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Deliverable D1 IDENTIFICATION OF THE KEY LINKAGES BETWEEN TRANSPORT INTENSITY AND ECONOMIC GROWTH Status: Public SPRITE GRD1-1999-11067 (Separating the intensity of transport from economic growth) Project Co-ordinator: Institute for Transport Studies, University of Leeds Partners: Marcial Echenique and Partners Ltd PROGNOS Transport PROGNOS Economics/Energy Dipartimento Idraulica, Trasporti, Strade, University of Rome La Sapienza Date: 25th JULY 2000 PROJECT FUNDED BY THE EUROPEAN COMMISSION UNDER THE GROWTH PROGRAMME OF THE 5th FRAMEWORK PROGRAMME Contents C.1 Contents Page List of figures List of tables Executive summary 1 Introduction 1.1 2 The linkages between transport and economic activity 2.1 2.1 Introduction 2.1 2.2 An overview of the linkages between transport and economic 2.1 activity 3 2.3 Economic and other influences on the demand for transport 2.1 2.3.1 Passenger transport 2.2 2.3.2 Freight transport 2.3 2.4 The influence of transport on economic activity 2.5 2.5 Conclusions 2.7 Review of transport trends across Europe 3.1 3.1 Introduction 3.1 3.2 Transport intensity 3.1 3.3 Past trends in passenger transport 3.8 3.3.1 Past trends 3.8 3.3.2 Understanding the causes of past growth in passenger transport 3.11 3.4 Past trends in freight transport 3.17 3.4.1 Past trends 3.17 3.4.2 Understanding the causes of past growth in freight transport 3.20 3.5 Future trends in passenger transport growth 3.25 3.5.1 Transport related influences on road passenger travel demand 3.25 C.2 4 5 D1: Identification of the key linkages between transport intensity and economic growth 3.5.2 Substitutes for travel 3.29 3.6 Future trends in freight transport growth 3.29 Experience of de-coupling output from economic growth in other 4.1 sectors 4.1 Review of experience from other sectors 4.1 4.1.1 Energy consumption and economic development 4.2 4.1.2 Developments by sector 4.6 4.2 Implications for the transport sector 4.10 Conclusions 5.1 5.1 Transport and economic activity 5.1 5.2 Transport trends 5.1 5.3 The de-coupling debate 5.3 References Contents C.3 List of figures 3.1 Index of GDP and passenger travel by mode in the EU15, 1970-95 3.3 3.2 Index of GDP and freight transport by mode in the EU15, 1970-95 3.3 3.3 Passenger travel by mode in the EU15, 1970-95 3.4 3.4 Freight transport by mode in the EU15, 1970-95 3.4 3.5 GDP and vehicle kilometres by vehicle type in the UK, 1952-97 3.5 3.6 GDP and vehicle kilometres by vehicle type in pre-unification 3.6 Germany, 1952-90 3.7 GDP, goods lifted (tonnes) and goods moved (tonne-kilometres) by 3.7 road in the UK, 1952-97 3.8 GDP and goods moved (tonne-kilometres) in pre-unification 3.7 Germany, 1950-90 3.9 Annual number of journeys, kilometres travelled and travel time per 3.9 person and GDP in the UK 3.10 Cars per 1000 inhabitants in selected EU15 countries and the USA, 3.12 1970-95 3.11 Total journeys per person, per year for households with and without 3.13 access to a car and by person type for the UK, 1995/97 3.12 Modal share of journeys per person, per year for households with and 3.13 without access to a car and by person type for the UK, 1995/97 3.13 Real changes in the cost of transport in the UK, 1970-94 3.14 3.14 Motor vehicle traffic growth on UK roads, 1987-97 3.16 3.15 Annual road goods vehicle kilometres travelled, tonnes-lifted, average 3.17 length of haul, tonne-kilometres and GDP in Great Britain, 1974-96 3.16a Annual road tonnes-lifted, average length of haul and tonne- 3.18 kilometres for Belgium, 1970-93 3.16b Annual road tonnes-lifted, average length of haul and tonne- 3.18 kilometres for the Netherlands, 1970-93 3.16c Annual road tonnes-lifted, average length of haul and tonne- 3.19 kilometres for France, 1970-93 C.4 D1: Identification of the key linkages between transport intensity and economic growth 3.16d Annual road tonnes-lifted, average length of haul and tonne- 3.19 kilometres for Germany, 1970-93 3.17a Annual rail tonnes-lifted, average length of haul and tonne-kilometres 3.20 for Belgium, 1970-93 3.17b Annual rail tonnes-lifted, average length of haul and tonne-kilometres 3.21 for the Netherlands, 1970-93 3.17c Annual rail tonnes-lifted, average length of haul and tonne-kilometres 3.21 for France, 1970-93 3.17d Annual rail tonnes-lifted, average length of haul and tonne-kilometres 3.22 for Italy, 1970-93 3.18 Linking economic activity and road freight traffic 3.24 4.1 Primary energy consumption and GDP in the EU15, 1970-94 4.3 4.2 Energy consumption, electricity consumption, CO2 emissions and 4.5 GDP in the EU15, 1985-97 4.3 Energy intensities by sector in the EU15, 1985-97 4.7 4.4 Energy intensity of steel production in Western Germany, 1980-94 4.7 4.5 Energy consumption of dishwashers in Western Germany, 1980-98 4.8 4.6 Energy consumption and energy intensity of road transport in 4.9 Germany, 1980-94 List of tables 3.1 Comparison of changes in trip rates, over time, for selected European 3.9 countries 3.2 Comparison of changes in average time spent per trip, over time, for 3.10 selected European countries 3.3 Comparison of changes in average distances per trip, over time, for 3.10 selected European Countries 3.4 Income and travel per person in EU countries in 1995 4.1 Implications for transport sector de-coupling, drawn from the energy 4.12 sector 3.11 Executive summary E.1 Executive summary This is the first deliverable of the SPRITE (Separating the intensity of transport from economic growth) project. The project is looking at the observed correlation between economic growth and growth in the movement of people and goods. In particular it is seeking ways to separate transport from economic growth, that is, to reduce the transport intensity of the economy. In this respect, the project is very much concerned with the trade off between economic growth and environmental sustainability. Transport and economic activity are interrelated; economic activity can influence the demand for transport but, at the same time, changes in the transport system can also influence economic activity. The demand for transport, particularly road transport, has increased strongly across EU countries in recent decades. Of particular note: - growth in passenger car travel has been far more rapid than that in other surface modes and has also outpaced the rate of growth of economic activity; - the major proportion of past passenger travel growth across all modes has arisen from increases in the length of trips rather than in the overall number of trips; - the quantity of freight moved by road has grown far more rapidly than that moved by other modes and has also outpaced the rate of growth of economic activity and - increases in the average length of haul have been the predominant source of growth in freight tonne-kilometres in recent decades. The main factors that have encouraged the observed growth in road passenger and freight transport include: - changes in the relative costs of transport by different modes; - increased income levels; - increased car availability; - improvements in the supply of transport (speed, comfort, reliability); - land use effects including changes in migration and commuting patterns; - economic changes affecting the commodity structure of the economy; - European integration and globalisation and - changes in the operational behaviour of companies. To date there is little evidence to suggest that the growth of transport demand has been or ever can be separated or ‘de-coupled’ from the rate of economic growth. Moreover, in some countries certain types of transport have historically grown at a E.2 D1: Identification of the key linkages between transport intensity and economic growth much faster rate than that of the economy in general. De-coupling can, however, be said to have occurred in some other sectors of the economy. For example, taking the energy sector as a whole, it can be seen that the energy intensity of the EU economy has been systematically decreasing since at least the mid-1970s. Within the energy sector, though, the experience of individual sub-sectors has been more varied. Though significant differences exist between the transport and energy sectors, there may be some lessons that can be drawn from experience gained in the energy sector. De-coupling there occurred chiefly as a result of: - sometimes sharp increases in the cost of primary energy inputs; - economic restructuring, leading to a relative decline in the economic importance of high energy using industries and - regulation, driven by environmental pressures. The response to these pressures and trends, by both households and firms, was to seek more energy efficient ways of meeting their own needs in terms of consumption or production. Firms also responded to regulatory and environmental pressures by switching to ‘cleaner’ energy producing or using technologies. Should the political will exist, there is no reason why similar pressures could not be applied in the transport sector. The problem is that transport is different. To begin with, it is not straightforward to define exactly which transport ‘outputs’ should be de-coupled from economic growth. After all, the ability to travel easily and cheaply is essentially an economic benefit to individuals and firms. Should policy therefore be concerned to minimise travel only by private car and for leisure purposes, for example? Alternatively, perhaps it should just focus on travel at certain times of day and/or locations? These are questions that go to the heart of the ‘de-coupling’ debate. In seeking to de-couple transport from economic growth it is important to bear in mind the ultimate objectives of policy. In other words, what policy makers are really seeking to minimise are the unwanted environmental and other side effects - the negative externalities - created by transport. This is a debate that will be taken forward in the second deliverable of the SPRITE project. Introduction 1.1 1. Introduction This is the first deliverable of the SPRITE (Separating the intensity of transport from economic growth) project. The project is looking at the observed correlation between economic growth and growth in the movement of people and goods. In particular it is seeking ways to separate transport from economic growth, that is, to reduce the transport intensity of the economy. In this respect, the project is very much concerned with the trade off between economic growth and environmental sustainability. SPRITE has three core objectives: (i) To examine the linkages between transport and economic growth and identify objectives and indicators that can be used as a guide to reducing transport intensity. (ii) To identify all possible measures (both within and outside the transport sector) that could be used to reduce transport intensity. (iii) To assess which of the measures, identified in (ii) are potentially practical and cost efficient and which offer the best trade off between environmental protection, transport spending and economic growth. This deliverable is concerned with one aspect of the first project objective, an examination of the linkages between transport and economic growth. The second project deliverable will focus on the identification of objectives and indicators that can be used as a guide to reducing transport intensity. Chapter 2 of this deliverable provides an overview of the linkages between transport and economic activity. The two are interrelated; economic activity can influence the demand for transport but, at the same time, changes in the transport system can also influence economic activity. The chapter begins by looking at economic and other influences on the demand for transport. This section provides an introduction to the subsequent, more detailed, review of transport trends across Europe, contained in Chapter 3. The final part of Chapter 2 looks at the ways in which transport can influence economic activity. Chapter 3 reviews transport trends across Europe and looks, in more detail, at economic and other influences on the demand for transport. It begins with a discussion of transport intensity and briefly reviews some of the evidence regarding changes in transport intensity that have taken place at EU and national level. The chapter goes on to examine past and present trends in passenger and freight transport and attempts to explain the driving forces behind those trends. It concludes by considering some possible future transport trends. Chapter 4 looks at the experience of other sectors of the economy, in particular the energy sector, in separating or ‘de-coupling’ growth in their output from economic growth. It begins by establishing the meaning of ‘de-coupling’ in the energy sector and examines whether de-coupling has taken place in all parts of the sector. It then goes on to consider the causes of energy sector de-coupling and concludes by drawing 1.2 D1: Identification of the key linkages between transport intensity and economic growth some implications for the development of a de-coupling strategy in the transport sector. Chapter 5 concludes the deliverable and looks forward to some of the issues that will be taken forward in the second project deliverable. The linkages between transport and economic activity 2.1 2. The linkages between transport and economic activity 2.1 Introduction This chapter considers the linkages between transport and economic activity. Section 2.2 provides a brief overview of this subject area. Sections 2.3 and 2.4, respectively, then go on to look at economic and other influences on the demand for transport and, conversely, the influence of transport on economic activity. This latter topic has most recently been examined in work carried out in the UK by the Standing Advisory Committee on Trunk Road Assessment (SACTRA). SACTRA were requested, by the Department of the Environment, Transport and the Regions (DETR) to investigate the linkages between transport and economic activity. Their subsequent report (SACTRA, 1999) covers this topic in some detail and many of the areas covered are of direct relevance to the SPRITE project. Section 2.4 provides only the most fleeting of summaries of the SACTRA work. Readers interested in the detail of the subject matter are directed to the SACTRA report itself. Finally, section 2.5 contains a few brief conclusions to the chapter. 