Executive summary The road transport sector is a cornerstone of robust economic development. It accounted for around 20% of global final energy consumption and about 50% of oil demand in 2021, a similar share to 2000, despite rising demand for transport services. Factors such as transport activity, shifts between transport modes, energy efficiency, and the carbon content of fuels shape energy demand and CO2 emissions and pollution from the sector. As populations and incomes grow across a wider range of countries, demand for transport services is projected to rise, along with the need to decarbonise. One of the objectives of this report is to broaden understanding of where the road transport sector is heading in major emerging economies, particularly in light of recent net zero pledges. The major emerging economies analysed in this report – Brazil, People’s Republic of China, India, Indonesia, Mexico and South Africa – represented around 14% of global road transport energy demand in 2000; by 2021, this share was 27%. Their total vehicle stock was around 185 million in 2000; at end-2021 it was about one billion, a fivefold increase. This compares to an increase of around 40% in the rest of the world over the same period.

Composition of road transport In 2021, there were around 2.3 billion vehicles (including two- and three-wheelers) on the world’s roads. Cars4 accounted for the bulk of the global vehicle stock, with around 1.4 billion vehicles compared to around 800 million two decades previously. In contrast, in the selected emerging economies, two- and threewheelers outnumbered cars.

Road vehicle fleet, 2000-2021

The number of vehicles in these major emerging economies has increased substantially over the last two decades. In 2000, their total vehicle stock was around 185 million. At the end of 2021, it was about 1 billion, or a near fivefold increase. This compares to an increase of 42% in the rest of the world over the same period. China accounted for 52% of the increase, followed by India (29%) and Indonesia (11%). In 2000, the vehicle stock per 1 000 inhabitants in advanced economies was around 460 vehicles; by 2021 it had increased to 480 vehicles per 1 000 inhabitants. In China, the vehicle stock per 1 000 inhabitants was around 65 vehicles in 2000; in 2021, it had increased to more than 350 vehicles per 1 000 inhabitants. This is above the global average of around 290 vehicles per 1 000 inhabitants, but below that of advanced economies.

Road vehicle fleet by mode and share of electric vehicles in selected major emerging economies, 2000-2021

The rate of increase in vehicle numbers varied across modes of road transport and among the selected emerging economies since 2000. Cars (almost sevenfold increase) and two- and three-wheelers (more than threefold increase) had the greatest rates of increase in numbers, supported by strong economic growth and the resultant increase in demand for mobility. The number of trucks has also rose significantly, by almost 300%, as incomes rose and demand for goods increased among these major emerging economies.

Trucks (40%) and cars (35%) accounted for three-quarters of road transport CO2 emissions in 2000 in selected emerging economies. In 2021, their combined share had increased to 86%. In contrast, the share of sector emissions from two- and three-wheelers declined from 9% in 2000 to 7% in 2021, despite more than quadrupling in number. This decline reflects increasing electrification rates in China. Heavy-freight trucks, which accounted for less than 2% of all vehicles on the road in 2021 in the selected emerging economies, contributed 25% of all CO2 emissions in the sector.

Road transport CO2 emissions, 2000-2021

Historical trends of CO2 emissions vary notably among selected emerging economies. China has experienced the largest increase in relative terms, with emissions from road transport more than quadrupling from 2000 to 2021. Over the same period, China’s GDP per capita increased fivefold, triggering increased demand for transport services, with 290 million cars on the road in 2021 compared to 8.2 million in 2000.

The first category includes, for example, regulations that mandate a certain share of sustainable biofuels such as bioethanol or biodiesel in the gasoline and diesel fuel mix or standards around the fuel economy of a vehicle. Incentives can range from subsidies and tax credits for the purchase of an EV to fuel excise taxes and public investment in biofuels production. Informational measures focus on programmes that either facilitate co-operation and knowledge sharing among companies and research institutes or information campaigns such as spreading awareness on the benefits of e-mobility.

