Repowering Transport report: rapid increase in global transportation expected to cause up to 40% more oil consumption by 2030 under a business as usual scenario

Compared to the estimated US$ 740 billion cost of annual global oil subsidies (IMF), the report estimates that a US $400 billion annual investment would diversify transport energy consumption away from oil and reduce oil consumption in transport by 2030

Some countries are already taking substantial action: Brazil fuels nearly 25% of its transport sector with domestic biofuels; China plans to invest approximately US $15 billion in new energy vehicles over the next 10 years

The Middle East region has a significant potential to reduce emissions by establishing modern public transport systems and increasing the share of public transport to 30-40%

The envisaged rail freight transport system will be an important component to mitigate the growth of emissions of the freight and logistics sector. Yet, further restructuring of the supply chains and technology-driven improvements in the sector are required

There is a large untapped potential to reduce transport-driven emissions by provision of bio-generated fuels. Governments will need to provide regulation and incentives for these fuels to penetrate the market

The unique opportunity of the Middle East region to develop an emission-free transport sector building on its Solar Power potential is not even addressed today. While technology is progressing, the regions innovation capability promoted by companies such as Masdar is still negligible on a global scale

More information on the report can be found here: www.weforum.org/reports/re-powering-transport-2011

Dubai, United Arab Emirates, 10 May 2011 - A report released by the World Economic Forum in collaboration with Booz & Company argues that countries seeking to reduce oil dependency and emissions of their transport sector must support the development, distribution and adoption of new technologies in transport through a structured policy approach, strong public-private partnerships, risk hedging and collaborative financing.

Global transportation and fossil fuels are inextricably linked. More than 60% of the 87 million barrels of oil consumed every day powers the world's transportation system, and liquid fossil fuels account for more than 96% of the current energy supply to the transport sector.  

The Repowering Transport report estimates that a US$ 400 billion annual investment is required to achieve 25% penetration of alternative energy sources (electricity, biofuels, CNG/LPG) from 2010 to 2030 and reduce total oil consumption in transport by 0.5% per year. The capital needed is moderate in relation to the US$ 740 billion annual expense in global oil subsidies or the global transport industry's annual US$ 4,500 billion revenue. Research found that lack of financing for green transportation is not a matter of capital availability but rather of uncertainty in the regulatory environment and challenges in assessing the risk involved.

The report's proposed two-pronged policy approach to achieve energy diversification involves establishing regulation (fuel taxes, carbon fees) and/or setting performance standards that the market can meet independent of the technology choice, while supporting technology-specific policies chosen based on the country's own competitive advantage. "Understanding the

opportunities and challenges in energy supply across all modes of transport is a highly complex undertaking; this report is the first to provide a comprehensive framework identifying critical enablers and ensuring deployment of the broadest range of technologies," said Nick Pennell, Vice President of Booz & Company.

As examples, the report features China, whose US$ 15 billion investment pledge in electric vehicles, coupled with a tight-knit collaboration between government and private enterprise, aims to put 5-10 million electric vehicles on the road by 2020. The report also highlights Brazil's consistent 30-year policy supporting the development of biofuels, a technology that today powers 20% of the country's entire transportation system. Brazil continues to support biofuels with up to US$ 2.5 billion dollars per annum of tax breaks and other consumption incentives.

Specifically, the Middle East is prone to rethink its consumption of fossil fuel for transport and mobility. While already having some of the largest CO2 emissions per capita, public transport in the Gulf Cooperation Council (GCC) countries only accounts for about 5-10% of all motorized trips. Urban transport demand is expected to double by 2025 in Middle Eastern Cities. Establishing efficient public transport systems and achieving a public transport share of approximately 30-40% as planned by several GCC countries is not only beneficial to mitigate increasing congestion but also provides a significant lever to reduce CO2 emissions in the region. "The Middle East needs a whole new approach to mobility and public transport", says Fadi Majdalani, Vice President of Booz & Company, "current emission levels are simply not sustainable. A comprehensive approach of establishing excellent public transport systems and reducing the usage of private cars by means of road tolling, as well as an increase in fuel prices and a systematic demand management are required - and many cities such as Dubai, Abu Dhabi, Doha, Kuwait and Jeddah in the region are actually acting accordingly".

Also today, freight transport and logistics in the Middle East region are highly inefficient and dominated by road transport. Governments in the region have initiated multi-billion US Dollar programs to establish a rail network in the Middle East / GCC to benefit from the lower emissions of rail freight transport and to accommodate the significantly increased demand. "Rail freight is only measure to reduce emissions in the transport and logistics sector", says Ulrich Koegler, Vice President of Booz & Company, "yet, it is not even enough to off-set the emissions which will result from the growth of the sector. In land transport a comprehensive program of tight emissions charging schemes and promotion of modern and emission efficient technologies as well as taxation of fossil fuels is required simply to maintain current levels of CO2 emission. But the sector can do far better. A fundamental restructuring of the supply chains and technology-driven improvements of truck fleet utilization have been key factors in the reduced emissions sector in Europe." Also, recent experiences in slow steaming in maritime transport have shown that this process can not only be beneficial to the cost of transport but also reduce fuel consumption by up to 20%.

Still, the Middle East region as a whole has not embarked on a program of modern and biofuels. "We see Brazil, Germany and many other countries paving the way to complement fossil fuels with bio-generated components", states George Chehade, Vice President of Booz & Company, "these countries truly invest in CO2-reducing fuels. Already today's engine technology can accommodate a significant share of bio-fuels and we expect that in the near term the technology will allow for up to 30% and more of bio-components. Yet, there are no policies and incentives across the region for the industry to provide such modern fuels. It will not happen on its own - this is a call for government regulation and support to make it happen." Also, the automotive industry is working intensively on providing cost-effective electric vehicles. While energy storage of batteries used in electric vehicles is still a significant challenge, the Middle East regions solar power potential could be a great source of energy provision. "Why do we need to wait for Siemens and other Western Industry Players to come up with programs such as Desert Tec to provide solar power on a large scale?", asks Walid Fayad, Vice President of Booz & Company, "Masdar, the Abu Dhabi-based renewable energy company is developing concepts and technologies for 100% emission-free transportation. This is the time where the Middle East/GCC could truly pave the way for emission-free

mobility and transport. However, significantly larger innovation and investment efforts are required".

"The report finds that oil will continue to be the dominant fuel for transportation over the next 20 years, but innovative partnerships among business, government, academia and civil society markets are accelerating technology development of alternative sources," said John Moavenzadeh, Head of Mobility Industries at the World Economic Forum.

The report sets out a framework to identify the most useful partnerships at each point of the technology lifecycle. Successful partnership case studies at the global and country level are featured in the report, including examples from Canada, Sweden, the United Kingdom and the US. The first interactive online data bank for transportation partnerships complements the report's findings, featuring 50 partnerships so far and is intended to be a resource for stakeholders in the partnership ecosystem of the transport industry: http://www.partnershipsforenergy.com/main.html

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