2.2 An overview of the linkages between transport and economic activity SACTRA note that, ‘the close correlation between economic growth and increased movement – and, since 1945, the correlation in particular between road traffic growth and economic growth – is seen as evidence of a close link between transport and the economy. But this does not help clarify the direction of cause and effect – whether increased movement is a sign of economic growth stimulated by other factors; whether traffic growth, facilitated by transport improvements, itself stimulates economic activity; or whether there is some iteration of the two.’ They go on to say that, ‘on the one hand, there are linkages which can help explain how transport has an impact on economic activity. On the other hand, economic activity itself can shape the demand for transport. There may often be iterations between these two aspects – for example, a transport intervention may lead to changes in the economy which in turn may have further impacts on the demand for transport.’ The following section summarises the evidence concerning the latter type of linkage, that is, the role of economic activity in shaping the demand for transport. This topic is considered in more detail in Chapter 3. Section 2.4 then goes on to discuss the first type of linkage - how transport can impact on economic activity. 2.3 Economic and other influences on the demand for transport The demand for transport, particularly transport by road, has increased strongly across EU countries in recent decades. Sections 2.3.1 and 2.3.2, consider the key trends and main driving forces that have been important in the passenger and freight transport markets. 2.2 D1: Identification of the key linkages between transport intensity and economic growth 2.3.1 Passenger transport Key trends For passenger transport, across all modes: - the average number of trips made by a particular type of person exhibits reasonably similarity across the EU; - when broken down by trip purpose, different categories of people have different needs to travel but, in general, the young and the retired make the fewest trips while those in employment make the most; - the number of trips made does not vary greatly either over time or between countries; - the major proportion of past passenger travel growth has arisen from increases in the length of trips rather than the overall number of trips and - growth in overall passenger travel demand is quite closely correlated with economic growth. Looking at particular modes: - growth in car travel has been far more rapid than that in other surface modes; - though air travel has grown rapidly, much of its market is over distances where car cannot easily compete, hence it has had little impact on the demand for car travel; - because car travel now accounts for such a large share of all passenger travel, even strong future growth in rail travel would not significantly reduce the dominance of car travel and - the main growth in car travel has not been in congested city centres but in the less congested outer suburbs and the surrounding areas outside cities – areas in which public transport is currently unable to compete cost effectively with the car. Driving forces To understand the factors that create and influence the demand for transport, the key concept is that transport is a derived demand. It generally occurs as an indirect result of trying to achieve some other goal. Travel is not normally of central importance in its own right. There are certainly some cases where people go out for a spin in a car at weekends to see the countryside. But even just within the category of leisure trips, trips where the travel is the central purpose of the trip are in a minority, compared to trips where people are trying to get quickly and cheaply to a beach, a sports or cultural centre, or a park. For example, in 1992/94 in the UK the trip purpose ‘day trip/walk’ accounted for only 4.0% of total person-kilometres travelled by residents of urban areas (data The linkages between transport and economic activity 2.3 from the UK National Travel Survey, quoted in Potter, 1997). For most passenger trips and for all freight trips, the travel is just a necessary side effect of trying to carry out some social or economic activity. It is the activity that is of primary importance and the travel that is of secondary importance in determining people’s behaviour. When travel is slow, tedious and expensive it will be important to people to avoid travel as much as possible. People will need to be satisfied with the activities that are close at hand. One hundred years ago every part of each EU country would have had its own brewery/winery to provide alcohol for the local population. Only the finest drinks were exported for the consumption of the wealthy in foreign countries. Nowadays fashionable Europeans are drinking Japanese and Mexican beers and Chilean and Australian wines. This has come about because of two interrelated factors. First, the costs of transport and distribution have reduced greatly so that the unit cost of travel is an ever decreasing proportion of the cost of production of many goods. Second, the average income of individuals in the EU has increased greatly, allowing them more money to spend on refining their choices and on satisfying their quest for variety. This increases the demand for goods travel. Similar trends are evident in the case of passenger travel. Nowadays, people will travel long distances on fast motorways to go to a special restaurant or a sporting event for the day. Fifty years ago all but the very rich took their annual holidays in their own country, that is if they had any annual holidays at all. Then came the rise in travelling abroad in the Summer to the sunny South of Europe. More recently, there has been major growth in weekend breaks across the whole year. Again, here, the increase in the demand for travel is a combination of the same two factors. The travel itself has become less onerous through being faster, more comfortable and relatively cheaper, whilst the population, through being richer, is prepared to spend more money on luxuries such as a few days away from home in a hotel. This illustrates the two main forces underlying the past growth in demand for travel: - the improved characteristics of the supply of travel in terms of speed, comfort, reliability, cost and so on and - the strong positive relationship between the demand for travel and economic growth. Chapter 3 reviews transport trends across Europe and looks in more detail at the forces which have underlain those trends. 2.3.2 Freight transport Key trends For freight transport: - the quantity of freight moved by road has grown more rapidly than GDP whilst that moved by rail, pipeline and inland waterway has grown at a slower rate or actually decreased; 2.4 D1: Identification of the key linkages between transport intensity and economic growth - in absolute terms, road freight is by far the most important form of freight transport; - disaggregation of freight tonne-kilometres into tonnes-lifted and average length of haul shows that the role of these two variables in contributing to the overall increase in overall tonne-kilometres has varied through time, though increases in the average length of haul have been the predominant source of growth in recent decades; Driving forces Rothengatter and Szimba (2000) identify a number of different forces which have contributed to trends of the type outlined above. These are summarised under the following headings: - changes in commodity structure; - European integration and globalisation; - changes in the operational behaviour of companies and - application of advanced information and communication technologies (ICT). Changes in commodity structure The process of economic change has meant that bulk goods such as coal, iron and steel have become less important, in modern economies, relative to ‘emerging commodities’ such as vehicles, machines, manufactures, foods and chemical goods. For several reasons the modes rail and inland waterway were more competitive in the markets for the transportation of bulk goods than they are for the ‘emerging commodities’. As a result, rail and inland waterway have tended to lose market share to road freight. The ‘emerging commodities’, for example, tend to make certain demands on their mode of transport. These include the need for quick, reliable and flexible transport; often the need for careful transportation and direct transport with few or no interchanges. Road transport is often, therefore, better suited to moving these type of goods. European integration and globalisation The processes of European integration and globalisation have intensified trade both between EU countries and between EU countries and the rest of the world. Both the volume - and the distances - of goods carried have tended to increase as a result. Road has tended to benefit more, from the increased demand for movement of goods, than have other freight modes. International rail transport, for example, has been hampered - for both technical and bureaucratic reasons - by delays and lack of reliability associated with border crossings. Changes in the operational behaviour of companies Changes in the production technologies employed by companies has also tended to favour road against other forms of freight transport. Modern production techniques The linkages between transport and economic activity 2.5 have led firms to seek to reduce their stock levels, shorten turn around times and generally improve the flexibility to react quickly to the needs of the market. The most well-known example of such a technology is Just-in-Time production. This approach requires a quick, reliable and highly flexible transport service of the sort which only road can currently provide. Application of advanced information and communication technologies (ICT) Application of ICT has enhanced the efficiency and reliability of freight transport, for example by improving vehicle utilisation rates and reducing delivery times. Whether the net effect of ICT is to increase or decrease overall freight tonne-kilometres is not clear cut. For example, reduced delivery times enables more deliveries to be made in a given period of time. To date, ICT in freight transport has mainly been applied in the road sector. This has tended to enhance the competitiveness of road vis-a-vis other modes. Chapter 3 looks in more detail at the forces which have underlain the observed growth in demand for road freight transport. 2.4 The influence of transport on economic activity The Current debate on the relationship between transport and economic activity is summarised by SACTRA as follows. ‘Traditionally, transport has been thought of in terms of derived demand, implying that the basic causality runs from the level of activity in the economy to the demand for transport. People and businesses demand transport in order to enable them to carry out desired activities. This is too simple, however, since changing the provision of transport enables changes in the location and composition of activities. For individuals, this might be reflected in changes in commuting patterns or holiday destinations. For businesses, the impact might be felt in terms of new sources of supplies, reorganisation of production or access to more distant markets.’ SACTRA quotes a range of international sources on this debate. These include USA Transportation Research Board (1997) who concluded that infrastructure investments have a modest positive effect on the nation’s private economic activity and the study for the European Commission on the impact of the Trans European Networks. SACTRA commence their investigation into the influence of transport on economic activity by establishing what theory has to say about the causes of economic growth. Traditional economic theory suggested that growth depends on greater inputs, or more efficient use, of capital and labour. Investment would therefore have an effect on the level of production but only a transient effect on its rate of growth. More recent theories also treat skills, knowledge and infrastructure as forms of capital. Improvements in these can ultimately increase growth rates as they spread through the economy. In modern theories, innovation therefore plays a central role in stimulating growth. SACTRA go on to look at the potential role of transport improvements in relation to innovation, barriers to trade, freight and logistics, the labour and housing markets and local and regional effects. Their comments under each of these headings are summarised below. 2.6 D1: Identification of the key linkages between transport intensity and economic growth Innovation Transport improvements might be expected to influence innovation through: - increasing the size of markets, allowing higher expected sales to cover fixed costs in the event of a successful innovation; - encouraging the formation of clusters of firms whose specialist knowledge has synergetic effects; - stimulating technology transfer by helping to attract foreign investment and - leading to better integration of markets and enhancing competition. Barriers to trade Transport costs might also be considered as being analogous to trade barriers. Opening up of markets through the reduction of trade barriers - or improvement of the transport system - is likely to have a positive effect on economic activity as a result of: - the efficiency of larger scale production; - greater competitive pressures; - concentration of certain products in those regions most suited to their production and - transfer of new technologies. It is important to note, however, that such a process is likely to benefit some areas at the expense of other areas. Freight and logistics SACTRA’s comments here tend to reinforce the findings of McKinnon and Woodburn (1993) and of the REDEFINE project (1999), discussed in more detail later, in Chapter 3. The direct impact of transport improvements on a firm’s transport costs are likely to be negligible in terms of increasing output however transport improvements may allow firms to re-organise their operations and thus benefit from significant cost savings, in excess of the simple reduction in transport costs. Such savings might, for example, arise from a reduction in the number of production locations or depots and/or from lower stock levels. There may also be other opportunities to improve efficiency and/or output as a result of improved vehicle utilisation, the chance to source supplies more widely and to compete for sales in more distant markets. Labour and housing markets Transport improvements may affect labour productivity through: - reducing time spent travelling - to and from and - in the course of work and The linkages between transport and economic activity - 2.7 firms being able to access a wider labour market. A common response of commuters to a transport improvement is to move house to an area further away from work in order to benefit from lower house prices or a better quality of life. This type of effect may, to some extent, offset the commuting benefits for the labour market. Savings in commuting time may, as a result, be captured in the housing market rather than the labour market. Local and regional effects SACTRA note that changes in transport costs are likely to have an ambiguous effect on the relative development of different regions. Thus, high transport costs between a region and the outside world may help to ‘protect’ firms serving the local market from competition from firms in other regions. A lowering of transport costs will not, therefore, automatically ensure access to larger markets. Lower transport costs may benefit firms with the potential to achieve larger economies of scale but they may also benefit firms that have lower input costs. Such firms may either be located within the region where the transport improvement takes place, or in another region. This analysis is used to explain the so-called ‘two way road’ argument. Improved transport facilities have effects at both ends of the improved facility. Which end of the link derives the greater benefit will depend upon: - whether either region has unique assets to exploit (e.g. natural resources); - the relative configuration of scale economies; - the size of the local markets; - local labour and land market conditions and - the nature and scale of backward and forward linkages in local sectors. 2.5 Conclusions This chapter has contained a general discussion of the linkages between transport and economic activity. It was noted that, in most EU countries, a close correlation exists between economic growth and increased movement of both people and goods. Transport and economic activity are interrelated. The first part of this chapter summarised the ways in which economic activity can influence the demand for transport. The second part of the chapter then went on to take a brief look at the ways in which transport can exert an influence on economic activity. Chapter 3 now returns to the former topic in more detail, the way in which economic and other effects can influence the demand for transport. Review of transport trends across Europe 3.1 3. Review of transport trends across Europe 3.1 Introduction This chapter reviews transport trends across Europe. Section 3.2 discusses the concept of ‘transport intensity’ and briefly reviews the evidence regarding changes in transport intensity that have taken place at EU and national level. Sections 3.3 and 3.4 go on to examine past and present trends in passenger and freight transport and attempt to explain the driving forces behind those trends. Finally, sections 3.5 and 3.6 consider possible future trends in passenger and freight transport. Where possible, the analysis carried out in this chapter makes use of data at the European level. Unfortunately, it has not always been possible to obtain suitable data to support the analysis at this level. Where European level data is not available, data for one or more European countries has been used. In some cases it has been necessary to rely on data solely for the United Kingdom. The authors believe that many of the findings, based on data from the UK, also hold for a number of other European countries and continue to seek additional support for their arguments. 3.2 Transport intensity ‘Transport intensity’ is an aggregate measure of the importance of transport in the economy, in principle covering all modes (SACTRA, 1999). The idea was initially put forward by Peake (1994), drawing on the concept of ‘energy intensity’, used in the energy sector as an indicator of the efficiency with which energy was being used in production and consumption. Peake defined the concept of ‘gross mass movement’, which included both passenger and freight mobility within a single index, expressed in tonne-kilometres. More recent work on transport intensity has looked separately at passenger and freight movements and has considered a broader range of measures including passenger kilometres, vehicle kilometres, tonnes lifted and tonne-kilometres. Figures 3.1 and 3.2, respectively, compare the growth in passenger and freight transport with GDP for the EU15, over the period between 1970 and 1995. From the Figures it can be seen that the number of passenger-kilometres travelled by air and by private car have grown at a faster rate than that of the economy, whereas passenger travel by rail, bus and coach have grown at a slower rate over the same period. Similarly, in the case of freight tonne-kilometres, road freight has grown more rapidly than GDP whilst freight moved by rail, pipeline and inland waterway has grown at a slower rate than the economy. A question worth asking is whether there are “turn offs” which prevent rail, bus, coach, pipes and inland waterways from growing as fast as road transport and, perhaps, result in a lower saturation level for these modes. Intuitively it seems likely that the advantages for both passengers and freight of door-to-door travel, which are only possible for road transport, will influence both the total volume of travel and the proportion that travel by road. The ideal form of ‘decoupling’ would provide the 3.2 D1: Identification of the key linkages between transport intensity and economic growth economic and welfare benefits of individual road transport with the efficiencies of the higher density modes. Though it is interesting to look at the relative growth in different types of travel it is also important to be clear about the relative importance of different modes. Figures 3.3 and 3.4 show the evolution of passenger and freight transport by mode in the EU15 over the same time period. Review of transport trends across Europe 3.3 GDP and passenger kilometres (1990=100) Figure 3.1 – Index of GDP and passenger travel by mode in the EU15, 1970-95 140 120 Air 100 Private car GDP 80 Bus & coach 60 Rail 40 20 1970 1975 1980 1985 1990 1995 Source: EU transport in figures, statistical pocket book, 2 nd issue, EUROSTAT (1997a) and National Accounts ESA, Aggregates, 1970-1995, Theme 2A, EUROSTAT (1997b) GDP and tonne-kilometres (1990=100) Figure 3.2 – Index of GDP and freight transport by mode in the EU15, 1970-95 130 120 110 Road 100 Pipelines 90 GDP 80 Inland waterways 70 Rail 60 50 40 1970 1975 1980 1985 1990 1995 Source: EU transport in figures, statistical pocket book, 2 nd issue, EUROSTAT (1997a) and National Accounts ESA, Aggregates, 1970-1995, Theme 2A, EUROSTAT (1997b) 3.4 D1: Identification of the key linkages between transport intensity and economic growth Figure 3.3 – Passenger travel by mode in the EU15, 1970-95 Billion passenger-kilometres 4000 3500 3000 Private car 2500 Bus & coach 2000 Rail 1500 Air 1000 500 0 1970 1975 1980 1985 1990 1995 Source: EU transport in figures, statistical pocket book, 2nd issue, EUROSTAT (1997a) Figure 3.4 – Freight transport by mode in the EU15, 1970-95 Billion tonne-kilometres 1200 1000 800 Road Rail 600 Inland waterways Pipelines 400 200 0 1970 1975 1980 1985 1990 1995 Source: EU transport in figures, statistical pocket book, 2 nd issue, EUROSTAT (1997a) Review of transport trends across Europe 3.5 In both Figures the most striking feature is the enormous growth in road (private car and freight) transport that has taken place relative to other modes. Figure 3.5 looks in more detail at the growth of vehicle kilometres and economic growth in the UK over the period between 1951 and 1995. It can be seen that the distance travelled by buses and coaches and by heavy goods vehicles (HGVs) have grown more slowly than GDP. Light goods vehicle (LGV) kilometres, in contrast, have grown more rapidly than GDP, whist growth in car and taxi kilometres have far outperformed all other modes of transport. Figure 3.5 – GDP and vehicle kilometres by vehicle type in the UK, 1952-97 Index of GDP and vehicle kilometres (1952 = 100) 1250 1050 850 Cars and taxis LGVs GDP 650 HGVs Buses and coaches 450 250 50 1952 1961 1970 1979 1988 1997 Source: Office for National Statistics (www.ons.gov.uk), Social Trends Data Set, On-Line Statistics (www.statistics.gov.uk/statbase/datasets.asp) and Transport Statistics Great Britain, 1998 edition (DETR, 1998). A similar pattern is shown in Figure 3.6 for pre-unification Germany. Between 1952 and 1990 growth in car kilometres far outpaced GDP growth. In contrast, freight and bus vehicle kilometres grew at a similar rate to the economy. 