Context
From 2011 to 2020, Shenzhen wanted to reduce carbon emissions by 40–45%. To activate green public and private investments, the city leaders formulated several policies for New Energy Vehicles (NEV) and charging infrastructure promotion and application.
In 2017, Shenzhen became the first city in the world to electrify all public buses with a view to cutting emissions, reducing noise pollution and improving air quality. The initiative also helped to further develop electric mobility. The adoption of new service models incentivises manufacturers to design vehicle components so that they are maintained and kept in use, retaining value.
Stakeholders involved
- Funders: China Development Bank Leasing & China Construction Bank Financial Leasing
- Commissioner: National Government
- Subsidiser: Finance Commission of Shenzhen Municipality
Problem
Cities struggle with poor air quality - 20% of Shenzhen’s air pollution is attributed to vehicle emissions.
The local and national government wanted to explore possible developments to cut emissions, reduce noise pollution, and improve air quality – in addition to managing current overcapacity of electric power.
Shifting to a 100% electric vehicle system requires large up-front capital investment
Innovation
Financial support from national subsidies and matched funding from the city government has enabled the initiative to grow enough to become self-supporting.
Third-party financial institutions purchase and rent the e-buses to bus operating companies in Shenzhen. This lowers the up-front capital cost for operating companies and since bus manufacturers retain responsibility for bus maintenance it incentivises circular design for reuse and durability.
The project financing has also made use of, and benefited from using, cost-effective service models.
Timeline
Results and impact
- First to reach 100% e-buses: In 2017 Shenzhen became the first city in the world to reach a goal of 100% electrically run buses.
- Reduced pollution: Combustion engine buses used to contribute to 20% of air pollution, but through the transition it is now estimated the city will see an annual reduction of 4.316 million tonnes of particulate matter. The average GHG emissions per e-bus kilometre is 40% less than a diesel vehicle, which, as of 2017, had reduced carbon emissions in the city by 0.63 million tonnes.
- Reduced price of e-buses globally: Prior to 2016, an e-bus was priced at approximately CNY¥1.8m (USD 290k). As a result of the program, pioneering improvements were supported to battery technology, contributing to the price competitiveness of e-buses.?
- Expanded operations globally: The national piloting scheme has encouraged the development of the local electric vehicle industry, which is expanding to a global market. The largest Chinese electric vehicle producer, headquartered in Shenzhen, is now selling e-buses to 300 cities in Japan, Europe, the United States, and other countries globally.
- Model being adapted to other mobility forms: The lessons from the pilot are being extended to other mobility forms. Shenzhen now has electrified 16,000 buses and 23,000 taxis in the city.
Key lessons learnt
- Policy and regulation provide a mandate for change: A combination of national- and city-level policy measures have created the enabling conditions for an electric mobility system in the city to develop. This includes the national government’s ambition to expand the electric vehicle sector, permitting Shenzhen to have bespoke trading and business rules to stimulate economic activity and innovation.
- Enabling innovation through the use of new business models and financial support: Financial support from national subsidies and matching funding from the city government has enabled the initiative to grow enough to become self-supporting.
- The provision of e-buses on a rental basis has also alleviated initial capital outlays, mitigated against potential ongoing financial risks for the bus companies, and supported the refurbishment and reuse of components and parts.
- Incentivising the transition, by supporting both demand and investment: Development of the broader electric vehicle industry has also been encouraged through the pilot. For example, incentives such as free licence plates for e-vehicle drivers and the removal of a passenger levy for fuel in e-taxis.