Electrifying public buses cuts urban emissions and pollution while connecting people to jobs, education, and services. Yet despite this potential, the upfront cost and capacity needed to transition to an e-bus system have slowed progress. Development financing for sustainable urban transport, and bus electrification in particular, accounts for a small share of overall financing needs. Private financing could fill budget shortfalls, but public transport projects have not traditionally generated the revenues or short-term returns commercial investors require.

Instead, international climate finance has focused much more on electrifying private vehicles — cars and two-wheelers — in recent years. In fact, less than 10% of such financing has gone toward other essential decarbonization strategies such as buses, non-motorized transport, or transit-oriented development. While electric cars and chargers matter for reducing transport emissions, shifting investment toward high-volume electric public transport is equally urgent. It offers broader benefits for air quality, inclusion, and urban livability, and costs far less to implement and maintain.

This is a critical moment for governments to leverage public and private sector support to implement high-quality e-bus systems that deliver livability goals. ITDP’s recent report, Financing the E-Bus Transition: Improving Project Bankability and Enabling Scale, helps governments, especially those with limited resources, understand how to make e-bus systems more financially viable and attractive to investors. It explains business models, financing tools, and risk-sharing approaches that can support bankability and successful project implementation.

The Opportunity of E-Buses

Transitioning to comprehensive, integrated urban e-bus systems is not simply about replacing diesel buses with electric ones. Successful e-bus systems combine vehicle electrification with more efficient planning, regulation, and service integration. For example, e-buses create opportunities to improve informal transport. Because e-buses have attracted private investment, governments have stronger incentives to pursue contract and business-model reforms that enable them. This, in turn, can create a more stable business environment and a more connected system that attracts more riders and satisfies operators.

E-buses offer multiple advantages over conventional diesel fleets. First, e-buses are quieter, cleaner, and more energy-efficient, reducing air and noise pollution, particularly around depots and major corridors. E-buses are also typically equipped with modern amenities such as air conditioning, accessible boarding, digital fare collection, and GPS, improving comfort, access, security, and reliability for riders. Anecdotal evidence and early studies also suggest that e-buses can expand bus ridership.

On-board technologies such as digital fare collection and GPS enable better bus operations and management, reducing operational costs and improving service delivery and efficiency. Finally, e-buses can also help to strengthen national economies. Electrifying public transport can significantly reduce fuel imports and foreign-currency outflows, increasing economic stability and growth, another incentive for governments to invest.

Unlocking Private Financing

Despite their benefits, e-bus systems face well-known financing barriers. Upfront costs for buses, depots, and charging infrastructure are high, and governments — especially those with limited fiscal capacity — often struggle to fund these investments. Compared with traditional road projects, e-bus business models are newer and less familiar to both public officials and private investors. As a result, projects can face long negotiation periods, high transaction costs, and greater perceived risk.

However, governments do not have to shoulder the financial burden of transitioning to an e-bus system alone. Investors, operators, and other private-sector players are increasingly interested in e-buses. The electrification transition is reshaping traditional public transport business models, making projects more attractive to a wider pool of investors, including leasing companies, utilities, private equity funds, and fintech firms. These new investors bring technical expertise, innovation, and financing flexibility.

We see this in leasing models that let governments or operators pay for e-buses over time, such as in Bogotá, Colombia, and in utility co-investments in charging infrastructure, such as in Santiago, Chile, and Addis Ababa, Ethiopia. Development finance institutions (DFIs), such as multilateral and national development banks, play a vital role in scaling e-buses by crowding in private investment through mechanisms like guarantees. Many DFIs have supported e-bus pilot projects in Bogotá, São Paulo, Brazil, and Dakar, Senegal. The next step is to scale these projects and replicate successful models in many more cities.

Bridging the Sectors

The electric BRT system in Dakar, Senegal, is an important case study in designing a public-private partnership for e-bus deployment that successfully distributes costs and risks. In Dakar, Meridiam, a private infrastructure investor, purchased 121 e-buses and operated them under a net cost contract with the Dakar transport agency, CETUD.

A separate contract with another private company provided the charging infrastructure. The government provided the road works, BRT stations, and depots. Three key financing mechanisms were used to manage risk and were crucial for private sector involvement in the project:

• Concessional loan: The Senegalese government received a concessional loan from the World Bank IDA to provide lanes, stations, and depots – system elements that typically do not generate revenue and are not attractive for private investment.
• Guarantee: The net cost contract with Meridiam includes a minimum ridership guarantee, ensuring that Meridiam, as the system operator, will receive payment even if ridership drops below anticipated levels. In this case, the government will subsidize the difference between fare revenue and the minimum ridership level.
• Viability gap funding: The World Bank International Development Association (IDA) provided funding to cover the price difference between diesel buses and e-buses.

This innovative financing model, which enabled Africa’s first all-electric BRT, won Dakar the Sustainable Transport Award in 2025. Now, other major African cities like Nairobi, Kenya, are looking to adapt the Dakar model to finance their own e-bus systems.

Investing In A Cleaner Future for All

Innovative financing models, reforms to existing business models and contracts, and catalytic investments from development banks are all crucial to scaling e-bus systems in the near term. This requires robust planning and project preparation, including realistic cost assessments, by cities and national governments. It also requires transparent data from industry, governments, and development banks to broaden the pool of investors who view e-bus systems as a viable investment. Integrated, well-financed e-bus systems are essential to urban decarbonization and improved mobility.

When designed as comprehensive systems supported by clear financing frameworks and partnerships among governments, investors, and DFIs, e-buses can transform urban transport. Achieving this will require stakeholders and policymakers to collaborate more to secure buy-in from both the public and private sectors. As climate and other investors increasingly view zero-emission mobility as a major opportunity for innovation, governments that successfully harness this investment interest for bus electrification can accelerate e-bus deployment and scale up pilots to maximize air quality, access, and economic impacts.