3.6 D1: Identification of the key linkages between transport intensity and economic growth Figure 3.6 – GDP and vehicle kilometres by vehicle type in pre-unification Germany, 1952-90 Index of GDP and vehicle kilometres (1952=100) 2600 2100 1600 Cars Buses GDP 1100 Lorries 600 100 1952 1957 1962 1967 1972 1977 1982 1987 Source: Verkehr in Zahlen, 1991 (DIW, 1991) Figure 3.7 shows the growth in freight tonnes-lifted and tonne-kilometres moved by road and economic growth in the UK over the period between 1952 and 1997. It can be seen that tonnes-lifted have grown more slowly than GDP, over this period, whilst tonne-kilometre growth has far outstripped the rate of expansion of economic activity. Figure 3.8 shows that for pre-unification Germany freight tonne-kilometres have grown at a similar rate, though slightly more slowly than GDP, over the period between 1950 and 1990. The general pattern of tonne-kilometres growing at a similar, or faster, rate than GDP and somewhat slower growth in tonnes-lifted is confirmed in work by Rothengatter and Szimba (2000). They examined whether or not a ‘de-coupling’ of the growth of freight transport from economic growth has been achieved in Western European freight transport markets. Using data for Belgium, France, Germany, Italy, the Netherlands, Spain and the UK, the following results were obtained: - Decoupling of growth of freight transport tonnes-lifted from growth of GDP has already taken place in many Western European countries. Analysis for Belgium, France, Germany, the Netherlands and the UK shows that growth rates of tonnes-lifted are lower than growth rates of GDP. There are, however, country-specific differences. In Belgium, Germany and the Netherlands there is a strong positive correlation between tonnes-lifted and GDP. In France and the UK tonnes-lifted appears to be less related to economic growth. Review of transport trends across Europe 3.7 Index of GDP, tonnes and tonne-kilometres (1952 = 100) Figure 3.7 – GDP, goods lifted (tonnes) and goods moved (tonne-kilometres) by road in the UK, 1952-97 550 500 450 400 350 Goods moved GDP 300 Goods lifted 250 200 150 100 1952 1967 1982 1997 Source: Office for National Statistics (www.ons.gov.uk), Social Trends Data Set, On-Line Statistics (www.statistics.gov.uk/statbase/datasets.asp) and Transport Statistics Great Britain, 1978-1988 edition (Department of Transport, 1989) and 1998 edition (DETR, 1998). 600.0 550.0 500.0 450.0 400.0 350.0 300.0 250.0 200.0 150.0 100.0 19 50 19 55 19 60 19 65 19 70 19 75 19 80 19 85 19 90 Index of GDP and tonne-kilometres (1950=100) Figure 3.8 – GDP and goods moved (tonne-kilometres) in pre-unification Germany, 1950-90 Source: Verkehr in Zahlen, 1991 (DIW, 1991) GDP Goods moved 3.8 - D1: Identification of the key linkages between transport intensity and economic growth The relationship between freight tonne-kilometres and GDP is not so clear cut. De-coupling has not taken place in Germany, Belgium, Italy and Spain. There is some evidence of de-coupling tendencies in France and the UK, though decoupling cannot be said to have been achieved in those countries, either. Clearer de-coupling tendencies are evident in the Netherlands. Finally, it is worth noting that although GDP is the most widely used measure for assessing the development of the economy, it does have some drawbacks. GDP can be defined as the sum of all the value added in the economy during any particular year. The rate of economic growth is then typically defined as the annual percentage change in GDP. One drawback of using GDP as a measure of economic progress is that it concentrates on flows of output that involve monetary transactions. Activities such as housework are not, therefore, included within a GDP based measure of economic activity. GDP also fails to take account of damage to the environment resulting from economic activity. In seeking to measure the transport intensity of the economy and in the course of designing policies to reduce transport intensity, it is important to bear in mind the drawbacks of GDP-based measures of activity. The debate on decoupling should not lose sight of the fact that GDP is the most significant indicator of growth, ultimately, it is the rate of increase in general welfare which it is desirable to maintain. It is also important to note that interdependencies exist between transport and GDP. For example, in 1998 the transport sector (transport services and manufacturing of transport equipment) in the EU accounted for approximately 10% of GDP. Equally, private households spent approximately 16% of their total final private consumption on transport. 3.3 Past trends in passenger transport 3.3.1 Past trends Figure 3.9 shows the growth through time on all forms of passenger transport in terms of the yearly number of trips, of travel hours and of passenger kilometres per person in the UK. The trends exhibited by the different statistics are not the same. Whereas travel distance has increased rapidly, the travel time and the number of trips per person have both grown quite slowly and at similar rates. Trip making behaviour exhibits a reasonable amount of similarity across EU countries. In research carried out under other European Commission research projects, ME&P analysed data from the national travel surveys of a number of different countries. An extract from the results of this analysis, covering France, Finland, Denmark, the UK and the Netherlands is reported in Tables 3.1, 3.2 and 3.3. Table 3.1 compares changes in trip rates over time. It can be seen that the number of trips per person has remained fairly stable through time in all of the countries surveyed. Review of transport trends across Europe 3.9 Figure 3.9 – Annual number of journeys, kilometres travelled and travel time per person and GDP in the UK Index (1972/73 = 100; for time only, 1985/86 = 100) 160 150 140 Distance per annum Journeys per annum Travel time per annum GDP 130 120 110 100 90 1972/73 1975/76 1978/79 1985/86 1989/91 1992/94 1994/96 Notes: Data relates to all forms of passenger transport. Data on travel time are not available prior to 1985/86. Source: UK National Travel Survey (DETR, 1997a) Table 3.1 – Comparison of changes in trip rates, over time, for selected European countries Country Year of survey Trips per day, per Year of survey Trips per day, per person person France 1982 3.3 1994 3.2 Finland 1974 3.0 1992 3.0 Denmark 1992 2.9 1995 2.7 UK 1985/86 2.8 1994/96 2.9 Netherlands 1986 3.4 1996 3.5 Source: ME&P analysis of the National Travel Surveys of various countries in the course of the STREAMS and SCENES projects. See References section for details of individual country data sources. Notes: Figures shown are for all trips. Table 3.2 compares changes in the average time spent per trip, over time. In three out of the four countries for which data were available, the average time per trip can be seen to have increased very slightly, though on an annual basis the changes are very minor. Finally, Table 3.3 compares changes in average distances travelled per trip. This table confirms that the UK is not unusual in recording significant increases in the length of trips through time. 3.10 D1: Identification of the key linkages between transport intensity and economic growth Table 3.2 – Comparison of changes in average time spent per trip, over time, for selected European countries Country Year of survey Average time spent Year of survey Average time spent per trip (minutes) per trip (minutes) France 1982 16.4 1994 17.3 Finland 1974 24.6 1992 25.6 Denmark 1992 19.6 1995 18.9 UK 1985/86 19.7 1994/96 20.3 Netherlands 1986 No data 1996 No data Source: ME&P analysis of the National Travel Surveys of various countries in the course of the STREAMS and SCENES projects. See References section for details of individual country data sources. Notes: Figures shown are for all trips. Table 3.3 – Comparison of changes in average distances per trip, over time, for selected European countries Country Year of survey Ave. distance Year of survey Ave. distance Average annual per trip (kms) per trip (kms) % increase France 1982 5.2 1994 7.3 2.9 Finland 1974 12.2 1992 17.2 1.9 Denmark 1992 12.0 1995 13.2 3.2 UK 1985/86 8.3 1994/96 9.9 1.8 Netherlands 1986 10.0 1996 10.8 0.8 Source: ME&P analysis of the National Travel Surveys of various countries in the course of the STREAMS and SCENES projects. See References section for details of individual country data sources. Notes: Figures shown are for all trips. When broken down by trip purpose different categories of people have different needs to travel. However, taking all trips together, in general the young and the retired make the fewest trips while those in employment make the most trips. The number of trips made does not vary enormously either over the years, or between countries. The major proportion of past passenger transport growth has arisen from increases in the length of trips rather than from increases in the overall number of trips. There are some indications that the relationship between personal travel, and income changes when a threshold level has been reached. Table 3.4 shows the EU countries ranked in order of income per head. The figures suggest that there is more similarity between the propensity to travel per head in the EU than in income per head. It is noticeable that the four countries with the lowest income per head all appear to have a considerably higher ratio of per capita kilometres of travel to per capita income than for the other countries. Portugal and Greece have the lowest income per head, by a substantial margin, and also the lowest kilometres of personal travel. Nevertheless, the kilometres ‘bought’ per Euro of income in Portugal are some 50% higher than the EU average. Review of transport trends across Europe 3.11 Table 3.4 – Income and travel per person in EU countries in 1995 Personal income per Kilometres per capita in 1995 Kilometres per Euro capita in 1995 of income in1995 (1990 Euros) per year (Km) per day (Km) (Km/1990 Euros) Portugal 3946 8933 24 2.3 Greece 4022 10791 30 2.7 Ireland 6736 12947 35 1.9 Spain 6863 13476 37 2.0 UK 8476 12103 33 1.4 Germany 9318 11242 31 1.2 Netherlands 9318 11176 31 1.2 Sweden 9510 13765 38 1.4 Italy 9731 12988 36 1.3 Austria 9839 12906 35 1.3 Benelux 9949 13390 37 1.3 Finland 9847 12546 34 1.3 France 10330 13394 37 1.3 Denmark 11494 13930 38 1.2 Source: European Union Energy Outlook to 2020, Table 6.1, (European Commission, 1999) Few other patterns can be observed at this aggregate level, though it appears likely that there will be greater distances of personal travel in more dispersed regions. It is therefore possible to put forward a cautious hypothesis that the rate at which travel growth exceeds income growth may moderate at higher income levels but that any actual reductions will almost certainly require structural changes (possible interventions?) in the patterns of social and economic life. 3.3.2 Understanding the causes of past growth in passenger transport This section considers, in more detail, the causes and mechanisms that have generated the past growth in passenger transport. The focus is particularly on car travel since this has been the major growth mode. Many interrelated trends have combined to generate the observed rapid growth in car kilometres. These include the following causes: (i) The population has grown through time - this has been a minor source of road traffic growth. The Great Britain population grew by just under 5% over the years 1970 to 1993 while car and taxi kilometres increased by 118% over this period. Likewise for the EU as a whole, a population growth of under 9% has translated into a growth of 138% in car and taxi kilometres (Sources: Eurostat, 2000, Table 1.6 and Department of Transport, 1996, Table 7.4). (ii)A greater proportion of the population are now in those population age segments that have the highest trip rates, that make the longest trips and that are most likely to use cars. In 1995 an annual average of 10,800 kilometres (DETR,1997a) was travelled in the UK by those in the most mobile group, namely those between the ages of 16 and 59. This is 130% greater than the average distance for the under 15s, and 118% greater than that for the over 60s. Furthermore, this most mobile group is the population segment which also has the largest proportion of its travel taking place by car. Because demographic pyramids are not smooth through time, the last 20 years has seen relative growth in the 16 to 64 age group, compared to 3.12 D1: Identification of the key linkages between transport intensity and economic growth the growth in other age groups. In the UK, between 1971 and 1991 the proportion in the most mobile group increased from 62% to 64% of the population (Office for National Statistics, 1997b, Table 1.5). (iii)More people have access to cars - both more households have cars, and more individuals within the household have cars. Average household size has reduced while the average number of cars in households with two or more adults has increased rapidly. The increased car ownership is due largely to the average incomes of individuals increasing more rapidly than the cost of car ownership (see Figure 3.13) - this reduces