Decarbonizing Transport: Key Policies in Emerging Economies

Fuel excise taxes and carbon pricing have emerged as effective instruments to incentivise efficient fuel consumption. India leads among the selected emerging economies with its significant effective carbon rate, driven primarily by fuel excise taxes. South Africa closely follows suit with its General Fuel Levy and the Road Accident Fund levy.

Biofuel blending, initially introduced to enhance energy security, now plays a crucial role in reducing emissions from conventional internal combustion engine vehicles. Brazil and Indonesia have established robust biofuel programs and mandates, emphasizing the need to align these initiatives with sustainable development goals.

The report underscores the potential of advanced biofuels derived from non-food crops and agricultural residues, emphasizing their promotion as a sustainable alternative. Indonesia’s successful implementation of biofuel blending policies is cited as an encouraging example.

Vehicle electrification emerges as a pivotal strategy to mitigate CO2 emissions in the road transport sector. A comprehensive policy framework encompassing fiscal incentives, charging infrastructure development, and standardized guidelines for electric vehicle supply equipment is essential. India stands out for its ambitious production-linked incentive schemes, providing substantial support for domestic EV manufacturing and advanced battery production.

While Indonesia is making strides in fiscal incentives for EV adoption, there is room for further development. Recent decisions to exempt EVs from luxury taxes and lower tax rates for hybrids signal a positive shift. The legalization of conventional vehicle conversions to electric powertrains could accelerate the electrification of two- and three-wheelers.

The report concludes by emphasizing the critical need for increased public investment in charging infrastructure and standardized charging guidelines. India’s allocation of USD 130 million for public charging infrastructure through the FAME II program is hailed as a notable step, while other emerging economies are encouraged to follow suit.

Overall, the IEA’s report underscores the instrumental role of policies in steering road transport decarbonisation, providing a roadmap for sustainable mobility in emerging economies.