The smart steps needed to close a €1.5trn transport investment gap

Following a summer that’s served as a stark reminder of climate challenges faced, and a Cop27 summit where serious doubt was cast over our capacity to limit global warming to 1.5 degrees, it’s clear that any truly smart city needs to have the decarbonisation agenda front and centre.   

With transport activity (much of it concentrated in urban settings) currently accounting for around a fifth of greenhouse gas emissions across the EU, decarbonisation of our land, air and sea networks marks a pressing priority.   

The European Commission, recognising the vital role of private investors, estimates that €1.5trn in investment will be needed to facilitate a net zero, sustainable EU-wide transport network by 2050.

Time is of the essence, and the global competition to attract inward investment is growing, so the question facing EU policymakers today is: how can we close that investment gap in good time? 

Working with our expert members, we’ve detailed a series of recommendations that speak to that very challenge. As we did so, we found three overarching themes emerging.  

First, the ever-present investor call for fair, constructive, understandable regulatory frameworks that pave the way for project delivery.   

Unfortunately, there are too many examples of where this approach is absent. To give just one, consider the trajectory of the EU wind turbine market over the course of this year.

Whilst policymakers keep investors on tenterhooks as they work through proposals for energy price caps and the decoupling of gas from electricity prices, sales of turbines plummeted 36% in Q3 2022 (compared to the same period last year) against a backdrop of surging inflation and borrowing rates.

From a transport perspective, that translates into a massive loss in renewable energy capacity to facilitate the green hydrogen, manufacture of clean vehicles, and electric power networks that will be fundamental to achieving FitFor55 targets.   

Second, the need to streamline EU funding instruments to make them accessible for all relevant projects. Between the Connecting Europe (CEF), Structural and Investment (ESIF), Regional Development (ERDF), Cohesion (CF) and InvestEU funds, it can be hard for investors to know which way is up when seeking support for decarbonisation initiatives.

Lessons should be learnt from where a mix of public and private funding is making progress possible (especially in areas where market viability may not exist yet, but will in future) such as the €5.2bn EU hydrogen IPCEI initiative. 

And third, demand for a strong project pipeline. The money is there – dry powder held by global investors is estimated to have quadrupled to just shy of $300bn in the ten years to 2021 – what investors need is a clear cross-party, long-term map for delivery.     

Embrace those three principles and we can make decarbonised transport, and decarbonisation in the round, a reality for smart cities across the EU and beyond.

This article is based on a piece that originally appeared in Mediaplanet.