their likelihood of using other modes and encourages individuals to adopt the relatively higher travel demands of the car owning segment of the population. For a selection of countries and the EU15 as a whole, Figure 3.10 shows how the number of cars per head of the population has increased between 1970 and 1995. Evidence from the UK (for example, see Chapter 6 of Potter, 1997) suggests that the number of journeys made by a household increases substantially when a car is acquired and some existing journeys transfer from other modes to the car. Figures 3.11 and 3.12 provide some support for this view. Figure 3.10 - Cars per 1000 inhabitants in selected EU15 countries and the USA, 1970-95 700 Cars per 1000 inhabitants 600 500 400 France Germany Netherlands Spain UK EU15 USA 300 200 100 0 1970 1975 1980 1985 1990 1995 Source: EU transport in figures, statistical pocket book, 2nd Issue, 1997 (EUROSTAT, 1997a) (iv)Cars have captured a greater share of all the trips that are made - because the cost-effectiveness of car travel has improved relatively more quickly than that of other modes (except air). Data from the UK (Department of the Environment,1996) shows that over the 20 years from 1974, motoring costs were almost unchanged in real terms, while bus and rail fares increased by 55% and 71% respectively, which was somewhat higher than the growth in disposable incomes of 51%. This is shown in figure 3.13. Review of transport trends across Europe 3.13 Figure 3.11 – Total journeys per person, per year for households with and without access to a car and by person type for the UK, 1995/97 All households No car With car, non-driver With car, other driver 1400 1200 1000 800 600 400 200 0 With car, main driver Journeys per year Journeys per person by household type and by person type Source: Office for National Statistics (www.ons.gov.uk), Social Trends Data Set, On-Line Statistics (www.statistics.gov.uk/statbase/datasets.asp) Figure 3.12 – Modal share of journeys per person, per year for households with and without access to a car and by person type for the UK, 1995/97 Modal share of journeys per person by household type and by person type 100% 90% 80% 70% Other 30% Local bus 20% Walk 10% Car 0% All households 40% No car Bicycle With car, non-driver 50% With car, other driver Motorcycle With car, main driver 60% Source: Office for National Statistics (www.ons.gov.uk), Social Trends Data Set, On-Line Statistics (www.statistics.gov.uk/statbase/datasets.asp) 3.14 D1: Identification of the key linkages between transport intensity and economic growth Figure 3.13 – Real changes in the cost of transport in the UK, 1970-94 180 Index (1974 = 100) 160 Rail fares 140 Bus fares 120 Disposable income All motoring 100 Petrol/Oil 80 60 1970 1974 1978 1982 1986 1990 1994 Source: Indicators of Sustainable Development for the United Kingdom, Indicator b3 (Department of the Environment, 1996) (v)People now tend to make longer trips due to the improved cost effectiveness of travel, especially by car. This has been a significant source of growth since average trip lengths for car drivers have increased by 12% to 13.5 kms over the 20 years to 1995 (DETR, 1997a), This growth is due both to lower car operating costs and to higher average road speeds due to the greater availability of and the more intensive use of the motorways and the high quality inter-urban primary road network. Other modes have improved their generalised costs more slowly, if at all. (vi)People are likely to travel further due to the increased average income of individuals. Analysis of national travel surveys indicates that, across the EU, the average length per trip increases in a pronounced fashion as a function of the income of an individual. The relative damping effect of the monetary cost of travel becomes less important as incomes increase. (vii)People make longer trips because of the population shift away from dense urban areas. This increase in demand results from the migration of households and jobs to areas which are less congested for cars. The scale and nature of the impact of these land use changes on magnifying the growth in car travel is discussed in more detail below. (viii)Car occupancy levels are lower the increase in car ownership has lessened the average number of occupants per car kilometre travelled, from 1.73 in 1975 to 1.62 in 1995 according to the UK NTS (DETR, 1997a), so that the same number of Review of transport trends across Europe 3.15 person journeys in car would now generate 7% more vehicles to make these journeys Land use impacts on transport demand Land use changes have had a significant impact on facilitating and encouraging the increase in the demand for car travel over the last 25 years. During this time there has been implicit traffic demand management in the denser urban areas through rationing by congestion. The primary impact of rationing by congestion has been clear cut. There has been a major switch in population patterns away from congested urban areas where cars are awkward/costly to keep and run, into areas where cars are easy to park and have fast speeds. Urban road congestion has certainly not been the sole cause of population decentralisation but it certainly acts as a major contributory factor. The empirical evidence for the UK is as follows: (a) The population has been migrating consistently from the most urbanised towards the least urbanised areas. For example, Champion et al (1998) report that over the period 1981-94 the six metropolitan counties and Greater London together recorded a net loss of nearly 1.5 million people to the rest of the UK. Champion and Atkins (1996) also provide evidence of a ‘counter-urbanisation cascade’. There is, however, some evidence that this trend has been slowing down in recent years and even reversing in such highly urban areas as inner London. (b) Total travel distance per person increases systematically with decreasing settlement size. Averaged over all modes, residents in small urban areas travel 40% further than those in major cities (Potter, 1997) - and furthermore are much more likely to use a car for this travel. This disparity is growing strongly through time. However, the number of trips per person is much more stable across settlement sizes, it is primarily the average length of trips that differs significantly between areas. (c) The increase through time in car mileage per person is greater for residents in the medium to small urban areas than in towns of more than 250,000 population (Potter 1997). (d) The rate of growth in traffic has been lowest on roads in built-up areas which have low free flow speeds and are most subject to congestion. Figure 3.14 shows how vehicle traffic has grown on different types of roads in the UK between 1987 and 1997. (e) The rate of growth in traffic has been highest on motorway and on non-built up trunk roads which have high free flow speeds and many of which are not subject to regular congestion. (f) The net result of all of this has been that despite the undoubted build up of traffic congestion in towns, the flow weighted average car speeds over the 3.16 D1: Identification of the key linkages between transport intensity and economic growth whole road network are consistently increasing through time as shown by the NTS (DETR, 1997a): 1975/76 21.7 mph 1985/86 22.5 mph 1989/91 23.1 mph 1993/95 23.5 mph Figure 3.14 – Motor vehicle traffic growth on UK roads, 1987-97 450 350 300 Minor roads 250 Built up major roads 200 Non-Built up major roads 150 Motorways 100 1997 1995 1993 1991 0 1989 50 1987 Billion vehicle kilometres 400 Source: Transport Statistics Great Britain, 1998 Edition (DETR, 1998). The explanation linking these phenomena is that people appear to respond to increasing congestion by moving to avoid it if they can, rather than simply by changing mode or by reducing the number of car trips. However the latter are the mechanisms that have traditionally been employed in conventional transport models and analysis. It is not surprising that forecasting in transport has not had the most successful of histories. People vote with their wheels - moving to live in areas with good access to a high quality road network where they can travel easily and cheaply by car. Review of transport trends across Europe 3.4 3.17 Past trends in freight transport 3.4.1 Past trends In common with experience in the passenger transport sector, the dominant trend in the freight transport sector has been the enormous growth in the importance of road relative to other modes (recall Figures 3.2 and 3.4). Because of the dominance of road, this section will focus largely on trends in road freight transport. Figure 3.15 presents numerous statistics relating to the growth of road freight traffic carried on heavy goods vehicles (HGVs) in the UK, together with an index of GDP. Whereas the amount of goods lifted (measured in tonnes) has increased sporadically and by only 12% in total over the last 22 years, goods moved (measured in tonnekilometres) have increased by around 70%, more rapid growth than was shown by GDP over the same period. Average length of haul and vehicle kilometres have increased by around 50% over the same period. Figure 3.15 – Annual road goods vehicle kilometres travelled, tonnes-lifted, average length of haul, tonne-kilometres and GDP in Great Britain, 1974-96 170 160 Index (1974 = 100) 150 140 Tonne-kilometres GDP Average length of haul HGV vehicle-km Tonnes lifted 130 120 110 100 90 80 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Notes: The data includes UK registered operators and the UK leg of international journeys, carried out by foreign registered hauliers. Source: National Road Traffic Forecasts (Great Britain) 1997 (DETR, 1997b) and UK National Accounts (The Blue Book) 1997 (Office for National Statistics, 1997a). The data presented in Figure 3.15 are for the UK. Figures 3.16a to 3.16d show similar data for Belgium, the Netherlands, France and Germany. From 1970 to 1995 road tonne-kilometres in the EU increased by 156% while the road tonnes lifted increased at a much slower rate. For example, on French roads a reduction of 20% in tonnes lifted was accompanied by an increase of 70% in tonne-kilometres moved. Rothengatter and Szimba (2000) report that between 1965 and 1996 freight tonnekilometres increased by 376% in Spain and 273% in Italy. 3.18 D1: Identification of the key linkages between transport intensity and economic growth Figure 3.16a – Annual road tonnes-lifted, average length of haul and tonnekilometres for Belgium, 1970-93 275 250 Index (1970 = 100) 225 200 175 150 Tonne-kilometres - B Average length of haul - B Tonnes lifted - B 125 100 75 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 Source: International comparisons of transport statistics, 1970 – 1993 (UK Department of Transport, 1996). Shows freight lifted and moved by national vehicles on national territory. Figure 3.16b – Annual road tonnes-lifted, average length of haul and tonnekilometres for the Netherlands, 1970-93 275 250 Index (1970 = 100) 225 200 175 150 Tonne-kilometres - NL Average length of haul - NL Tonnes lifted - NL 125 100 75 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 Source: International comparisons of transport statistics, 1970 – 1993 (UK Department of Transport, 1996). Shows freight lifted and moved by national vehicles on national territory. Review of transport trends across Europe 3.19 Figure 3.16c – Annual road tonnes-lifted, average length of haul and tonnekilometres for France, 1970-93 275 250 Index (1970 = 100) 225 200 175 150 Average length of haul - F Tonne-kilometres - F Tonnes lifted - F 125 100 75 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 Source: International comparisons of transport statistics, 1970 – 1993 (UK Department of Transport, 1996). Shows freight lifted and moved by national vehicles on national territory. Figure 3.16d – Annual road tonnes-lifted, average length of haul and tonnekilometres for Germany, 1970-93 275 250 Index (1970 = 100) 225 200 175 150 Tonne-kilometres - D Average length of haul - D Tonnes lifted - D 125 100 75 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 Source: International comparisons of transport statistics, 1970 – 1993 (UK Department of Transport, 1996). Shows freight lifted and moved by national vehicles on national territory. 