175 billion dollars

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The Transforming Transportation conference took place in Washington DC this month. The event is organized and hosted by Embarq, ITDP, The Worldbank, The World Resource Institute and a number of development banks. This was my first time attending this event.

I found it an exciting new challenge to learn a lot of acronyms and phrases all at once. I can tell you that MDG, for example, stands for the United Nations Millennium Development Goals.

Another thing that I noticed was that the presentations in general contained very very large numbers… In fact, the numbers thrown around were so large that they need to be translated into a more down-to-earth way.

Below I have played around with the numbers to give you an understanding of the potential impact this amount of money could have on transportation:

175 Billion Dollars: Is the total number to be invested on sustainable transport over 10 years.

450 000 is the number of Volvo diesel-electric hybrid buses that can be purchased for 175 billion dollars.

1 600 000 is the number of Volvo diesel-electric hybrid buses that can be purchased for 175 billion dollars provided that just the additional cost for the hybridization is financed.

355 tons of CO2 is omitted from each hybrid bus.  If the new hybrid buses are used to replace diesel equivalents, Volvo hybrid technology will lower fuel consumption by 30% on average under real world conditions. An average bus runs 1 000 000 km during its life time. With the average diesel fuel consumption in city traffic being about 45 liters per 100 km, the total fuel consumption totals at  450 000 liters during the life time of the bus. A 30% saving equals 135 000 liters in fuel.

160 000 is the number of buses that can be introduced every year. This is roughly all new buses in the whole world (longer than 10 meters) for the next 10 years, globally.

135% return on capital is the outcome if we assume that we save $1.35 in lower cost for fuel for each dollar invested in diesel fuel. This effectively means that an investment in hybrid buses not only lowers the carbon dioxide emissions by 3.5 kg CO2 per dollar invested,  but the investor also  gets 135% interest return on capital over 12 years (the expected average life time of the bus).

The Volvo 7900 hybrid

The Volvo 7900 hybrid

 Now, if we assume that we use the money to purchase new hybrid buses to replace the need for new cars (rather than replacing old diesel buses) the full price for a modern hybrid bus is about $400 000 (varies a lot depending on market and specification).

Further, each bus has a global capacity average of 20 passengers (~20% filling factor) and each car that will be replaced carries on average 1.4 passengers (a global value, excluding drivers that are not travelling themselves, like taxi drivers). An average modern car emits 150 g/CO2 per kilometer on a yearly basis. This means that the hybrid bus lowers carbon dioxide by 66 gCO2/km.

If we would assume that the 175 billion dollars would be used to invest in additional 420 000 hybrid buses for increased capacity to replace cars, the CO2 saving per dollar turns out to be $0.31 per kg CO2. If the price for the corresponding cars is included in the calculation each bus generates a local profit of $2 per $1 invested in the hybrid buses, climate gains and fuel savings not regarded in this example. Let me estimate that the capital return over twelve years for society will be about $4 per $1 invested.

The rational for the high cost efficiency for investing in climate efficient hybrid bus technology is straightforward. A bus is utilized 12-18 hours per day generating tons of savings (355 to be precise).

Mind you, I’m just a chemical engineer by profession and the numbers above are generated by simple straightforward calculations without including index compensation. This exercise needs to be done properly by people that understand acronyms like IRR and NPV. Never-the-less, the margins are on a level that should be interesting for anyone, with or without targets, that has an objective of lowering emissions of greenhouse gases.

On Friday morning I took a taxi from the hotel to the venue at the Worldbank.

The driver asked me if I heard about the freezing temperatures and the snow they had last week.

He continued: “Do you know how cold it was?”

I responded : “I heard on the news; it was below -10 degrees F.”

The driver said: “No, it must have been even less, in fact it was so cold that the lawyers had to keep their hands in their own pockets.”

Global ambassador for road safety, Michelle Yeoh, closed the event

Global ambassador for road safety, Michelle Yeoh, closed the event.

The event was closed by celebrity global ambassador for road safety, the actress Michelle Yeoh.

 

About volvobuses

Adjunct Professor of Catalysis at Chalmers University of Technology. Lives in Gothenburg, Sweden, with my wife and three daughters born in 1991, 1994 and 1997. Is a passionate runner with a half marathon personal best of 1.24.
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