Road transport policy landscape in the selected major emerging economies

Given the projected energy demand growth in the STEPS (as illustrated in the previous section), energy efficiency in the road transport sector is a key enabler for decarbonisation. Fuel economy standards are important policy instruments that governments put in place to promote vehicle efficiency improvements. In addition to increasing the fuel efficiency of conventional ICE vehicles, such standards can also accelerate the adoption of ZEVs8 , if set at sufficiently stringent levels.

The analysed powertrain switches could be responsible for more than 60% of cumulative emissions savings in road transport in India, with electrification driving most of the savings. This major role for electrification in driving CO2 emissions reductions underlines the importance of a rapid decarbonisation of India’s power sector. Outside the scope of the MACC analysis, another 1.5 Gt CO2 in emissions savings could be triggered through fuel economy improvements in the remaining stock of vehicles, powertrain switches to EVs and FCEVs in vans and buses, as well as using biofuels. By far most CO2 emissions in India’s road transport sector could be abated through powertrain switches in cars, followed at some distance by trucks, and two- and three-wheelers. This is unsurprising given the existing large stock and the expected explosive growth in the number of cars on India’s roads, especially from 2025. In the APS, the stock of cars is projected to increase by a factor of 6 by 2050 (relative to 2022), with the number of trucks more than doubling, and the number of two- and three-wheelers almost doubling.

Selected CO2 abatement costs in India’s road transport sector in the Announced Pledges Scenario, 2022-2050

Electrification could drive most of the emissions savings in the APS. For trucks, significant savings could also come from switching to fuel cells. Switching ICE cars to battery electric in India could abate an additional 1.7 Gt CO2 compared to the STEPS at an abatement cost of around -USD 120/t CO2, as battery EVs experience a rapid reduction in costs and become cost-effective quickly. This could lead to cost savings of USD 200 billion, just for this powertrain switch.

example, EVs use around six times more minerals than conventional vehicles, with the difference coming particularly from battery packs. As the dependence of the road transport sector on critical minerals grows, so too will the importance of securing adequate supplies of sustainable and affordable minerals. With rising mineral prices – as has happened in the past 2 years – critical minerals contribute to an uptick in the total cost of clean energy technologies, reversing a long-standing trend of cost reductions. In addition to volatile prices for critical minerals, the global EV battery supply chain is highly concentrated, which can exacerbate supply chain risks. The extraction of key minerals is often dominated by a single country or region, for example: graphite (China, 79%), cobalt (Africa, 76%), nickel (Other Asia Pacific, 66%), rare earth elements (China, 57%) and lithium (Other Asia Pacific, 56%). In the downstream supply chain, the situation is often even more concentrated geographically, with China dominating.

Geographic distribution of the global downstream EV supply chain

Getting the prices for critical minerals down and ensuring robust and resilient mineral supplies will be crucial for achieving clean energy transitions in road transport. Greater investment in new mines and refineries, and collaboration between producers and users, will be critical to meet the growing demand for critical minerals while reducing costs. Technological innovation to substitute or reduce the quantity of certain minerals in batteries will also be important. Reuse and recycling can address supply bottlenecks and reduce overall mineral demand, while mitigating some of the adverse environmental and social impacts associated with extraction and processing of critical minerals.

Leverage public funds in a clear and transparent manner to accelerate private finance investments Transitions will require considerable investment in vehicle efficiency and EVs in Indonesia, which need to grow eightfold to over USD 4 billion annually in 2026-30 in the APS compared to in 2016-21. Infrastructure investment is also needed to enable electrification, as is investment in public transport and active mobility alternatives such as walking and cycling. Indonesia needs to send a clear signal to private investors, with transparent policy and regulatory frameworks, and use public funding strategically to leverage private investment. This could include using public procurement to scale up market demand for new technologies and providing loan guarantees to de-risk projects in priority areas. Indonesia could also enhance sustainability criteria and integrate transport transitions priorities in its PPP framework to leverage the system to accelerate development of charging infrastructure and public transport solutions. Improving access to affordable and longer-term financing would be important to accelerating investment in clean energy projects. It could also support consumers to overcome the barrier of higher upfront costs of more efficient EVs, such as through purchase subsidies, which can be financed by repurposing fossil fuel subsidies or introducing EV loan programmes.

Source:IEA