3.20 D1: Identification of the key linkages between transport intensity and economic growth A similar, though less pronounced, trend has also been evident for rail freight, as shown in Figures 3.17a to 3.17d, for Belgium, the Netherlands, France and Italy. The trends shown for Italy are slightly different from those apparent in the other countries. Up to 1993, the average length of rail haul showed only a modest increased in Italy. Indeed, after 1993 the average length of rail haul has actually decreased, while Italian rail freight tonne-kilometres and tonnes-lifted have continued to increase. This may be due to a consolidation of combined transport. From 1970 to 1993 rail tonne kilometres in the EU as a whole decreased by 27% while the rail tonnes lifted decreased at a much faster rate, by 41%. This created an increase in the average length of rail haul of 24%. This analysis leads to the following conclusion, which holds in the case of both road and rail freight. The vast majority of past freight transport growth has arisen from increases in the length of freight journeys, rather than from increases in the number of tonnes carried. Figure 3.17a – Annual rail tonnes-lifted, average length of haul and tonnekilometres for Belgium, 1970-93 140 130 Index (1970 = 100) 120 110 100 90 Average length of haul - B Tonne-kilometres - B Tonnes lifted - B 80 70 60 50 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 Source: International comparisons of transport statistics, 1970 – 1993 (UK Department of Transport, 1996). Shows freight lifted and moved by national vehicles on national territory. 3.4.2 Understanding the causes of past growth in freight transport Superficial explanations of freight – and particularly road freight - transport demand tend to concentrate on the link between GDP growth and freight transport. Higher incomes mean greater demand for goods and thus a requirement for increased movement of freight. A number of researchers have looked beyond this simple explanation and attempted to examine firms’ logistical decision-making processes. Review of transport trends across Europe 3.21 Figure 3.17b – Annual rail tonnes-lifted, average length of haul and tonnekilometres for the Netherlands, 1970-93 140 130 Index (1970 = 100) 120 110 100 90 Average length of haul - NL Tonne-kilometres - NL Tonnes lifted - NL 80 70 60 50 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 Source: International comparisons of transport statistics, 1970 – 1993 (UK Department of Transport, 1996). Shows freight lifted and moved by national vehicles on national territory. Figure 3.17c – Annual rail tonnes-lifted, average length of haul and tonnekilometres for France, 1970-93 140 130 Index (1970 = 100) 120 110 100 90 Average length of haul - F Tonne-kilometres - F Tonnes lifted - F 80 70 60 50 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 Source: International comparisons of transport statistics, 1970 – 1993 (UK Department of Transport, 1996). Shows freight lifted and moved by national vehicles on national territory. 3.22 D1: Identification of the key linkages between transport intensity and economic growth Figure 3.17d – Annual rail tonnes-lifted, average length of haul and tonnekilometres for Italy, 1970-93 Source: Ministero dei Trasporti e della Navigazione (1998) Conto Nazionale dei Trasporti. (In Italian: National Transport Accounting System). Istituto Poligrafico e Zecca dello Stato, Roma. Two such studies are the work by McKinnon and Woodburn (1993), and the REDEFINE project (REDEFINE 1999). For the UK, McKinnon and Woodburn examine the development of freight tonne-kilometres over the period between 1950 and 1990 (recall Figure 3.7). Tonne-kilometres can be disaggregated into tonneslifted and average length of haul. Between 1950 and 1990, these two variables made a broadly equivalent contribution to the overall growth in tonne-kilometres, though their relative contributions have varied in importance through time. In the 1950s, the increase in tonnes-lifted was the most important factor. During the 1960s, both tonnes-lifted and average length of haul grew at a similar rate. In the 1970s tonnes-lifted declined, while average length of haul grew substantially. In the 1980s both variables increased again, a trend that has continued in the 1990s, leading to rapid overall growth in tonne-kilometres. McKinnon and Woodburn argue that, for the UK at least, the spatial concentration of economic activity has been the major cause of the observed changes in tonnekilometres and average length of haul. They identify a number of factors that have encouraged this spatial concentration. Concentration of production/warehousing in larger units can lead to savings through economies of scale in the manufacturing process, warehouse construction and operation. It also allows firms to benefit from the ‘square root’ law of inventory and substantially cut stock levels. These cost savings have to be weighed against increased transport costs, as average length of haul increases. Review of transport trends across Europe 3.23 They go on to argue that changes in production and stockholding systems are probably a response to falling transport costs and improved efficiency/accessibility created by improvements in the (road) transport network. It is suggested that much of the growth in average length of haul in the UK in the 1970s was due to development of the motorway network during that period. McKinnon and Woodburn note, however, that industrial concentration in the UK seems to have continued despite the slowdown in improvements to the road transport system. They argue that further impetus to the concentration process would have come from the creation of the single European market and the deregulation of international haulage. The REDEFINE project recently studied the drivers of road freight traffic demand in Europe. The project adopted a framework of analysis that is summarised in Figure 3.18. This shows the relationship between the value of goods produced and road freight traffic demand as a series of key ratios. If each of these ratios were to remain constant, road freight traffic demand would be perfectly correlated with changes in the value of goods produced. In reality, each of the ratios can vary independently. The project attempted to estimate changes in each of the key ratios through time and thus establish what proportion of the growth in road freight is a function of economic growth and what proportion is attributable to logistical changes. REDEFINE found that, for each country studied, increases in the average length of haul was the single most important contributor to increased road freight demand. For some countries, this was accompanied by a significant increase in the modal share of road freight. On average, this combination of factors resulted in around a 50% increase in road tonne-kilometres over the period between 1985 and 1995. This was at least double the increase in the weight of goods produced or imported. Use of heavier vehicles was found to have gone some way toward offsetting the rise in tonnekilometres. Together with a reduction in empty running, this was found to have limited the increase in vehicle-kilometres to around 30%, over this period. The project went on to try and explain why the seven key ratios had changed over time. A number of key logistical trends were identified, that could act as potential drivers of changes in the key ratios. These were grouped into four types of decision making in logistics and one concerned with product design. Their list of key logistical trends and drivers for the period 1985 to 1995 was: 1. Restructuring of logistical systems 1.1. Spatial concentration of production (either through reduction in plant numbers or increased plant specialisation) 1.2. Spatial concentration of inventory 1.3. Development of break-bulk/transhipment systems 1.4. Centralisation of sorting operation in hub-satellite network 3.24 D1: Identification of the key linkages between transport intensity and economic growth Figure 3.18 – Linking economic activity and road freight traffic Value of production and imports Value density Weight of produced and imported goods Modal split (road share) Products transported by road Handling factor Vehicle carrying capacity Road tonneslifted Average length of haul Load factor Tonne-Kilometres Average payload Vehicle-Kilometres Empty running Aggregate Key ratio Source: REDEFINE (1999) 2. Realignment of supply chains 2.1. Vertical disintegration of production 2.2. Concentration of supplier sourcing 2.3. Wider geographical sourcing of supplies 2.4. Wider distribution of finished products 2.5. Increase in retailer’s control over supply chain Review of transport trends across Europe 3.25 2.6. Concentration of international trade on hub ports 3. Rescheduling of product flow 3.1. Application of Just-in-Time principle in manufacturing 3.2. Adoption of Quick Response and ECR in retail distribution 3.3. Growth of ‘nominated day’ deliveries 3.4. Proliferation of booking-in/timed-delivery systems 4. Changes in management of transport resources 4.1. Improvement in road’s relative cost/performance 4.2. Increased use of outside transport/distribution contractors 4.3. Changes in vehicle size regulations 4.4. Changes in handling systems 4.5. Increased use of Computerised Vehicle Routing and Scheduling 4.6. Increase in return loading 5. Changes in product configuration/design 5.1. Increase in complexity/sophistication of product REDEFINE examined the evidence relating to these key drivers through a number of sector-specific case studies. The importance and relative strength of each driver was found to vary between sectors and between countries. The project suggested that any freight forecasting or policy appraisal exercise must take these differences into account. 3.5 Future trends in passenger transport growth This section describes in more detail the main factors that are likely to influence the future level of the demand for transport. It focuses primarily on whether the pattern of influence of each factor will continue in the same direction as in the past, or whether it may impact rather differently on future demand. 3.5.1 Transport related influences on road passenger travel demand It was shown in Figure 3.9 that even though the annual number of trips made per person has grown only slowly, the annual distance travelled per person has risen strongly over the past 20 years. High levels of growth in annual travel distances have taken place in all EU countries over this period. In the past, many factors acted together to encourage increased passenger travel by road. Not all of these factors will necessarily be so important in the future. There are 3.26 D1: Identification of the key linkages between transport intensity and economic growth four main groups of factors that create growth in the distance travelled per person, per annum. Cost reductions The distance related costs of car travel have not increased in real terms over the last twenty five years (recall Figure 3.13). This was the result of increased fuel efficiency, coupled with unit fuel costs that have not increased greatly in real terms. This occurred at a time when personal incomes have also risen substantially. Accordingly, people have been increasingly able to pay the costs of longer travel on road. Current environmental policy trends suggest that car operating costs are not going to reduce significantly in the near future across the EU. They are more likely to increase. Higher fuel prices will have a two-fold effect. In direct terms they will reduce the rate of increase in car kilometres, since personal travel is price sensitive. In indirect terms they will encourage people to purchase smaller vehicles and to look toward new engine technologies that are more fuel efficient and less polluting, so that in the longer term the environmental pressure on road transport may reduce. Goodwin (1992), for example, suggests that a sustained real 10% increase in fuel price can be expected to have the following short and long run effects: - a short run decrease in traffic of around 1.5% and a decrease in fuel consumption of about 3% and - a longer run decrease in traffic of 3 to 5% and a decrease in petrol consumption of 7% or more (due to the use of smaller, or more fuel efficient, vehicles). There is no guarantee that crude petroleum prices themselves will not increase rapidly at some stage, as has often happened in the past. However one of the side effects of the current environmental pressures around the world is that the demand for fuel consumption may grow more slowly than in the past. This will cause downward, rather than upward pressures on crude petroleum prices. Increases in income Those with higher incomes tend to travel furthest. Since it is expected that average incomes in the EU will continue to increase in future years, not surprisingly, this should increase the overall demand for travel. This increase will feed through to travel by car in particular. (a) the impact of the monetary cost of travel on deterring people from travelling long distances becomes less powerful the greater the disposable income that a person has