcountrieswillrealiseonlyaround60%oftheinvestmentinEVsneededfortheAPSpathway.Roadtransporttransitionsalsorequireinvestmentincharginginfrastructure.Inadditiontoinvestmentinpubliccharginginfrastructureandassociatedgriddevelopment,averageannualspendingonprivateEVchargersintheselectedemergingeconomiesneedstoincreasetonearlyUSD40billionin2026-30intheAPS.ThiswaslessthanUSD1billionannuallyin2016-21,withIndia’sprivateEVchargerspendingrisingtocomparablelevelstoChina’s(overUSD16billion),followedbyIndonesia(USD4billion).Intheoverallperiodto2050,averageannualinvestmentneedsforprivatecharginginfrastructuredoublestoaroundUSD90billionintheAPS.IntheSTEPS,spendingforprivateEVchargersisprojectedtobeonlyaroundhalfthelevelsoftheAPSinmostcountries.Theuseoflow-carbonfuelsisanotherimportantchannelforroadtransportdecarbonisation.InvestmentinliquidbiofuelsintheselectedemergingeconomiestotallednearlyUSD5billionannuallyinrecentyears,ledbyBrazilwith70%oftheshare.Mostoftheliquidbiofuelsusedareintheroadtransportsector,thoughgraduallygrowingsharesaresettobeusedassustainableaviationfuelandformaritimetransport.IntheSTEPS,investmentinbiofuelsintheselectedemergingeconomiesgrowsmoderatelytoUSD6billionby2030andfurthertriplesby2050.InvestmentscalesupsignificantlyintheAPS,tooverUSD30billionby2030andsubsequentlygrowsmarginallyto2050,withincreasedinvestmentinadvancedbiofuels.ActorsandinstrumentsAvarietyofactorsareinvolvedinshapingtheroleoffinanceandinvestmentforroadtransporttransitions.Governmentsplayacriticalroleinmobilisingandenablingcleanenergyinvestment.Theydefinethepolicyframeworkandmarketenvironmentforroadtransportandforsustainablefinance,aswellasoftenactingasanimportantsourceoffinance.Inaddition,financialregulatorsandsupervisorscanpromotesustainablefinancebydefiningorencouragingtheadoptionofclimatechangedisclosureandriskmanagementstandards,providinginvestmentincentives,andshapingrulesondebtissuanceinsupportofcleanenergytransitions.Internationalstandardsetters,suchastheFinancialStabilityBoard,theBaselCommitteeonBankingSupervisionandtheInternationalAssociationofInsuranceSupervisors,helpsetupsuchdisclosureandriskmanagementrecommendationsandsharingofbestpractices.PAGE57IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesEnergyinvestmentsinEMDEsgenerallyrelyonpublicsourcesoffinance.Thesesourcesincludepublicfinanceinstitutions,suchasdevelopmentbanksandinfrastructurefunds,whichplayimportantrolesinextendingcreditlinesandguaranteestofinancialinstitutionsandcompanies,reducingrisksandimprovingbankabilityofprojects.State-ownedenterprisesconstituteanothermajorsourceofpublicfinancinginEMDEsandareparticularlyimportantforinvestmentinregulatednetworkssuchaselectricitygrids.Theygenerallyhavelargestakesinpower,oilandgas,andindustry.Aselsewhere,cleanenergysectorsinEMDEshavesofarmostlybeenfinancedbyprivatefinance,includingcompanies,commercialbanks,privateinvestorsandconsumers.Meetingtheinvestmentneedstosupporthigherclimateambitionswillrequireanevengreaterscale-upofprivatefinance.Inthetransportsector,mostofthefutureinvestmentsintheend-usetransitionby2030–inEVsandEV-relatedenergyefficiency–areexpectedtocomefromprivatesources.Theseincludeautomobilecompanies(alsoknownasoriginalequipmentmanufacturers)andhouseholds,butgovernmentscontinuetoplayimportantrolesinmobilisingcapital.Publicfinancingcontinuestohelpde-riskandmobiliseinvestmentandsupportmarketuptakethroughpublicprocurementforvehiclefleets.Moreover,itprovidesgrantsorguaranteestoconsumersandenablinginfrastructure,suchasEVchargingstationsandmass-transitinfrastructure.Comparedtosectorssuchaslow-carbonpower,directinvestmentinroadtransporttransitionsismorelikelytocomefromdomesticsources,asvehiclepurchasesusuallyoccurlocally.However,internationalparticipationcanprovideimportantfinancingsupporttosustainabletransportinfrastructureandindustrydevelopment.Forexample,theAsianDevelopmentBankhadcommittedoverUSD18billiontoIndia’stransportsectorasofApril2022.Thissupportsalmost200projectsbymeansofloans,grantsandtechnicalassistance,withastrongfocusoninfrastructuretoimproveconnectivityandalleviatepoverty.Suchinternationalsupportcanacceleratethetransitions,withastrongerfocusonlow-carbonmobilityinfrastructure.WithrespecttovaluechaindevelopmentforEVs,investmentandproductioncapacityfromcarmanufacturersandsuppliersareconcentratedinadvancedeconomiesandChina.However,opportunitiesexistforotherselectedemergingeconomiestoattractinvestmentfromoriginalequipmentmanufacturersandtoexpandlocalmanufacturingcapacity.Inmanycases,thiswillrequiredevelopingmorefavourableregulatoryframeworksfordomesticvehiclemanufacturingandaddressingchallengesrelatedtoaccesstofinanceandimportofkeycomponents.PAGE58IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesIntermsoffinancinginstruments,investmentinemergingeconomiesreliesheavilyonequityfinancing,whileprovisionofdebtisoftenlimitedbyhigherperceivedorrealdefaultrisks,alackofprojectsmeetingbanklendingcriteriaandshallowlocalbankingsystemsandcreditmarkets.Thismeansthatforemergingeconomies,theoverallcostofcapitalisoftenhigherthanforadvancedeconomiesbecausedebtfinancingisnormallycheaperthanequity.Inadditiontotheshallowerbankingsystemsandcreditmarketsandtheassociatedcurrencyriskforinternationallenders,debtprovidersreceiveinterestpaymentsandhaveapreferredrepaymentstatusinthecaseofinsolvencyordefault.Thistranslatesintoausuallylowerriskpremiumfordebtinvestmentsthanequity,thusloweringthecostofcapital.Giventhisdifficulty,domesticpublicandmultilateralfinancialinstitutionssuchastheWorldBank,itsInternationalFinanceCorporationortheAsianDevelopmentBankcanplayanimportantenablingfunctioninthisinvestmentsegmentbyprovidingdebtfinanceorunderwritingdebtinvestments.However,governmentshavearesponsibilitytoimprovedomesticbankingsystemsandassociatedcreditmarkets.Atamicrolevel,increasingdebtfinancingoptionssuchascarloansforconsumers,whichcanhelpwithfinancingthehigherupfrontcostsofZEVs,iscrucialtofacilitatemarketuptake.Formorenascenttechnologiesrequiredforlong-termdecarbonisationoftheroadtransportsector,blendedfinancefromdevelopmentfinanceinstitutionssuchasconcessionalfundsandguaranteesplaysanimportantrole.Providingsuchfundsandguaranteescanhelptoenableandleverageprivateinvestmentbyde-riskingandsupportingfirst-of-a-kindprojectsinEMDEs.Astechnologiesmatureandbusinessmodelsemerge,exportcreditagenciesandlargerinstitutionalinvestorscanactasfinancingsourcesforlargerprojectsthroughprojectfinancingstructuresandlong-termofftakeagreements.BarrierstoscalingupinvestmentFinancingroadtransporttransitionsinlinewiththeannouncedclimateambitionsofthemajorselectedemergingeconomiescontinuestofacebarriers.Theseareoftenrelatedtocross-cuttingpolicyandregulatoryfactors,developmentofcapitalmarketsandfinancingcapacityincountries.Strengtheningpolicyframeworksiscrucialtoaddressthebarriersandscaleupinvestmentfortransition.Cross-cuttingfactorssuchascleanenergytransitionsplanning,pricesignalling,marketstructureandbroadergovernanceareimportantfactorsforinvestmentdecisions.Whilealltheselectedemergingeconomieshaveimplementedsomepoliciestosupportroadtransportdecarbonisation,thissectorhasnotnecessarilybeenapriorityfornationalemissionsreductionstrategies.PAGE59IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesInaddition,thesectormaylackholistic,long-termplanningwithafocusondecarbonising.Thiscouldleadtopoliciesthatsendmixedsignalsforinvestment,suchaspoliciesaimedatfacilitatingtheuptakeofallkindsofvehiclesratherthanfocusingonZEVsorpublictransport.Fossilfuelsubsidiesareaprominentexampleofnegativepriceincentivesforsustainabletransport.Suchsubsidiestilttheplayingfieldagainstinvestmentincleanenergies,whilealsoconstrainingfiscalcapacityfrominvestingintransition.Inaddition,challengesrelatedtogovernanceandadministration,suchasuncertaintyoropaqueregulation,contractualenforcement,andcomplexitiesinlicensingandpermittingprocessesespeciallyforprivateorforeignactors,tendtodeterinvestors.Besides,thisincreasesfinancingcostsandlengthensprojectdevelopment.Furthermore,someEMDEsmaintainrestrictionsonforeigninvestment,marketaccessandownership,thuslimitingthepotentialroleofinternationalcapital.HighercostofcapitalisanimportantbarriertoexpandingcleanenergyinvestmentandimprovingaffordabilityoftransitionsinEMDEs.ExceptforChina,theotherselectedemergingeconomiesfaceequityfinancingcoststhataretwotothreetimeshigherthanthoseofEuropeortheUnitedStates,anddebtfinancingcoststhatare7%higherormore.Theselevelsreflectmultiplefactorsincludingperceivedcountryrisksandthematurityoftheirfinancialsystems.Inadditiontohighercosts,thistranslatestogreaterchallengesinaccessingdebtfinanceandofferingadequatereturnsonequity,despiteabundantglobalcapital.Ahighcostofcapitalcanhaveanespeciallylargeimpactoncleanenergyinvestments,whichofteninvolvehighupfrontcosts,andwhicharemoresensitivetofinancingcosts.Globalinflationarypressuresin2022haveaggravatedthismatter,ascentralbanksaroundtheworldincreasedinterestrates(withsomeexceptions,suchasChina).Higherinterestratesmeanhigherfinancingcostsforgovernments,corporatesandconsumers.Inaddition,inflationincreasesthecostsofrawmaterialsandproducts,thusrequiringmoreinvestment.PAGE60IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesFigure3.2Indicatorsofcostofcapitalfordebt(left)andequity(right),2016and2020Governmentbond+countrydefaultriskGovernmentbond+equitymarketriskpremiumSouthAfricaIndonesiaIndiaBrazilMexicoChinaUnitedStatesGermany-5%0%5%10%15%0%5%10%15%20%20162020IEA.CCBY4.0.Note:UnitedStatesandGermanyhavebeenincludedforcomparisonpurposes.Source:IEA(2021),Thecostofcapitalincleanenergytransitions.EMDEstendtohaveshallowerbankingsectorsandfinancialmarketsthanadvancedeconomies.Thisconstrainsaccesstocapitaltofundcleanenergytransitions.Theleveloffinancialsectordevelopmentvariesacrosscountries.AssessedbasedontheshareofprivatebankcredittoGDPandtheshareofstockmarketcapitalisationtoGDP,ChinaandSouthAfricahavebetteraccesstofinancethantheglobalaverage.Incomparison,Brazil,India,IndonesiaandMexicohaveshallowfinancialsystems.Moreover,localbankingsectorsinEMDEsoftenlackthecapacityandexpertisetoevaluatetheriskandreturnprofileofcleanenergyprojects.Thistendstoreduceaccesstocapitalandincreasecosts.Inaddition,debtfinanceinEMDEsistypicallymoreconstrainedforconsumers,andsmall-andmedium-sizedenterpriseslackaccesstoformalcreditmarkets,thusincreasingtheirfinancingcosts.Thisconstitutesanimportantbarrierforadoptinglow-carbontransportsolutions,despiteimprovedtechnologymaturityandcost-competitivenessoveravehicle’slifetime.Inmostmajorselectedemergingeconomies,EVpurchasesremainachallengeformanyconsumersintheabsenceofgovernmentsupport.ThisisduetothehighupfrontcostscomparedtoconventionalICEvehiclesandthelackofaccesstocheapfinancingoptionssuchasloans.Emergingeconomiesarealsomorelikelytofaceinsufficientresources–financialorfiscal–toacceleratethedeploymentofinfrastructurerequiredforsustainabletransport.SuchinfrastructureincludesEVchargingstationsandhydrogenrefuelingstations,whicharecrucialforEVsandfuelcellvehicles.Long-tenuredebtisoftennotavailablefrom(orto)localbanksinEMDEs.Forexample,loansPAGE61IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesinSoutheastAsiahaveanaveragedurationofjustoversixyears.Thismakesitdifficulttofinanceinfrastructurethathaslongoperatinglifetimesof20-30years.Publicfinancehasacriticalroleinco-financingandreducingrisks,especiallyforinfrastructureinvestments.However,manyEMDEstendtohavelimitedfiscalcapacityduetotheinabilitytoraisesufficientlycheapcapitalthroughdebtissuanceonfinancialmarkets.Recommendationsforstrengtheningtransitions’financingInadditiontosettingclear,ambitiousandintegratedcleanenergystrategiesfortheroadtransportsector(seethesectiononkeytransportpolicyinterventions),removingmarketandpricingdistortionsthatcontraveneascale-upincleanenergyinvestments,suchasfossilfuelsubsidies,isessential.Establishingthecorrectpricesignalstoreflectthefullcostsoffossilfuels,includingphasingoutfossilfuelsubsidiesandgraduallyintroducingcarbonpricingtoreflectthecostofcarbonemissions,isessentialtodiscouragewastefulfuelconsumptionandincentivisecleanenergy.Phasingoutfossilfuelsubsidieswillalsohelpfreeupfiscalcapacity,andcarbonpricingcangeneraterevenuetoinvestintransitionmeasuresandenablinginfrastructure.Whilesubsidyandmarketreformsareoftenpoliticallychallenging,strongstakeholderengagementandtargetedprotectionforvulnerablesegmentsofthepopulationcanensureequityandsupportpoliticalacceptability.LeveragepolicyandpublicfinancingsupporttoaccelerateinfrastructuredevelopmentAsinfrastructureprojectsoftenrequirehighupfrontinvestmentandlongconstructionperiods,aswellasfaceuncertaintiesonfuturerevenues,strongpolicycommitmentandinvolvementofpublicfinancingcanreducerisksandattractadditionalprivateinvestment.Public-privatepartnerships(PPPs)canbeanimportantinstrumenttoscaleupinfrastructureinvestment.Forexample,IndonesiahasidentifiedPPPsasanimportantmechanismtoencourageprivateinvestmenttomeetoverhalfofthefundingneedsfor2020-24inaddressingthecountry’sinfrastructuregaps.Ithasestablishedacomprehensivepolicyframeworkandgovernancestructure,toimprovetheattractivenessofPPPsforprivateinvestorsthroughgreatertransparencyandclarityontheprocess.ItalsoestablishedadedicatedunitforPPPmanagementwithintheMinistryofFinance.ThisissupportedbyseveralpublicfinancinginstrumentssuchasPTSaranaMultiInfrastrukturandPTPenjaminanInfrastrukturIndonesia.Bythesemeans,PAGE62IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesIndonesiacanprovideloans,guaranteesandtechnicalassistance,andimprovegovernanceandtransparencyforguaranteedprovision.StrengthensustainablefinanceframeworksCreatingtaxonomiesonsustainablefinanceandenhancedriskdisclosureandassessmentcanstrengthensustainablefinanceframeworks.Countriesaredevelopingtaxonomiestoclassifyactivitiesandassetscontributingtocleanenergytransitionsorfinancialrisksassociatedwithclimatechangeandtoguideinvestment,including“green”,“carbon-intensive”and“transition”taxonomies.Forexample,ChinaissuedaGreenBondEndorsedProjectsCatalogue,lastupdatedin2021,toguidefinancialinstitutionsandcorporatesontheissuanceofgreenbonds.By2020,over70%ofgreenbondsissuedinChinafollowedthecatalogue.Indialauncheditssovereigngreenbondsframeworkin2022,earmarkingproceedsforenvironment-friendlyprojectsincludingcleantransportation.ThecountryraisedUSD1billioninitsfirstgreenbondsale,achievingalowerborrowingcostthanforaconventionalbondofsimilarmaturity.Indonesia’s2022GreenTaxonomyisoneofthecountry’sfirstpolicyattemptstoencouragetheprivatesectortoprioritisegreeninvestments.Itemploysatrafficlightsystemtoindicateanactivity’salignmentwithnationalenvironmentobjectives.EnhanceavailabilityofdebtfinanceandstrengthenthedomesticbankingsectorMakingdebtfinancemoreaccessibletotheprivatesector(includinglonger-durationloans)throughthedevelopmentofcorporatebondmarketscanplayanimportantroleinreducingthecostofcapitalforcleanenergytransitionsprojects.IncreasingtheavailabilityofcarloanstohouseholdsforpurchaseofZEVsisalsoimportant.Forexample,theStateBankofIndialaunchedadedicatedprogrammetosupportEVpurchases,offeringadiscountof0.2%forEVloanswithatenureofupto8years.Itisplanningtoreplaceitscurrentcarloanprogrammeswith100%EVcarloanprogrammesby2030.Atthesametime,itisimportanttostrengthenthecapacityofthelocalbankingsector–especiallywithregardstocreditappraisalsforcleanenergyprojects–tooptimisecapitalallocationinlinewithcleanenergytargets.Todoso,somecountrieshaveestablisheddedicatedinstitutionsorinstruments.Forexample,theClimateFinanceFacility(CFF)inSouthAfricaisaspecialisedlendingfacilitytoincreaseprivateinvestmentinclimate-relatedinfrastructurePAGE63IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesprojects.Itsupportsprojectsthatarecommerciallyviable,butwhichareunabletoattractmarket-ratecapitalatscalefromlocalcommercialbanksbyusingcreditenhancementinstrumentssuchaslong-termsubordinateddebtandtenureextension.ScaleupinternationalsupportforcatalysingtransitionsinEMDEswithlimitedfiscalresourcesAlongsidecountryeffortstoachievetransitions,strongerinternationaleffortstochannellowercostandlonger-termcapitalarerequired.Theseincludeenhancingstrategicmandatesoncleanenergytransitionsforinternationalfinancialinstitutions(e.g.,multilateraldevelopmentbanks)andincreasingtheuseofblendedfinancetoleverageprivatecapital.Thesecouldbecomplementedwithcapacitybuildingeffortsforlocalfinancialmarkets,withafocusoncreditappraisalsandriskmanagementforcleanenergyprojects.TherecentlyagreedIndonesiaandSouthAfricaJustEnergyTransitionPartnershipsofferstrongexamplesofinternationalco-operationinfinancingcleanenergytransitionsinemergingeconomiesandleveragingprivatecapital.Whilethetwopartnershipsfocusonthepowersectortransition,themodelcouldbeexpandedtothetransportsector.KeyroadtransportpolicyinterventionsAroadtransportdecarbonisationpathwayinlinewiththeAPSintheselectedmajoremergingeconomiesrequiressignificantlyenhancingexistingpoliciesandintroducingadditionalpoliciesinmostoftheselectedcountries.Beyondtherecommendationsforstrengtheningfinancingfortheroadtransporttransitions,thissectionlaysoutsixpolicyareaskeytothesetransitionsandprovidesmeasuresandgoodpracticestofacilitateknowledgesharingamongcountries.Table3.1SummaryofkeyroadtransportinterventionareasandmeasuresfortheselectedmajoremergingeconomiesInterventionareaMeasureEnsureholisticlong-termplanningforthetransportsectorGeneraltransportpolicymakingEnhanceinstitutionalco-ordinationacrossjurisdictionallevelsAvoidfossilfuelsubsidiesandintroducedifferentialpricingPublictransportandtransportdemandEnhanceamodalshifttopublictransportandactivemobilityElectrificationofcarsandtwo-/three-DecarbonisepublictransportwheelersImplementdemand-sidepoliciestoacceleratemarketdemandPAGE64IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesInterventionareaMeasureVehicleefficiencyImplementsupply-sidepoliciestoincreasemarketavailabilityofEVsRoadfreighttransportStrengthenbuildoutoftheEVcharginginfrastructureBiofuelsFinanceAdoptandregularlyupdatefueleconomystandardsDevelopappropriateandstringenttestproceduresDesignfueleconomystandardsfortrucksDriveinnovationinanddeploymentofzero-emissionfreighttrucksEncouragemodalshiftandimprovelogisticsImplementpoliciestosupportbiofueluptakePromoteinnovativeandsustainablebiofuelsLeveragepolicyandpublicfinancingsupporttoaccelerateinfrastructuredevelopmentStrengthensustainablefinanceframeworksEnhanceavailabilityofdebtfinanceandstrengthenthedomesticbankingsectorScaleupinternationalsupportforcatalysingtransitionsinemergingeconomieswithlimitedfiscalresourcesStrengtheningtransportpolicymakingEnsureholisticlong-termplanningforthetransportsectorRobustdecarbonisationoftheroadtransportsectorrequiresholisticlong-termplanningthatalsoinvolvesothermodesoftransportsuchasrail,aviationandshipping.Acomprehensiveandinclusivelong-termplantodecarbonisetheroadtransportsectorrequiresaligningtransportpolicywithurbaninfrastructureandotherinvestmentplanning,aswellaswithallstakeholders.Technologyimprovements,modalshifts,demandmanagementandeffectivegovernanceoftransportpolicyareessentialcomponentsofcleanroadtransporttransitions.Countriesshoulddevelopanoverarching,holisticstrategyfortransportdecarbonisation(e.g.,anationaltransportplan),andshoulddosoinaninclusivemannerinvolvingallstakeholders.Suchastrategyhelpstoprovideaclearandcrediblevisionforthesectorandidentifiesmilestonesthatneedtobeachievedagainstadefinedtimeline,aswellasthepoliciestoenabletransitions.Suchanationaltransportplancanenhancetransparencyandpolicypredictabilityforregionalandlocalgovernments,manufacturers,investorsandconsumers.ThisisimportantforinvestmentsintechnologyR&Dandinfrastructure,marketuptakeforlow-emissionvehiclesandZEVs,andcrucially,thepoliticalacceptabilityofroadtransporttransitions.PAGE65IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesOneexampleofsuchanationalcleantransportplanisSouthAfrica’sGreenTransportStrategy.Itformulatestheambitiontobuildasafe,efficient,reliableandaffordabletransportsystemthatenablessustainablesocio-economicdevelopment.Itpromotesbehaviouralchangestowardssustainablemobilityalternativesthroughinformationcampaignsandinvestmentsinlow-carboninfrastructure.Italsoseekstoenhancefreightmodalshiftbysettingsub-sectoraltargetsforthefreightsector.Dedicatingaspecificsectiontotransportinnationallong-termclimatechangemitigationstrategiesisanotherpossibilitytodevelopaholisticvisionforroadtransportdecarbonisation.CostaRica’sNationalDecarbonisationPlanfor2018-50identifiestransportasanimportantareaforclimateaction,namingpublictransportandactivemobilityschemes,zero-emissioncarsandamodalshiftinfreighttransportasthefirstthreeoutoftenopportunitiesfordecarbonisationandsettingshort-andlong-termambitionsforeachofthem.Countriescouldalsoseektoalignstrategiestodecarbonisethe(road)transportsectorwithnationallong-termclimatetargetssuchasnetzeropledgesandnationallydeterminedcontributions(NDCs).14Oneapproachtolinkthesetwocouldbetodevelopsectoralpathwaysfor(updated)NDCs.WhilenearlyallNDCsmentionthetransportsector,only53%ofthemrefertospecificmeasurestoachievetheirmitigationtargetsinthetransportsector.Forinstance,BangladeshandColombiahavesetunconditionalemissionsreductiontargetsfor2030fortheirtransportsectors,layingoutmitigationmeasurestheyintendtoimplement.Colombiaaimstomitigate4MtCO2-eqbydeploying600000EVsby2030.Bangladeshtargetsadecreaseof3.4MtCO2-eqby2030throughreducingtrafficcongestion,improvingfuelefficiencyandpromotingmodalshift.Enhanceinstitutionalco-ordinationacrossjurisdictionallevelsImplementingcomprehensiveroadtransporttransitionsrequireseffectiveinstitutionalco-ordinationandcollaboration.Roadtransportisaconcurrentpolicyareainmostjurisdictions,andsomeinstitutionshaveresponsibilitiesrelevanttotransport.Effectiveco-ordinationacrosstopicareas(e.g.,transport,energyandenvironmentpolicy)andacrossgovernmentlevels(e.g.,national,regionalandlocal)candecreasecostsandenhanceoutcomes.Forinstance,manytransportministriestraditionallylackknowledgeonclimatechangepoliciesandcouldbenefitfromcapacitybuilding.Cross-ministerial14NDCsembodytheeffortsbyeachcountrytoreducenationalemissionsandadapttotheimpactsofclimatechange.TheIEA.CCBY4.0.ParisAgreementrequireseachPartytoprepare,communicateandmaintainsuccessiveNDCsthatitintendstoachieve.PAGE66ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesco-ordinationgroupscanhelpwithtransferringrelevantknowledgeandintegratingitintopolicymaking.Effectiveco-ordinationacrossgovernmentlevelsisparticularlyrelevant,asmanytransportpolicydecisionsaretakenonasubnationallevel.Havingadedicatednodalagencycanenhancethelinkingofpolicymakersfromthedifferentgovernmentlevels.Forexample,intheUnitedStates,theJointOfficeofEnergyandTransportationco-ordinatesactivitiesbetweentheDepartmentofEnergyandtheDepartmentofTransportationwhilecollaboratingwiththeirrespectivestate-levelcounterparts.AvoidfossilfuelsubsidiesandintroducedifferentialpricingHolisticandco-ordinatedpolicymakinginthetransportsectorwiththeaimtodecarboniseshouldalsoavoidcontinuingorimplementingdistortiveincentives.Thismeansphasingoutfossilfuelsubsidies,especiallyfortransportoil,withsimultaneoustargetedsupportforvulnerablehouseholds.Forexample,Indiasuccessfullyusedaperiodofrelativelylowoilpricesin2014and2015tophaseoutsubsidiesfortransportoils.Introducingacarbonpricecouldreinforceshiftingtheincentivebasistowardslow-carbonfuelsandtechnologiesintheroadtransportsector–againbysimultaneouslyprovidingtargetedsupportforvulnerablehouseholds.TheEuropeanUnionispioneeringthisbyintroducinganEmissionsTradingSystem(ETS)forroadtransportandbuildingswhileprovidingtargetedsupportthroughaSocialClimateFund.PromotingpublictransportanddemandmanagementEnhanceamodalshifttowardspublictransportandactivemobilityAmodalshiftfromprivatelyownedvehiclestopublictransportmodessuchasbusandrailservices–inurbanandruralenvironments–ispartandparceltomanagingthedemandforcarswhilemeetingneedsforsafemobilityandreducingcongestion.Thisrequiresthebuildoutofpublictransportsystemsthroughincreasedpublicinvestmentsintransportinfrastructureandstringentinclusioninurban–andinterurban–planning,aswellassettingappropriateincentivesfortheuseofpublictransportandensuringasafeenvironmentforitsusers.Notableexamplesincludecreatingbusrapidtransit(BRT)systemswithseparatebuslanesonpublicroads.Urbancentresstrugglewithpopulationgrowthandtrafficcongestion,andsuchsystemsoftenallowcustomerstoreachtheirdestinationsfasterthanwithothermodesoftransport.ThishasbeensuccessfullyimplementedinJakarta.AnothersuccessfulexampleistheCuritibaBRTsystemPAGE67IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesinBrazil,openedin1974,whichiswidelyregardedasoneofthefirstBRTsandwhichinspiredothercitiessuchasBogota,JakartaandMexicoCitytodeveloptheirownBRTsystems.ThesysteminBogotanowtransportsalmost2millionpeopleonanaveragebusinessday,andthoseinJakartaandMexicoCitytransportaroundonemillionpeopledaily.Transportbyrailisanothereffective,thoughsignificantlymorecapital-intensive,modetosatisfymobilityneeds.Itoftenrequiressignificantinvestment,whichcouldbeaworthwhileinvestmentfocusforblendedfinance(capitalprovisionfromdevelopmentbanksandprivatefinance).Forexample,onthebackofitsstrongeconomicgrowth,Chinahasconstructedmorethan42000kmofhigh-speedrailway.Thishasimprovedsubstantiallytheinterconnectivityofitsmajorcitiesandprovinces,displacingdemandforairandroadtravelandensuringtheaffordabilityofmobilityforlargepartsofthepopulation.TheGovernmentofIndiaisalsoaimingtoimproveitsrailnetwork,especiallyincities,inresponsetoincreasingurbanisation:about4000kmofmetroandsuburbanrailwaysarealreadyoperating,withanother1000kmunderconstruction.Suchdevelopmentofurbanpublictransportshouldalsobecombinedwithencouragingandenablingactivemobilitysuchascycling,walkingorotherinnovativemobilitymeasurestolimittheuseofprivatecartransportforshort-distancetrips.Upgradingorcreatingthenecessaryinfrastructurelikepavementsandcyclelanescanprovideanincentivetosafelyswitchthemodeoftransportandcanbecombinedwithadditionalincentivesandencouragementtoacceleratebehaviourchange.Forexample,Colombiaadoptedalawin2016thatprovidesemployeeswithhalfapaiddayoffforevery30timestheycycletotheoffice.ManycitiesinadvancedandemergingeconomiesalsousedtheCovid-19pandemicasanopportunitytoaccelerateamodalshifttoactivemobilitybytransformingsomecarlanestocyclelanesandgivingmorespacetopedestriansonpublicroads.MexicoCityhaspursuedthisstrategyespeciallyactivelybyaddingaround50kmofbikecyclelanes2020alone.Thecapitalcitynowaimstoincreasethelengthofitscyclelanestoreach600kmby2024.Box3.1MobilisingfinanceforpublictransportinfrastructureinEMDEsInthepasttwodecades,financingnewinfrastructureforpublictransportinEMDEshasofteninvolvedpublicfinancethroughpublicprocurementprogrammesorstate-ownedenterprises.However,fiscalconstraintsinemergingeconomiesPAGE68IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesincreasinglylimitsuchanapproach,forcingarethinkonhowtofinancethebuildoutofpublictransportinfrastructure.SomeEMDEprojectshavebeensuccessfulinusingalternativefinancinginstrumentssuchasgrants,early-stageequity,greenbonds,PPPsandjointventures.Forexample,Indiaissuedagreenbondin2017throughitsstate-ownedIndianRailwayFinanceCorporationtofinancelow-carbontransportprojects,raisingUSD500millionfrominternationalinvestors.Developmentfinancecanalsobeanavenuetomobilisefinanceforpublictransportinvestments.The2021PeshawarSustainableBusRapidTransitCorridorProjectinPakistanaimstoconstructthecity’sfirstBRTsystemtoimprovemobilityandairqualitywhilealsoreducingtrafficcongestion.IthasreceivedalmostUSD500millionfromtheAsianDevelopmentBankandtheFrenchDevelopmentAgency.Ontopofthis,regionalpartnershipsamonglike-mindedcitiescanpromoteknowledgesharing,developmentofregionalindustriesandmobilisationofinvestments.Forinstance,theZeroEmissionBusRapid-deploymentAcceleratorpartnershipofmajorLatinAmericancitiesinBrazil,Chile,ColombiaandMexicosecuredmorethanUSD1billionininvestmentcommitmentsfromprivateinvestorstoacceleratethedeploymentofzero-emissionbuses.Besides,itsecuredcommitmentsfrommajormanufacturessuchasVolvoandBYDtorampupproducingsuchvehiclesfortheregion.Anotherwaytofinanceespeciallycapital-intensivehigh-occupancyrailisthroughcapturingincreasesinlandvaluegeneratedbygreaterconnectivityandactivityinareasthatareconnectedtorailnetworkssuchashigh-speedrailandmetrosystems.Forexample,HongKong’spublicoperator,theMassTransitRailway(MRT)Corporation,generates60%ofitstotalrevenuesfromnon-transportsources.DecarbonisepublictransportIEA.CCBY4.0.Apreconditionforanydecarbonisationeffectassociatedwithmodalshiftistheswiftpublictransportdecarbonisation.Thiscanalsogeneratesignificantairpollutionco-benefits.Electrificationofbuses–andanyremainingdieseltrains–isimportantforthis,withelectricbusesinmostselectedemergingeconomiesreachingsharesofupto55-85%ofthebusstockby2050intheAPS.PublicprocurementrequirementsforZEVs,subsidiesforthepurchaseofelectricbusesandCO2standardscansupportthisshift.AsuccessfulexampleisthebulkprocurementprogrammerunbyIndia’spublicsectorjointventureEnergyEfficiencyServicesLtd.Itpurchasedmorethan5000electricbusesataPAGE69ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiescompetitivepriceowingtothesizeoftheorder.Itisnowplanningtotenderapurchaseof50000busesoverthenextfiveyears.Acceleratingcarsandtwo-andthree-wheelerselectrificationImplementdemand-sidepoliciestoacceleratemarketdemandIncreaseduseandrelianceonpublictransportintheselectedemergingeconomiesdoesnotoffsettheexpectedgrowthintheuseofpersonalvehicles.Manycitizensinthesecountriesareyettopurchasetheirfirstmotorisedpersonalvehicle.BringingdowncostswillthereforebecriticaltoachievingEVuptakeatscale.EventhoughEVandbatterycostshavedeclined,EVsremainmuchmoreexpensiveintheiracquisitionthancomparableICEmodels.MajorEVmarketssuchasthoseofChina,Germany,Japan,UnitedKingdomandUnitedStateshavebeensubsidisingEVpurchasesforyears.Otherselectedemergingeconomiesarealsostartingtointroduceorexpandsuchpurchasesubsidies.IndiaextendeditsflagshipFAMEprogrammein2019,therebysecuringpurchaseincentivesuntil2024;andin2021,itraisedthesubsidyforelectrictwo-wheelers.IndonesiaplanstobeginsubsidisingEVpurchasesin2023.Insomecountries,upfrontincentivesarealsoprovidedatthesubnationallevel.Severalcountries,includingChina,CostaRica,India,IndonesiaandUkraine,alsoreducepurchasetaxesforEVs,tolowerupfrontcosts.Subsidiescanberelatedtoincome(asdoneinCalifornia)orlimitedtoEVsbelowacertainthresholds(asdoneinIndia),toensuretheyreachthosethatneedthemmost.AsbatterypricesandEVcostsfall,subsidiescanbegraduallyreducedandphasedout.Chinaintroducedanation-widesubsidyprogrammein2013.However,tolowercosts,ithassinceintroducedannualcapsforeligiblevehicles.Recognisingtheincreasingcost-competitivenessofEVs,thesubsidyhasbeenphaseddownintheformofabasesubsidyamountreductionof10%,20%and30%eachyearfrom2020to2022.China’ssubsidyschemeincentiviseslonger-rangebatteryEVsovertime,withtheeffectthattheaveragerangeofbatteryEVssoldhasincreasedby50%since2016.Despitedecreasingsubsidies,EVsalesinChinahavecontinuedtoincrease,profitingfromstrongdomesticproductionandlowerpricepoints.TherearealsopolicyinstrumentsthathelppushdemandforEVswithoutputtingaburdenonpublicfinances.Oneexampleistheestablishmentofzero-emissionzones–areaswhereonlyZEVs,pedestriansandcyclistsaregrantedunrestrictedaccess.Mostlow-emissionzonesestablishedorannouncedareinEurope,butthismaychangeinthefuture.PAGE70IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesThetownofKevadiainIndiaplanstoconvertpartofthetownintoazero-emissionzone.TheChinesecitiesofBeijingandShenzhenhaveestablishedlow-emissionzonesforfreightvehicles,whileFoshanandLuoyanghaveannouncedplanstodoso.GovernmentscanalsoestablishcertainprivilegesforEVowners,suchasaccesstospecialparkingareas(includingpreferentialparkingrates),accesstopreferentiallanes(suchasbusortaxilanes)orreducedratesontollroads.Targetingdailyoperationaloron-dutyvehiclesforgovernmentofficialsacrossthecountry,IndonesiahasmandatedtheuseofbatteryBEVsandstartedtoswitchvehiclesin2022.TheGovernmentofDelhihasalsoproposedafleetmandateinadraftregulationofJuly2022,requiringcompaniesrunningdeliveryandtransportationbusinessestoelectrifypartoftheirvehiclefleet,withtherequiredsharesincreasingovertime.PrioritisinganearlytransitionoffleetvehiclescanalsohelpestablishausedmarketforEVs.Thiswouldmakeelectriccarsavailableatamoreaffordablecostforalargerportionofthepopulation.Implementsupply-sidepoliciestoincreasemarketavailabilityofEVsInadditiontofacilitatingtheavailabilityofEVs,supply-sidepoliciessuchasproductionincentives,standardsandmandatescanhelpincreasetheavailabilityofEVmodelsonthemarket.AlackofmodelsdetersconsumersfrompurchasingEVs,evenwhenadequatepurchaseincentivesandcharginginfrastructureareinplace.Supply-sidepoliciesalsoplayaroleincountrieswithanautomotivemanufacturingbase,wherebatteryandEVmanufacturingcanbecomeasourceofeconomicgrowthandcompetitiveness.Indiaprovidessupply-sideincentivesformanufacturingofEVs,EVcomponentsandbatteriesthroughproduction-linkedincentives,withabudgetoutlayofmorethanUSD5.5billion.Similarly,ThailandprovidesmanufacturerswithsubsidiesofuptoUSD4500perproducedEV,andUSD500forelectricmotorcycles,toencourageinvestmentandEVdeployment.Inaddition,tocombatlocalskilledworkershortages,theThaigovernmenthashalvedtheincometaxrateto17%forskilledforeignprofessionalsworkingintargetindustriessuchasthenextgenerationautomotivesindustryuntil2032.StringentregulatoryframeworkscanalsopushcarmanufacturerstopivotfromICEtoEVmodels.FueleconomyandCO2emissionsstandardsareimportanttoolsinthisrespect(seeChapter2).Somejurisdictions,includingCaliforniaand14otherUSstatesaswellasChina,haveadoptedmandatorytargetsonEVPAGE71IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiessales.15Californiaalsoadoptedtheworld’sfirstsalesrequirementsfortruckmanufacturers.Itfurthermoreaimstobanthesaleofnewcarspoweredbyfossilfuelsasof2035,similartoEUtargets.16InAsia,SingaporeissettobecomethefirstcountrytoimplementanICEbanby2030,andChina’sHainanProvincetargetstheexclusivesaleofnewenergyvehiclesby2030.Indonesiahasalsoannouncedthatitaimstosellonlyelectriccarsandmotorcyclesby2050.Globally,aboutone-quarterofthecarmarketissubjecttoa100%ZEVsalesambitionoranICEbanby2035.StrengthenbuildoutoftheEVcharginginfrastructureSuccessfulEVdeploymentrequiressufficientandreliablecharginginfrastructure.Policymakersthereforeneedtoensuresufficient,reliableandeasy-to-usecharginginfrastructureisavailable.TheIEAGlobalEVOutlook2022findsthat,globally,onaverage,10electriccarsareservedperpubliccharger.Thishaswideregionalvariability,forexample:7inChina,14intheEuropeanUnion,18intheUnitedStatesand32inIndia.Standardisingchargersandaccessibilitytoallplugsisessentialtoinitiatethewidedevelopmentofcharginginfrastructure.RegulationsthatopenandallownewactorsandbusinessmodelsaroundcharginginfrastructuretoinvestcanaccelerateEVuptake.Publicprocurementcanbeanenablingsteptodevelopcharginginfrastructureavailableforallusers.Asmentionedpreviously,India’sFAMEIIbudgetsaboutUSD130millionforpubliccharginginfrastructure,withtheobjectivetoinstall3000publicchargingstationsthroughoutthecountry.TheMexicangovernmentprovidesa30%taxreturnincentivetotaxpayerswhoinvestinachargingstationthatispubliclyaccessible.Whilepubliccharginginfrastructureiscritical,mostchargingtakesplaceathomeandattheworkplace.By2030,90%ofchargersworldwideareexpectedtobeprivatechargers.Toincentivisetheseprivateinvestments,manycountriesprovidesomeformofsubsidyortaxreduction.CanadaisinvestingUSD500millioninitsZeroEmissionsVehicleInfrastructureProgrammetoco-funddeployingchargingandhydrogenstationsinworkplacesandmulti-unitresidentialbuildings.Inaddition,provisionsinbuildingcodestoencouragechargingfacilitiesandthe“EV-readiness”ofbuildingsarebecomingmorecommon.15Targetsaresetviaannual“ZEVcredits”thatautomakersneedtoreachasapercentageoftheirannualvehiclesales,withIEA.CCBY4.0.thenumberofcreditsearnedperEVsolddependingonthetypeofvehicleandattributessuchasbatteryrange.16TheEUFitfor55packageincludesaproposalfor100%ZEVsby2035throughitsCO2emissionsstandard,effectivelybanningICEsales.PAGE72ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesBatteryswappingisanalternativetostandardcharginginstallations,anditsuseisincreasinginemergingeconomies.ItallowsforthesaleofEVswithoutbatteries,loweringtheupfrontpurchasecostandmakingthevehiclesmoreaffordable.Chinaisleadingthebatteryswappingindustry,withabout1400swappingstationsalreadyinstalled.Itsindustryaimstoinstall26000stationsby2025,fosteredbyautomotivestandardisationandsubsidiesspecificallyforbattery-swapEVmodels.Indiaalsoaimstorampupbatteryswappingandpublishedadraftbatteryswappingpolicyin2022.Indonesiaisexploringtheuseofusebatteryswappingmodelstoacceleratetheelectrificationofitsfleetoftwo-andthree-wheelers.Emergingeconomiesmayfacechallengestoensureelectricityaccessandstablegridconnections,toprovethatEVsareareliableformoftransportation.Thus,supplyreliabilityandgridpointsaremajorenablingfactorsforelectrification.MorematureEVmarketsalsoneedtoensureawell-connectednetworkisdevelopedtoprovideEVchargingaccessinurbanandruralareas,aswellasinimportanttransportcorridors.Accesstothegrid,alongwithsupportingbuildingregulations,interoperabilitystandardsandefficientpermitting,caneaseinfrastructuredevelopment.Collectingdataonmobilitypatternscanhelptounderstandchargingpatternsandbehaviours,tooptimiseEVnetworkplanningandoverallgridmanagement.Inaddition,technologiessuchasvehicletogridenableEVbatteriestofeedelectricitybacktothegrid,flatteningtheelectricitydemandcurvethroughouttheday.EnhancingfueleconomystandardsAdoptandregularlyupdatefueleconomystandardsFueleconomystandardshavehadasignificantimpactonfossilfuelusewheretheyhavebeenappliedstringently.Tobesuccessful,thosestandardsmustbesetatsufficientlyrigorouslevels.Fueleconomystandardsforcarsandtwo-andthree-wheelersshouldideallybefleet-based.Theyareusuallyadoptedascorporateaveragefueleconomy(CAFE)standards,appliedtoacompany’snewvehiclesales.Ifsetatasufficientlystringentlevel,thisdesigncanpushmanufacturerstopivottoZEVsandlow-emissionsvehiclesinsteadofimprovingthefuelefficiencyofvehicleswithICEs.Nexttoensuringsuccessfulimplementation,fueleconomystandardsalsoneedtoberegularlyupdatedandtightened.Thiswillhelptoachievegreateremissionsreductionsinlinewithincreasingclimateambitionsandtokeeppacewithnewtechnologydevelopment.UpdatesshouldbeadoptedwellbeforethenewtargetPAGE73IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesyear(about2-4yearsahead),togivesufficienttimeformanufacturerstoplanproduction,whichiscriticalforcompliance.Forinstance,theUnitedStatesreleasednewCAFEstandardsin2022thatrequireafuelefficiencyincreaseof8%annuallyforvehiclesalesin2024and2025and10%for2026.Similarly,theEuropeanUnionadoptedanupdatein2019,strengtheningfueleconomystandardsforpassengervehiclesby15%in2025andby37.5%in2030comparedto2021.TheEUFitfor55initiativeproposedtotightenthelattertoa55%reduction.DevelopappropriateandstringenttestproceduresDesigningatestprocedureandputtinginplacetherequiredinfrastructuretoconductsuchtestsisaprerequisitefordesigningfueleconomystandards.Themethodusedtomeasurefueleconomyorcarbonemissionsstronglyaffectstheenvironmentalstringency.Vehicleshaveahigherfuelconsumptionunderreal-worlddrivingconditionscomparedtoinlaboratorysettings.Therefore,afueleconomystandardbasedonatestprocedurethatreflectsreal-worlddrivingconditionswouldresultinahigherabsolutevaluethanoneadoptedbasedonlaboratorytestingconditionswhilehavingthesameenvironmentalimpact.Inrecentdecades,advancedeconomieshavedevelopedtheirowntestprocedures,whichhavesincebeenusedbyemergingeconomiesandadaptedtolocaldrivingconditions.ExamplesincludetheUScombinedcycle,usedinBrazilandMexico,ortheNewEuropeanDrivingCycle,originallyimplementedinanadjustedforminChinaandIndia.Therehasbeenprogressinharmonisingtestmethodologiesacrossjurisdictions.TheUnitedNationsWorkingPartyonPollutionandEnergyadoptedtheWorldwideHarmonisedLightVehicleTestProcedure,designedtorepresenttypicaldrivingcharacteristicsaroundtheworld.TheEuropeanUnionadoptedaregulationin2017tomovefromtheNewEuropeanDrivingCycletotheWorldwideHarmonisedLightVehicleTestProceduretobetterreflectreal-worlddrivingconditions.Asthefirstmajoremergingeconomy,ChinahasmovedtostandardsbasedontheWorldwideHarmonisedLightVehicleTestProcedureforpassengercarsin2021.Box3.2Fueleconomystandardsfortwo-andthree-wheelersTwo-andthree-wheelersplayanimportantroleintheroadtransportsectorofemergingeconomies.Inthesecountries,two-wheelersenablethesurgeinprivate,motorisedmobility.In2021,thesegmentaccountedfornearlythree-quartersoftotalroadtransportactivityinIndonesia,two-thirdsinIndiaandone-fifthinChina.Three-wheelerscaterformobilityservicedemandandlast-milegoodstransport.PAGE74IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesInIndiaandIndonesia,thesegmentaccountsformorethan40%oftotalgasolineconsumption,despitehavingsubstantiallysmallerenginesandalowerenergyfootprintthanothervehicletypes.Two-andthree-wheelersaresettobefront-runnersinroadtransportelectrification.Electricmodelsarealreadycost-competitiveinmostmarkets.Nevertheless,mostmodelssoldstillrelyongasoline.Inaddition,thereisatrendtotheuptakeofheaviermodelsthatarelessfuelefficient(e.g.,inChinaandIndia).Fueleconomystandardscouldensurefueleconomyimprovementsamongmodelspoweredbyfossilfuels.Ifsetasfleet-basedstandards,theycanalsohelptopushelectricmodelscost-efficientlyintothemarket.Sofar,amongtheselectedemergingeconomies,onlyChinahasmandatedfuelconsumptionstandardsfortwo-andthree-wheeledvehicles.Thecountryhaslong-standingexpertiseinsettingfueleconomystandards.Itadoptednationalstandardsformotorcyclesandmopedsin2008.Standardswererevisedin2019,comingintoeffectin2020.Targetvaluescovergasoline-anddiesel-poweredvehiclesandaresetinatieredapproachbasedonenginesize.Standardsfortwo-wheelersrangefrom1.8L/kmto6.8L/km,andthoseforthree-wheelersrangefrom1.8L/kmto8.0L/km.Giventhecrucialroleoftwo-andthree-wheelersintheirroadtransportsectorandthelimitedinternationalexperience,emergingeconomieshaveauniqueroletoplayinthedesignandharmonisationofinnovativestandardsforthisvehicletype.Advancedregulationstobettercontrolthefleet’sfuelconsumptioncouldboostroadtransporttransitions.Suchregulationswouldallowthosecountriestoshareinternationalbestpractices,especiallywithcountriesthatarepoisedtoexperienceasurgeinprivatemobilitydemandinthenearterm.Startingtosystematicallymonitorthesegment’sfuelconsumptioncanhelptoadoptsuchstandardsinthefuture.VietNamisoneofafewcountriesthathasmandatedfuelconsumptionlabellingfortwo-wheelers.Issuedin2018,theregulationtookeffectin2020andappliestoallnew,domesticallymanufacturedorimportedtwo-wheelerspoweredbyfossilfuels.InIndia,benefitsanddesignoptionsoffueleconomystandardsfortwo-andthree-wheelersarebeingdiscussed.Withtheintroductionoftighterairpollutantemissionsstandards(BharatStageVI)in2020,therewillbearequirementtoupgradeengineswithmoremodernfuelinjectionsystems.Thiswillopenasignificantopportunityforfuelefficiencyimprovementsingasoline-fuelledmodels.Electricmodelscouldhelpmanufacturerstomeetfleet-basedtargetsmorecost-efficiently,inparticulariftheyaregranted(modest)supercreditsintheformofamultiplier(e.g.,anelectricscootercountstwiceinacompany’stwo-wheelersales).PAGE75IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesDesignfueleconomystandardsfortrucksDesigningefficiencyregulationsfortrucksismorecomplexthanforcars.Significantvariationsinvehicletype,size,configuration,missionprofileanddutycyclecreatedifficultiesindevisingtestproceduresandevaluatingperformance.Fueleconomystandardsforheavy-dutyvehiclesarethereforeusuallysetonaper-modelorper-vehiclebasisandnotasacorporateaverage.Thegreatestchallengeisthedesignofstandards,whileenforcementandcomplianceonthemanufacturers’sideislessproblematicthanforcars.In2020,theInternationalCouncilonCleanTransportationpublishedastepwiseguideonhowtoapproachthedesignoffueleconomystandardsforheavy-dutyvehicles.Againstthisbackdrop,manyjurisdictionsinadvancedandemergingeconomieshaveadoptedandimplementedfueleconomystandardsforheavy-dutyvehicles,providingvaluableexperienceforothercountries.Withnearly3millionsalesin2021,Chinaistheworld’slargestnationalmarketfortrucks.Ithasissuedthreestagesofprogressivelymorestringentstandards,startingin2012withStage1and,since2019,withStage3.Japanestablishedthefirstmandatoryfuelefficiencystandardsfortrucksin2006,followinga“top-runner”approachinwhichthestandardsaresetbasedontheperformanceofthebestvehiclesinthemarketinthebaselineyear.TheUnitedStatesadopteditsfirstphaseoffueleconomystandardsfortrucksin2011,updatedthestandardsin2016,andthecurrentstandardsarevalidupto2027.StandardsforheavytrucksinIndiaweresettobeimplementedinatwo-phaseapproach.However,enforcementofthePhaseIIstandardshasbeenputonhold,owingtostrongpush-backfromtheautomotiveindustry.ThismeansthatPhaseIstandardshavenowbeenre-notifiedandwillcontinuetoapply.DecarbonisingroadfreightDriveinnovationinanddeploymentofzero-emissionfreighttrucksRoadfreight,especiallybyheavy-freighttrucks,isthehard-to-abatesubsectorwithinroadtransport.AchievingsignificantdeploymentofZEVsinroadfreightisamilestoneindecarbonisingtheentiresector.Thisisparticularlythecaseintheselectedemergingeconomieswhereeconomicandpopulationgrowthisexpectedtodrivefreightdemandsignificantlyhigheroverthecomingdecades.DecreasingthecostsofelectricandfuelcelltrucksandimprovingtheirmarketmaturitythroughinvestingpublicR&Dfundingareessentialtoinducelarge-scaledeployment.PAGE76IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesForexample,throughitsHydrogenEconomyRoadmap,Koreaaimstoinvestoverthenexttwodecadesindevelopingfuelcelltechnologyandconstructingmassproductionsystemsthatcouldput30000fuelcelltrucksonthecountry’sroadsby2040.IntheUnitedStates,theDepartmentofEnergyisprovidingUSD100millionuntil2025throughitsSuperTruck3initiativetopioneerbatteryelectric,plug-inhybridandfuelcelltrucks.PublicR&Dfundingintendstofundprojectsthatarenotyetmarketreadyandtoenableandcomplementprivatesectorfunds.In2021,R&DinvestmentsbygloballylistedcompaniesinthetruckssubsectorreachedmorethanUSD16billion,withafocusonbatteriesandfuelcells.Venturecapitalinvestmentincleanenergystart-upsfocusedonlow-carbonmobility,energystorageandbatterieshasalsobeenincreasing.Ofcourse,publicfundingisnotalwaysreadilyavailable.TheNetherlandsisdemonstratinganovelwaytoraisefundsforinnovation.In2023,itintendstoimplementanationalHeavyGoodsVehicleLevy.Thelevelwilldependupontheairpollutantemissionclassofthevehicle–rangingfromEUR0.08/kmforlow-emissionsvehiclestoEUR0.26/kmforconventionaltrucks.TherevenuesraisedflowintoaninnovationfundthataimstofinanceinnovativetechnologiesforZEVs.Implementingzero-emissiontruckregulationsandstandardscanalsoincentivisemarketdemandforelectricandfuelcelltrucks.BindingtargetssuchasCalifornia’sAdvancedCleanTrucksRegulationcanprovideimportantmedium-andlong-termsignalstothemarket.Throughthisregulation,thestateofCaliforniarequiresatleast30%ofheavy-freighttrucksalestobefromZEVsincertainmarketsegmentsby2030andasmuchas75%by2035.Indoingso,thestatesetsthesetargetsbyapplicablevehiclecategoriesandzero-emissionpowertrainswhilealsoprovidinginterimmilestones.SuchpublicandprivatesectorR&Dinvestments,aswellasmarketregulations,canbecombinedwithdomestic,regionalorglobalpartnershipprogrammesthatcreateanecosystemofregulators,manufacturersandresearchorganisationstoaccelerateinnovationinthetruckssubsector.Forexample,theUS21stCenturyTruckPartnershipaimstoencouragethedevelopmentoftechnologiesthataremoreenergyefficient,andwhichhaveloweremissionsbypromotingcollaborativeR&Damonggovernmentandindustrypartners.TheGlobalCommercialVehicleDrivetoZeroprogrammeseekstoincreaseambitionbysettingtargetsonthesaleofzero-emissionmedium-andheavy-dutyvehicles.Itssignatoriescommitto100%zero-emissionnewtruckandbussalesby2040.PAGE77IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesEncouragemodalshiftandimprovelogisticsAsChapter2illustrated,eveninanAPSpathway,electricandfuelcelltrucksareexpectedtobecomeeconomicallycost-effectiveabatementoptionsinthecomingdecades.Thisisdespitetheincreasingpublicfundinginsuchascenario.Modalshiftoffreighttransportfromroadstolower-carbonmodessuchasrailwaysandinlandwaterwayscanthereforehelptoachieveapeakandeventualdecreaseintruckemissions.Thisisespeciallysountilelectricandfuelcelltrucksbecomeeconomicallymoreaffordableintheselectedemergingeconomies.Withthedevelopmentoftargetedpolicyinterventionstoincentivisemodalshiftoffreighttransport,publicpolicycanacceleratesuchashiftandhelpmanagetheenvironmentalimpactoftheexpectedincreaseinfreightdemandintheselectedemergingeconomies.Suchinterventionscanincludestringentfueleconomystandardsandpricinginstrumentssuchasfuelexcisetaxesandcarbonpricing.TheEuropeanUnionannouncedinDecember2022aprovisionalagreementtocreateanEmissionsTradingSystemforroadtransport.Thisshoulddecreasethecost-competitivenessofroadtransporttothefavourofrailandwaterwayfreighttransport,whilealsoincentivisingdevelopmentofZEVs.Tosoftenthepriceimpactonvulnerablehouseholdsandenterprises,thepricelevelwillbemaintainedbelowEUR45/tCO2,andaSocialClimateFundwillofferadditionalsupportfortemporarydirectincomesupportandinvestmentsinZEVs.Incentivisingthemodalshiftofroadfreighttransportwillhavetobeaccompaniedbyinvestmentsinrailandshippinginfrastructureshouldtheexistinginfrastructurenotbesuitedtoasignificantincreaseinfreightactivity.ImprovingtheflowandlogisticsofroadfreighttransportcanbeanotherlevertooptimiseroadfreighttransportandmitigatesomeofitsCO2emissions.ThroughmoderntechnologysuchasGlobalPositioningSystemtracking,roadagenciesandfreightcarrierscanreduceroadcongestion,guideroadfreightflowsandimproveinteractionwithfreighthubssuchasportsaswellasothermodesoftransportsuchasships.InBrazil,thePortoLogsystemhasbeencollectingfreightmovementdatatoimproveportlogisticsthroughoptimisingthearrivalofshipsandcargoatterminalswithprogramminguncongestedaccessoftruckstotheport,thusminimisingwaitingtimesforshipsandtrucks.ThisissupportedbytheCanalVerdeprogramme,whichimplementedelectronicsurveillanceofcrucialhighwaystomonitorandimprovetheflowoftrucks.PAGE78IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesBoostingtheuptakeofsustainablebiofuelsImplementpoliciestosupportbiofueluptakeWhiletheroleofbiofuelsremainsimportantinthemediumterm,theoverarchingtargetisthelarge-scaledeploymentofZEVs.PoliciessuchastheEUsalesbanofICEvehiclesby2035andseveralothercountries’pledgestointroducesimilartargetswillaffectandquestiontheroleofbiofuelsinroadtransportinthelongerterm.Thiswillalsodependonexistingdevelopmentsandinvestmentsinbiofuelswithinjurisdictions.Mostoftheselectedemergingeconomieshaveadoptedaformofblendingobligationforbioethanolandbiodieselthatincreasesinthenearfuture.Whilenon-bindingblendingtargets(e.g.,aspartofpolicyroadmaps)canhaveapositiveeffectonbiofueluptake,blendingmandatesremainanimportantpolicyinstrumenttoacceleratebiofueluseanddemandbyimposinglegallybindingstandards.TheBrazilianNationalBiofuelsStrategy(RenovaBio),adoptedin2017,setsquantifiablecarbonintensitytargetsontransportationfuels(areductionforbiodieselfrom24.2gCO2/MJin2019to21.1gCO2/MJby2032).RenovaBiorewardsbiofuelswithlow-carbonintensity17bycreatingaframeworkfortrackingandcompliancewithcarbonemissionstargets,aswellascertificatesreflectingenergyefficiencyandcarbonintensityofbiofuels.Financialincentivesrepresentanadditionalinstrumenttofosterdemand.Indonesiasubsidisesdomesticbiodieselconsumptiontosupportitsblendingmandates,aimingtooffsetthepricedifferencebetweenbiodieselandconventionaldiesel.Indiaexemptsbiofuelsfromitsfuelexcisetax.Statedincentivesareparticularlyeffectivewhenintegratedwithpoliciesthatenableconsumptionandtechnologicalinnovation,suchasintheformofanuptakeofflexible-fuelvehiclesinBrazil.ThesevehiclesareoptimisedtorunonanymixofbioethanolandmakeupmostoftheregisteredcarsinBrazil,representingtheworld’slargestflexible-fuelfleet.PromoteinnovativeandsustainablebiofuelsForthefutureapplicationofbiofuelsinalow-andzero-emissioneconomy,consideringlife-cycleemissionsandsustainabilitycriteriaofthefueliscrucial.Generally,feedstocksuchassugarcanedoesnotdirectlycompetewithfoodproductionandperformsratherwellfromalife-cycleGHGemissionsperspective.However,theuseofbio-oils,particularlypalmoil,canbemorecontroversial.Intermsoffeedstocksupplyshortagesandincreasingpricesforagriculturalstock,17Brazilranksthecarbonintensityofbiofuelsbasedonlife-cycleemissionsofthedifferentinputresources.PAGE79IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesadvancedbiofuels–basedonnon-foodcropsandagriculturalresidues–presentanattractivealternativeandshouldbepromoted.Governmentprogrammesandindustryinnovationwillneedtoimprovesupplychains,seekoutnewsuppliesanddevelopnewproductiontechniques.Brazilisresearchinginnovativenon-foodmaterialsforbiofuelsproduction,alsoknownassecond-generationoradvancedbiofuels.RecommendationsforIndiaandIndonesiaIndiaDevelopanationaltransporttransitionstrategyandestablishaco-ordinationmechanismforpolicyimplementationacrossjurisdictionallevelsIndiafacesthechallengeofboostingitstransitiontoalow-carbonroadtransportsector,whilemeetingthesurgeinprivatemobilitydemandandtheincreaseinfreightactivitylinkedtoagrowing,urbanisingandrapidlydevelopingpopulation.However,Indiadoesnothaveanoverarchingdecarbonisationstrategyforitstransportsector;itslastnational-leveltransportplandatesto2010.Revivingsuchlong-termandnational-levelplanningforthetransportsectorwouldbeimportanttoprovidingaclearvisionforthesectoranditsstakeholders.ThiscouldbedoneasaseparatenationalplanningdocumentorbydevelopingsectoralpathwaysandtargetsforitsNDC.India’sautonomousstatesalsoplayanimportantroleincountry’sroadtransporttransitions.Therefore,effectiveco-ordinationmechanismsamongnational,stateandevencitylevelswillberequiredtoturnnational-levelplanningintoreality.Indiacouldparticularlybenefitbyexchangingbestpracticesacrossstates.Onewaytoinstitutionalisethisandtohelpwithco-ordinationacrossjurisdictionallevelswouldbetoconsidercreatinganodalagencytoleadandaidpolicymakingrelatedtoroadtransport.State-andcity-levelgovernmentswillbecrucialactorsinpushingthedevelopmentofpublictransportinfrastructurethatcanmitigatesomeoftheincreasingdemandforpersonalvehiclesand,hence,slowenergydemandgrowth.PAGE80IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesRenewthefocusontruckelectrification,enhanceregulatorycertaintyandimproveaccesstofinancingbyleveragingpublicfundsPromotingvehicleelectrificationisanimportantleverforIndia’sroadtransporttransitions.Onthedemandside,theFAMEschemereducestheupfrontpurchasepriceofEVstostimulateearlyadoptionandmarketcreation.Onthesupplyside,twoproduction-linkedincentiveschemesprovidefundingtoboostIndia’sEVmanufacturingindustry.Targetsandsubsidypackageshavealsobeenintroducedtopromotecharginginfrastructuredevelopment.Inthefuture,Indiacouldfocusonsupportingitstruckfleetelectrification,forexample,bysettingupbulkprocurementprogrammes,liketheoneforelectricbuses.Indiawillneedtomobilisesubstantialinvestmenttoachievelarge-scaletransportelectrification.AnannualspendofoverUSD16billioninEVswillbeneededin2026-30intheAPS,andasimilaramountwillberequiredforprivatechargers.ThiscomparestoanannualspendofUSD0.2billioninEVsandprivatechargersin2016-21.CurrentpoliciesareontracktoachievejustoverhalfoftheinvestmentneedsoftheAPS.EVfinancingcontinuestofacechallengesmainlyrelatedtolackofregulatorycertainty,perceptionofhighriskandlackofriskmitigationmechanisms,andlimitedavailabilityoftargetedfinancinginstruments.Inadditiontoimprovingregulatorycertaintyandcontinuingexistingpolicysupport,Indiacouldimproveaccesstofinancingandhelpaddresstheupfrontcostbarrier.ThiscouldbedonebyincludingEVsinprioritysectorlending,providingcreditguaranteesorutilisationguarantees,andloweringinterestratesfortargetedvehicletypes.Enhancingthesustainablefinanceframeworkandtechnicalcapacitiesinthebankingandfinancialsectoroncleanenergyprojectsisalsoimportant.Itwouldsupportabroadersetoflow-carbonsolutionsandenablethesector’stransitioningeneral.Broaden,regularlyenhanceandstrictlyenforcefueleconomystandardsIndiahasimplementedfleetaveragefueleconomystandards–knownasCAFEstandards–forcars.Manufacturershaveoverachievedthese,andhencetheyhavehadlittleeffectinpushingEVsintothemarket.Beyondthealreadyimplementedtighteningofthestandardsin2022,designimprovementsinthepassengervehiclesegmentcanhelptodrivetheuptakeofEVs.Thesecouldinclude:(i)regularlyupdatingthestandardsforcarstoincreasetheirstringency,(ii)settingafinancialpenaltyofsufficientmagnitudeincaseofnon-complianceand(iii)implementingfueleconomystandardsfortwo-wheelers.PAGE81IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesIndia’srecentlyadopted2022EnergyConservation(Amendment)Billis,forthefirsttime,stipulatingfinancialpenaltiesfornon-compliancewithfueleconomystandards.InadditiontotheelectrificationofIndia’sdiesel-relianttruckfleet,continuousimprovementofthetruckfleet’sfueleconomyiscriticalforitsdecarbonisation.Enforcingadoptedfueleconomystandardsfortheheavy-dutyvehiclesegmentisessentialtorealisethis.Indiahasdevelopedfueleconomyregulationsforfreighttrucksasper-vehiclemodelstandards.However,enforcementhasbeentemporarilyhaltedduetostrongpush-backfromtheindustry.FueleconomystandardswillbeanimportantdrivertoensureannualinvestmentinvehicleefficiencydoublestoUSD6billionin2026-30undercurrentpolicies–comparedto2021–andadditionallyrisestoalmostUSD16billionasrequiredundertheAPS.Combinedwithfueleconomystandards,developingandadoptingadvancedbiofuelsthroughtheexpansionofcompatiblevehicles,reinforcedblendingtargetsandappropriatefiscalpoliciescould,intheshortterm,helpIndiaslowtheemissionsgrowthinitsroadtransportsectorwhilealsomitigatingoilimportdependency.Importantly,thisshouldbecombinedwithsustainabilitycriteriathatassesstheGHGemissionsperformanceoftheseadvancedfuelsandsupporttheuseof,forexample,domesticwasteandresiduesintheproductionofsuchbiofuels.IndonesiaElaboratethenationaltransporttransitionstrategyandimplementfueleconomystandardsTodecarboniseroadtransportemissions,Indonesiawillneedtosignificantlyenhanceitsroadtransportpolicypackageandbalancedecarbonisationwithmeetingsurgingdemandformobilityandfreighttransport.Thisshouldinvolveelaboratingalong-termtransporttransitionstrategy–buildingonthetransport-relatedelementsdevelopedforthe2021Long-TermLow-EmissionsDevelopmentStrategy.Energyefficiencywillalsobeanimportantelementinthisendeavour.Nofueleconomystandardsexisttoincentivisecarmanufacturersandimporterstosellmoreefficientvehicles.Thisresultsinarelativelyhighleveloffuelconsumption(8.8litresofgasolineequivalent(Lge)per100kmonaverageforpassengercars),significantlyhigherthaninIndia(6.5Lge/100km)andtheworldaverage(6.7Lge/100km).ImplementingfueleconomystandardsbeforetheendofthisPAGE82IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesdecadecoulddrivetheaveragefueleconomyfornewcarsdownto5.9Lge/100kmby2030,comparedto6.6Lge/100kmintheSTEPS.Standardscouldalsohaveasignificantimpactontrucks.IntheAPS,theaveragefueleconomyofheavytruckscoulddecreaseto29Lge/100kmby2030–adropofmorethan17%comparedto2021.Inaddition,thebuildoutofpublictransportinfrastructureespeciallyinurbancentresiscrucialtomitigatefuelconsumptiongrowthwhilealsotacklingtrafficcongestion.AccelerateelectrificationofthefleetandincentivisedevelopmentofthedomesticEVvaluechainAnotherleverforIndonesia’svehiclefleetdecarbonisationisitselectrification.Indonesiaisoneofthefewemergingeconomiestohaveannounceda100%salessharetargetforelectrictwo-andthree-wheelers,aswellascars,by2040and2050,respectively.Toreachthesetargets,IndonesiawillneedtoscaleupitsEVproductionandcreatetheappropriatemarketdemand.Thiscanbedonebyprovidingmarketincentivestoimprovethecompetitivenessofespeciallycarsandtrucks,includingsubsidiesasdevelopedinotherselectedemergingeconomieslikeChinaandIndia.Thedeploymentofcharginginfrastructurewillalsobeanimportantenablerforitsfleetelectrification.ThedevelopmentofanEVsupplychainisanothercrucialfactorinthisandforthecompetitivenessofIndonesia’seconomy.Thecountryalreadyoccupiesleadingpositionsincertainelementsofthisfuturesupplychain,forexampleintheprocessingofnickel.Localcontentregulations,asrecentlyadopted(80%forelectrictwo-/three-wheelersandEVsby2026and2030,respectively),canprovideadditionalsupportforcreatingalocalEVproductionsupplychain.However,theyshouldbecarefullydesignedtoavoidtradeconflictsandtoavoidunderminingthelong-termcompetitivenessofalocalEVindustry.ConsiderphasingoutsubsidiesfortransportwhileprotectingvulnerablehouseholdsAcompletephase-outoffossilfuelsubsidiesshouldalsobeconsideredinthetransportsector.ThiswouldcreatealevelplayingfieldforEVsandfuelcellvehiclesandprovidetherightincentivesforinvestmentsandconsumption.In2021,IndonesiaspentUSD13billiontosubsidisetransportoil,mostlyonvalue-addedtaxexemptionsforgasoline.ProgressivelyremovingthesesubsidieswouldenablethegovernmenttofinanceincentivesforEVsandfuelcellvehicles,aswellasforcleanenergymanufacturing.PAGE83IEA.CCBY4.0.ImplementingCleanEnergyTransitionsChapter3.ImplementingroadtransporttransitionsFocusonroadtransportinemergingeconomiesInthelongterm,thiscouldbecomplementedbyintroducing,forexample,acarbonpricefortheroadtransportsectorcoupledwithappropriatesupportmeasuresforvulnerablehouseholds.Thatwouldboostthecost-competitivenessofEVsandfuelcellvehicles,whichwillrequireadditionalsupporttobecomecost-effective,evenintheAPS.ItcouldalsoreducefueldemandinIndonesiaandreduceoilimportdependencybyextension,whilegeneratingrevenuesforthegovernment.LeveragepublicfundsinaclearandtransparentmannertoaccelerateprivatefinanceinvestmentsTransitionswillrequireconsiderableinvestmentinvehicleefficiencyandEVsinIndonesia,whichneedtogroweightfoldtooverUSD4billionannuallyin2026-30intheAPScomparedtoin2016-21.Infrastructureinvestmentisalsoneededtoenableelectrification,asisinvestmentinpublictransportandactivemobilityalternativessuchaswalkingandcycling.Indonesianeedstosendaclearsignaltoprivateinvestors,withtransparentpolicyandregulatoryframeworks,andusepublicfundingstrategicallytoleverageprivateinvestment.Thiscouldincludeusingpublicprocurementtoscaleupmarketdemandfornewtechnologiesandprovidingloanguaranteestode-riskprojectsinpriorityareas.IndonesiacouldalsoenhancesustainabilitycriteriaandintegratetransporttransitionsprioritiesinitsPPPframeworktoleveragethesystemtoacceleratedevelopmentofcharginginfrastructureandpublictransportsolutions.Improvingaccesstoaffordableandlonger-termfinancingwouldbeimportanttoacceleratinginvestmentincleanenergyprojects.ItcouldalsosupportconsumerstoovercomethebarrierofhigherupfrontcostsofmoreefficientEVs,suchasthroughpurchasesubsidies,whichcanbefinancedbyrepurposingfossilfuelsubsidiesorintroducingEVloanprogrammes.PAGE84IEA.CCBY4.0.ImplementingCleanEnergyTransitionsAnnexFocusonroadtransportinemergingeconomiesAnnexAbbreviationsandacronymsAPSAnnouncedPledgesScenarioBRTbusrapidtransitCAFEcorporateaveragefueleconomyEMDEemergingmarketanddevelopingeconomyEUEuropeanUnionEVelectricvehicleFAMEFasterAdoptionandManufacturingofHybridandElectricVehiclesGDPgrossdomesticproductGHGgreenhousegasICEinternalcombustionengineIEAInternationalEnergyAgencyMACCmarginalabatementcostcurveNDCnationallydeterminedcontributionNOxnitrogenoxidesPMparticulatematterPPPpublic-privatepartnershipR&DresearchanddevelopmentSTEPSStatedPoliciesScenarioSUVsportsutilityvehicleUSUnitedStatesWEOWorldEnergyOutlookZEVzero-emissionvehicleUnitscarbondioxideEuroCO2grammesofcarbondioxideperkilometreEURgrammesofcarbondioxideperkilowatthourgCO2/kmgrammesofcarbondioxidepermegajoulegCO2/kWhgigatonneofcarbondioxidegCO2/MJkilometreGtCO2litresofgasolineequivalentkmlitresofgasolineequivalentper100kilometresLgelitresperkilometreLge/100kmmilliontonnesofcarbondioxideL/kmmilliontonnesofcarbondioxideequivalentMtCO2milliontonnesofnitrogenoxidesMtCO2-eqmilliontonnesofoilequivalentMtNOxMtoePAGE85IEA.CCBY4.0.ImplementingCleanEnergyTransitionsAnnexFocusonroadtransportinemergingeconomiesEJExajoulettonnetCO2tonneofcarbondioxideUSDUnitedStatesdollarµg/m3microgrammespercubicmetreIEA.CCBY4.0.PAGE86InternationalEnergyAgency(IEA).ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualMembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.Forfurtherinformation,pleasecontact:climate.change@iea.org.SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/contactTypesetinFrancebyIEA-August2023Coverdesign:IEAPhotocredits:©Shutterstock

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