African Railway Development and Intermodal Solutions: Dr. Marcelo Blumenfeld on Climate Finance and Decoupling Economic Growth from Emissions

During the panel discussion, African Railway Development and Intermodal Solutions – Outlook for African Railways with Modal Shift from Roads to Rail, at the AfDB Transport Forum 2024, Dr. Marcelo Blumenfeld, Assistant Professor in Future Transport Systems at the University of Birmingham, shared insights from a study on railway finance and climate change, highlighting the potential for railways to decouple economic growth from carbon emissions.

Cross-Industry Collaboration for Railway Finance

Dr. Blumenfeld began by emphasising the importance of cross-industry collaboration in railway finance. The study, conducted by the University of Birmingham in partnership with UIC (International Union of Railways), Roland Berger, and other consultants, aimed to bring new perspectives on financing rail infrastructure in Africa. He noted that while financing is crucial, it’s essential to shift the discussion to explore other factors that can influence railway development and its long-term benefits.

A key focus of the study is the concept of “decoupling” economic growth from associated carbon emissions. Dr. Blumenfeld explained that traditionally, economic growth has been linked to an increase in CO₂ emissions. Research shows that for every 1% increase in economic growth, there is typically a 0.4% rise in CO₂ emissions.

Africa, with its rapid economic expansion, faces the challenge of growing its economy without significantly increasing emissions. Rail infrastructure, he argued, offers a viable way to achieve this decoupling. Dr. Blumenfeld pointed out that if transport sectors in low-income countries mirrored the emissions per capita of high-income countries, the world would see an additional 8.5 billion tons of CO₂ emissions per year. This highlights the urgency of finding ways to decouple economic growth from emissions in Africa and other developing regions.

Dr. Blumenfeld brought forward the idea of attaching a monetary value to the emissions saved through low-carbon transport systems like railways. He cited a 2022, Nature paper that estimated the social cost of carbon at $185 per ton. Using this figure, he estimated that the total annual value of decoupling economic growth from carbon emissions could be around $1.5 trillion per annum.

While acknowledging that this figure might seem unrealistic to some, he stressed the growing importance of carbon valuation in the long term. He argued that this value needs to be factored into financing decisions for rail infrastructure, as the benefits of rail extend well beyond traditional 25-30 year loan terms, potentially lasting 60-70 years or more.

Changing the Perspective on Railway Financing

Dr. Blumenfeld discussed the biases inherent in current financing models, noting that railways are often viewed as too capital-intensive and difficult to fund. However, he argued that this perception changes when adopting a long-term perspective. Considering the socio-economic and environmental benefits of rail, including its role in reducing carbon emissions, rail infrastructure becomes a far more attractive investment.

He proposed using different mechanisms to appraise the viability of railway projects. One approach could be leveraging the new Article 6 of the Paris Agreement, which allows countries to cooperate in achieving emission reduction targets. By reassessing traditional appraisal mechanisms, stakeholders can better understand the broader benefits of rail investments and support the case for climate finance.

Low-Carbon Infrastructure as a Global Good

Dr. Blumenfeld concluded by describing low-carbon railway infrastructure as a “global good.” He explained that Africa, by developing railways that reduce carbon emissions, contributes not only to its own growth but also to the global effort to mitigate climate change. This contribution has intrinsic value that should be recognised and realised to support the continent’s growth.

In closing, Dr. Blumenfeld urged the audience to view rail development through the lens of long-term socio-economic benefits and environmental impact. This approach, he argued, is essential for advancing railway infrastructure that will benefit Africa and the world at large.