available to pay these costs. The rise in incomes may offset some of the effects of environmentally inspired increased taxation of car travel costs, since social equity considerations for the relatively poor and those in rural areas, will put a limit on the extent to which car costs can be increased. Review of transport trends across Europe 3.27 (b)higher disposable incomes allow a greater number of people to own cars, and the speed and flexibility of the service provided by a car encourages more of these people to make the longer trips that may otherwise be inconvenient to carry out by non-car modes. Car availability The future level of car ownership is not easy to predict accurately. Looking at the US, the levels reached there are much greater than in even the most car-oriented parts of the EU (recall Figure 3.10). However, levels in the US do appear to have stabilised at this high plateau in recent years. Since the urban and social structures in the US are very different to the EU, it is unlikely that car ownership here will attain US levels. Most EU citizens (not those on the periphery) live in countries which have higher overall populations densities than the United States. It is possibly even more important that European countries have a tradition of more compact urban form. The reasons for apparent differences in car ownership saturation levels between countries were discussed in a background paper to the United Kingdom DETR 1997 National Road Traffic Forecasts. The study identified a variety of factors, including public policy issues such as a regime of strict vehicle tests, which appears to have restrained car ownership in Japan. Assuming that there are no immediate policy changes, car ownership rates are likely to continue to rise significantly in the EU for the immediate future, with the growth in each country mainly influenced by the growth in average incomes and by the level of car prices in real terms. This suggests that the most rapid rises will be in the lower income countries, assuming encouragement of economic cohesion continues within the EU. Speed increases The average travel time per trip has not increased significantly (Figure 3.9 and Table 3.2) over the years despite the significant increase in the average distance per trip. This increase in average travel speeds is due to a combination of many factors: (a) a switch to faster modes - due to increased levels of car availability a greater proportion of all trips are by car but the mode car tends to have the lowest door-todoor times of all modes for short to medium distance trips, except perhaps to city centres. This trend to higher car availability is likely to continue as explained above. (b)unit speed increases within a mode - unit speeds on most modes have tended to increase due, for example, to the introduction of faster trains, and of a greater number of high-speed motorways and dual carriageway roads, bus-only lanes, etc. Such fast new services tend to capture a substantial part of the travel market. (c) relatively more rapid growth in demand in the areas with the higher speeds average urban car speeds may indeed have decreased in the inner parts of many large cities over the years. This is due to road congestion increasing in those cities where investment in new road capacity has not kept pace with increased demand. However, the growth in ex-urban and inter-urban car travel has been much more rapid than that within the congested urban areas in which public transport still provides a competitive alternative. The higher car speeds available outside the 3.28 D1: Identification of the key linkages between transport intensity and economic growth urban areas and the associated higher level of car availability have encouraged many firms and households to locate, either on the edge, or completely outside the major urban centres and these land use effects have helped to create higher average car travel speeds. For a number of reasons it is far from certain that average road speeds will continue to increase in the future at the same rate as they have done in the past. Firstly, most of the EU countries (other than the four Cohesion Countries Spain, Portugal, Ireland and Greece) have already gone a long way towards linking their major cities together with a high speed motorway network, so that fast speeds are already available for much of the travel to these cities. Further extensions to the motorway network that occur in these countries are likely to connect areas of lower populations and so will have proportionally less effect in terms of increasing overall accessibility, and thus the overall passenger travel demand. Secondly, continuing environmental pressures have reduced the political acceptability in many countries of road building, hence the existing road system is likely to become more congested for parts of the day, reducing the speed and reliability of the road network and hence the demand for road travel. There will also be pressure through the land use planning system to concentrate future population growth into urbanised areas where public transport can compete with cars, rather than allowing unrestricted out of town growth of commercial and residential building construction. Thirdly, the lower levels of pollution emissions that occur when vehicles travel more slowly may lead to future pressure to reduce speed limits for cars to 90 kms per hour. This policy response has previously been used temporarily in some countries after the oil shocks in the seventies and might reappear again in the future. Fourthly, the trend in investment in passenger rail is towards faster and higher quality trains so that longer distance trips by car will face increased competition from a rail service offering the opportunity for businessmen to work as they travel. The big question mark over the strength of the competition from rail is on the cost side. Recent policies to reduce government spending in the lead up to European Monetary Union have created pressure to reduce government subsidies for rail travel in some countries. Current EU transport policy, however, strongly supports investment in rail and encourages improvements in efficiency of operation to enable it to compete with road for both passengers and freight. As yet it is unclear whether the increased tariffs required to cover the costs of the improved rail services will lessen rail’s ability to compete with car for non-business travel, or in contrast whether the organisational changes and gradual privatisation of rail activities encouraged by EU Directives will deliver improvements in costeffectiveness and quality of service that increase its ability to compete with car. It should be noted, however, that even under the most optimistic scenario, rail will never be in a position to compete with car for the majority of trips undertaken by the population. Review of transport trends across Europe 3.29 Drawing these trends together suggests that the contribution of car speed increases to future growth on road travel is likely to be slight. In fact on balance it seems more likely to act to reduce, rather than to increase, growth. 3.5.2 Substitutes for travel For the last 25 years or more various telecommunication developments have been hailed as possible agents that would reduce the need for travel. As yet these have only had a small impact on travel demand. Video conferencing is certainly increasingly in use, but as yet only has a very limited market. The advent of the Internet gives more food for thought. Despite the fact that it has been available for many years, its growth suddenly started to mushroom about 3 years ago and very rapidly it achieved wide coverage of its potential market. This is the style of new technological changes, they drift along, growing slowly for a long period, and then all of a sudden they reach a critical mass and make a large leap forward flooding the potential market. This makes it much more difficult to predict the scale and timing of their impact. Modern telecommunication innovations certainly have the potential to reduce the demand for certain types of travel. The increasing availability and quality of service of banking, shopping and other sales by phone and over the Internet will allow people to avoid various trips to services. Home working has increased rapidly in some industrial sectors, with an increasing number of staff working from home some days and from the office the rest of the week. These initiatives will certainly act as a stimulus to reduce the need to travel somewhat. Whether in practice this just means that people will use the time saved to increase their travel on other trip purposes remains to be seen. 3.6 Future trends in freight transport growth The future determinants of growth trends in the demand for freight transport closely parallel those of passengers that were discussed in the previous section. Population growth is only likely to play a minor role in generating growth in overall demand, though population growth will not be evenly distributed among the regions of the EU, so that in some areas it will be of importance. Economic growth is the primary stimulus for increased freight demand. It will act predominantly through diversification of industry, and increased international trade, rather than from major increases in tonnes lifted. The expected continued change in the composition of the goods transported, towards a higher proportion of high value finished goods, and towards more specialisation of production due to the greater range of goods being consumed, are both likely to support a continuing increase in the average length of haul. These trends will continue to be reinforced by the process of EU integration and expansion. Considering the predominant mode, road freight, the fuel component of operating costs is more likely to increase, for the environmental reasons discussed previously, than to decrease in the future. This may be complemented or replaced by the 3.30 D1: Identification of the key linkages between transport intensity and economic growth introduction of HGV charging in the future. The financial/capital costs and the administrative costs of road haulage seem likely to stay stable or perhaps decrease a little in real terms due to increased computerisation of information and to more efficient use of vehicles of a more efficient size. The labour costs are likely to increase more or less in line with the increase in GDP. Accordingly, in the absence of any major new developments it appears that overall truck operating cost functions are likely to remain reasonably close to current levels in the future, or perhaps even to increase somewhat. There is likely to be pressure on rail companies to cover a higher proportion of the full costs of rail freight than in the past. Ideally this could be achieved or even exceeded by the efficiencies achieved through more efficient operation of the rail freight system, both through privatisation of selected operations, and through continuing to focus on the markets in which rail can compete most effectively. Thus there are some grounds for believing that rail freight tariffs could reduce significantly in some key markets. However, whether they actually reduce in practice will depend on institutional changes that to date have not proved easy to achieve in the rail systems in a number of EU countries. However, even if there are significant reductions in the future operating costs of rail and inland waterway freight, these will not effectively compete with road freight for the majority of shorter distance, or small irregular shipments so that their impact on overall road freight growth will at most be partial. For similar reasons as the case for passenger travel, there are not strong grounds for believing that effective road freight speeds will increase in the future at the rate that they have in the past. Already in the UK more than 75% of road freight traffic travels on the fast primary network due, in part, to firms organising their locations to be adjacent to this network. Overall, other than in the Cohesion Countries, much of the trucking industry already has reasonably good access to a road system with a high enough level of service to allow trucks to travel at their desired/legal speed. Future speed gains in these countries will therefore be limited. The pressures against road construction, coupled with continuing growth in demand, is likely to increase the likelihood of road haulage firms suffering from congestion. While reorganisation of the timing of truck movements can in the short term reduce some of the effects of the predictable congestion, that occurs in the peaks close to major urban areas, there are limits to the degree of reorganisation that can be achieved