Policy Instruments for Reducing Greenhouse Gas Emissions from Transport

1. Policy Instruments for Reducing Greenhouse Gas Emissions from Transport Chris Nash

2. Changes in EU-27 greenhouse gas emissions by sector, 1990-2006 Data source: EEA 2008. Annual European Community greenhouse gas inventory 1990-2008 http://dataservice.eea.europa.eu/PivotApp/pivot.aspx?pivotid=455

3. EU27 passenger km (1995-2007 % growth) Source: Eurostat

4. EU27 freight tonne km (1995-2007 % growth) Source: Eurostat

5. Transport demand growth Britain 1977-2007 (% change over preceding 10 years) Source: Transport Statistics Great Britain 2008

6. Transport demand growth by mode Britain1997-2007 (% change) Freight Passenger Road 10 car 9 bus 14 Rail 24 41 Source Transport Statistics Great Britain 2008

7. Energy Consumption by Mode, inter city passenger transport 2010 *At 70% load factor Source: Derived from CE Delft (2003)

8. Energy consumption by mode – city commuting 2010 Source: derived from CE Delft (2003)

9. Energy consumption by mode – long distance non bulk freight 2010 Source: CE Delft (2003)

10. Policy Instruments - price • Road transport already subject to: • Value added tax • Fuel tax • Annual licence duty • Sales tax • And in some cases • Road pricing • Heavy goods vehicle kilometre charge

11. Impact of road fuel price on demand Source: Graham and Glaister (2004)

12. Air transport elasticities with respect to fare Source: Riddington (2006)

13. EU Policy • Adopted short run marginal cost cost-pricing as basis of policy (White Papers in 1998 and 2001) • Legislation exists on rail and heavy goods vehicles • Subsidiarity applies in the case of cars • International agreements on air and water transport preclude fuel tax or VAT (strictly only for international transport but often applies to domestic as well)

14. Road pricing • Several Norwegian cities, Central London and Stockholm have implemented urban road pricing • London and Stockholm achieved a 20% reduction in traffic • Funding used to improve roads and/or public transport • But extension difficult in terms of acceptability (Edinburgh, Manchester) • Several countries (Switzerland, Austria, Germany) have a km charge for goods vehicles • Some countries considering country wide road pricing for all vehicles (Netherlands)

15. Marginal social cost • The Marginal social costs of road transport depend on: • Congestion, which varies with vehicle type and traffic volume; • Road damage, which is sensitive to axle load and road quality; • Environmental and accident costs, which vary widely with vehicle type and geographical location.

16. Marginal social costs for car transport (example) (euros/km) Source: GRACE (2008) D7 www.grace-eu

17. Cost and charges for car transport (euros/km) Source: GRACE (2008) D7 www.grace-eu

18. Marginal social costs for heavy goods vehicles (example) (euros/km) Source: GRACE (2008) D7 www.grace-eu

19. Cost and Charges for heavy goods vehicles transport (euros/km) Source: GRACE (2008) D7 www.grace-eu

20. Modelled impact of road pricing Europe-wide (IASON/TIPMAC) • Biggest traffic reduction in core countries – they benefit more than periphery • Reassignment of traffic from urban to rural areas • Higher proportion of large trucks • 6% of road tonne km diverted to rail and water • But 50% of traffic reduction comes from changing distribution systems and more local sourcing of inputs and consumer goods

21. Charging for externalities in other modes • Rail • Electricity part of the emissions trading scheme • Tax on diesel for rail transport very variable • Air • Fuel untaxed • Departure taxes in some countries • To join emissions trading scheme in 2012 • Water?

22. Policy instruments - regulation • New vehicle standards • Why needed given fuel tax? • Payback period • Discount rates • Second hand market • Land use controls • Is higher density developments one reason for the success in restraining traffic growth in Britain? • Are other European countries still in the phase of urban sprawl?

23. Policy Instruments - investment • Roads • Reduced congestion means less CO2 but • Roads generate traffic • Investment needs to be combined with efficient pricing • Airports • Investment needed but combined with efficient pricing • Public transport • Of extra rail traffic following urban investment, • 41% from bus • 33% from car • 1% from walking/cycling • 24% generated • Alternative technologies • Do need start up funding (e.g. distribution networks, refuelling)

24. Conclusions • The most obvious policy instrument is price • But does need to be combined with regulation (mainly new vehicle standards) and appropriate investment • Alternative fuelled vehicles important; in the meantime rail and other public transport offer the best hope of a rapid switch to low carbon fuel (but depends on how electricity is produced) • Second best methods such as public transport promotion relatively ineffective, unless they use low carbon electricity • Raising price impacts not just on mode split but number and length of motorised journeys • Decoupling of transport demand and GDP growth IS possible!