Financing the Transition to Soot-free Urban Bus Fleets in 20 Megacities

Urban buses produce one-quarter of black carbon emissions from road transport, despite constituting only 1% of the global on-road vehicle fleet. Black carbon is a potent short-lived climate pollutant with a warming impact 900 to 3200 times that of carbon dioxide. As a harmful ultrafine component of particulate matter, black carbon operates as a universal carrier of toxins into the lungs and bloodstream, thereby contributing to premature deaths from outdoor air pollution globally. These black carbon emissions come from older-generation diesel engine technology, found in more than 80% of new buses sold today. Investments in “soot-free” engine technology in urban bus fleets will accelerate progress toward addressing urban air pollution and near-term climate change.

This report addresses the opportunities for facilitating, and the barriers to financing, the transition to soot-free urban bus fleets in 20 megacities. A soot-free engine is any diesel or alternative fuel engine that meets Euro VI or U.S. 2010 emission standards, such as any diesel engine with a diesel particulate filter, gas engine, or dedicated electric drive engine. These engines, in combination with ultralow-sulfur diesel (10 ppm S or less) or alternative fuels, are capable of a 99% reduction in diesel black carbon emissions. The Climate & Clean Air Coalition (CCAC) launched the Soot-Free Urban Bus Fleets Project in 2015 to accelerate the deployment of soot-free engine technologies in 20 large cities around the world. This report provides the technical basis for city officials, local fleet operators, and financial institutions to jointly increase the finance of soot-free urban bus fleets in these cities.

Despite higher upfront cost, a transition to soot-free technology in these 20 cities over the next 10 years is associated with cumulative cost savings in the tens of billions of dollars. In these cities, soot-free urban bus fleets will on average deliver lower total cost of ownership, relative to the higher-polluting buses purchased today, within 5 to 9 years of purchase. These buses would require lower financial outlays over the life of the vehicle in most cities (17 of 20) and under most cases (including a wide range of diesel prices, capital costs, and bus operating efficiencies), despite a higher upfront cost. For example, a 10-year shift to soot-free technologies in all 20 cities assuming median diesel fuel prices would result in 3% to 40% lower total cost of ownership (see Figure ES-1). These cost savings are attributable to the lower operating costs of soot-free buses, which arise from using less (or less expensive) energy coupled with lower maintenance costs for certain technologies (i.e., diesel hybrids and dedicated electric drive). The monetized value of climate and health benefits adds to the savings and can justify investments in soot-free buses in all 20 cities, even under conservative assumptions. In light of the potential social and economic return on investment, this study provides a basis for city officials, fleet operators, and financial institutions to finance the transition to soot-free urban bus fleets.