before the vehicles cease to be used fully and efficiently. In summary, future trends in road speeds seem more likely to increase than to decrease the operating costs of trucks. The continuing trend towards an increasing proportion of lighter, higher valued goods moved within the EU economy as a whole means that the responsiveness to transport cost increases should lessen, rather than increase, in the future. It should also mean that the number of vehicles required to transport a given number of tonnes will not necessarily decrease, even if maximum vehicle loads are allowed to increase. In summary, it seems likely that the economic forces that drive freight transport demand will continue in the future at a similar rate to the past. In contrast, the influence of supply factors will be much less clear cut than in the past. Various components of operating costs are as likely to increase as to decrease. Accordingly, Review of transport trends across Europe 3.31 the overall rate of growth in freight traffic is likely to increase rather more slowly than has been the experience in the past in the EU. Experience of de-coupling output from economic growth in other sectors 4.1 4. Experience of de-coupling output from economic growth in other sectors In chapter 3 it was shown that, over recent decades, there has been a close correlation between economic growth and growth in transport in the EU. This phenomenon occurred in the past also in other sectors. But there are examples in a couple of sectors where this development changed and a de-coupling of output from economic growth took place. Based on the analysis of an appropriate example, this chapter will go on to look at the implications for a de-coupling strategy for the transport sector. A good example is the development of energy consumption and CO2 emissions. Both were closely linked to economic development in the past, but have more recently show evidence of de-coupling for some decades. The energy and transport sectors are not, of course, totally independent because transport is, itself, a user of energy. Transport growth has also, therefore, had some impact on energy intensity. In the first part of this chapter (4.1) a detailed analysis shows the development of the last 20 to 30 years. The objective is to evaluate: – what does de-coupling in the energy sector mean; – if there was a de-coupling in all parts of the energy sector; – which developments were responsible for the de-coupling and – what effects on economic development resulted from the de-coupling? The objective of the second part of this chapter (4.2) is to find implications for the transport sector based on the experiences in the energy sector. Though these sectors show large differences there are also parallels in many points of the development and the way energy and transport products (i.e. mobility) are used as inputs in the economy. Against this background some initial conclusions will be drawn for how to develop a de-coupling strategy for the transport sector. 4.1 Review of experience from other sectors Energy is an essential factor for nearly all sectors for the production of goods and services. In the past the availability of energy and technologies for the use of different sources of energy were very important for economic development. For example the industrial revolution in the 18th century was inseparably combined with the usage of coal in steam engines and burgeoning economic growth after World War II depended on the availability of crude oil (Brune, 1999). Until the 1970s it was more or less common sense that economic growth depends on an at least equal growth of energy consumption, a de-coupling was unimaginable. Nevertheless the last 25 years showed exactly this development. The following explanation of this process exists in two parts. In a first step (4.1.1) the development is analysed from the angle of the entire economy. Within this not only the final energy consumption is taken into 4.2 D1: Identification of the key linkages between transport intensity and economic growth consideration but also the development of electricity consumption and CO2 emissions. This will be followed (4.1.2) by an analysis by sector (industry, transport, tertiary/domestic) with some examples to point out the specific developments. 4.1.1 Energy consumption and economic development From World War II to the first oil crisis in 1973 energy consumption grew in line with the economy in the most European countries. Coal was the most important source of energy directly after the war. During the following decades oil became more and more important. Accordingly the decision of the OPEC to slow down production and to raise the price for crude oil from 3 $/bl to 12 $/bl in winter 1973 had serious effects on the industrialised countries (Peake, 1994). Far more important than the oil price shock and its economic consequences was the acknowledgement that supply of the essential production factor energy was no longer seen to be safe. Furthermore the publication of the Club of Rome’s ‘Limits of Growth’ (Meadows, 1972) received much attention. It deals with the finite nature of natural resources. According to this perception – the uncertainty of energy supply in the short term as well as in the long term – society, business and policy came to the opinion that economic growth might come to an end. The economic shock resulting from the oil crisis was – compared to the repercussion – far exceeded by the psychological shock. Therefore the oil crisis triggered the de-coupling of energy consumption and economic growth (see Figure 4.1). While the economy grew by more than 75% since 1973, energy consumption increased only by about 15%. The energy intensity decreased until today to only 2/3 of the value in 1973. As a consequence of the first price shock in 1973 and the second one at the beginning of the 1980s energy consumption decreased and - in the short term - economies stagnated. In the short run the economic impacts of the enormous price increase were significantly negative. As mentioned before, the oil crisis was just the trigger for the de-coupling. The reasons were manifold and can be categorised as follows: – policy measures (see below); – energy costs; – technological progress; – economic structural change and – changes in behaviour. Experience of de-coupling output from economic growth in other sectors 4.3 Figure 4.1 - Primary energy consumption and GDP in the EU15, 1970-94 200 GDP [bil. EURO, const. prices] 180 PEC [PJ] 160 Energy Intensity [MJ / EURO] 140 120 100 80 60 1970 1975 1980 1985 1990 1995 Indices 1970 = 100 Sources: EUROSTAT, OECD, Prognos prognos 2000 As a direct outcome of the oil crisis the energy related questions got more and more important in politics. The first two points of the following listing of policy action fields mainly have been relevant in the 1970s and 1980s while the last two are still on the agenda of today’s energy policy. – International co-operation had been implemented between the industrialised countries in order to co-ordinate oil policy and to install an energy reserve management system. – Intensification and diversification of indigenous energy supply in order to lower the degree of import dependency. These measures included subsidies to unprofitable coal mines, and oil exploration especially in the North Sea was taken up. Another focus was on the development of nuclear power utilities and CHP-plants. – Contemplating the structure of energy demand with research programmes in order to examine the reasons for energy consumption and to identify possibilities to reduce energy demand. – Energy Conservation Programmes were and still are taken up to encourage the economical use of energy. In the 1970s such programmes were driven by uncertainties concerning the energy supply. Later environment protection (mainly aspects like air pollution) and nowadays the danger of climate change are the main reasons for promoting efficient and economical energy usage. 4.4 D1: Identification of the key linkages between transport intensity and economic growth Energy policy can be divided into three main groups of measures: – Information programmes: (audits, labelling, technical guidance, training) – Financial measures: (e.g. grants for insulation, Eco-taxes, tax incentives for energy efficient investments) – Regulations (technical standards for buildings or appliances) The goal of these measures is to reduce energy consumption or to increase the efficiency of energy usage. It is not the aim to restrict the consumption of usable energy but the decrease of energy input for the generation of the usable energy. So, the analysis mainly concentrates on the primary energy consumption but also takes a look at the final energy consumption. It does not deal with usable energy. Not only the governments showed reactions after the oil crisis but also business and population. As a consequence of the oil price shocks energy was no longer seen only as an important production factor but also as a significant cost factor. Therefore business was interested to decrease the energy input for the production. Analyses were made in order to identify potential for energy savings in production. Besides organisational improvements mainly technological progress accelerated. Increasing energy costs since the seventies were not the only reason for the decrease of energy intensity of production. Furthermore, environmental policy not directly concerned with energy consumption had an influence on efficiency. For example measures which intended a reduction of air pollution lead to an earlier replacement of old technology by new, cleaner and more energy efficient equipment. As a result energy efficiency of production increased significantly. Drawn to the economy as a whole also structural change in the economy had and still has a positive influence on energy consumption measured in a proportion of GDP. As industrial production is more energy intensive than production of services, a decrease of total energy intensity is a result of an increasing share of services in the economy. But also within the manufacturing sector there is a higher increase of high value products while production of energy intensive products like steel stagnate or even decrease. Also for private households the relevance of energy costs grew. Besides this environmental aspects became more important because of the partially enormous air pollution. The options for energy savings by households are mainly found in heating of buildings. With measures like heat measurement systems or insulation as well as fuel switch from coal to natural gas or oil significant savings were made. Especially during the 1970s and 1980s the motivation of the population to save energy was very high, nevertheless renunciation behaviour was found only directly after the first oil crisis (Traffic Free Sundays etc.). Looking at final energy consumption for example for heating, in principle there are two possibilities to reduce energy input. Firstly, energy efficiency can be increased by installing a new heater or by insulation measures which are correlated with costs. Secondly, people can reduce the temperature in their houses which, from the Experience of de-coupling output from economic growth in other sectors 4.5 economic point of view, leads to a decrease of welfare. But this decrease is not accounted within the concept of national accounts, so that GDP is not influenced by this measure. Therefore in this case energy efficiency related to GDP would increase though no improvements have been made. This shows the restriction of the concept of GDP as the base for measuring energy efficiency. This example demonstrates the importance of a clear definition of what should be decoupled from what. Today, the objective of de-coupling energy input is mainly to reduce resource consumption, environmental loads and with rising priority to reduce climate change effects. The consumption of usable energy, for example living in heated rooms, is not in the centre of discussions. One main objective concerning climate change is to reduce CO2 emissions and not primarily to reduce energy consumption. Therefore a de-coupling of CO2 emissions from economic growth can be achieved by a change in the structure of the consumed sources of energy, which give more weight to those with lower carbon density per energy unit. This is the reason why CO2 intensity decreased faster than energy intensity in the EU (Figure 4.2). While coal (carbon intensive) and oil were substituted by natural gas, additionally CO2-free electricity production with nuclear power was set up during the last decades. Figure 4.2 - Energy consumption, electricity consumption, CO2 emissions and GDP in the EU15, 1985-97 140 130 120 110 100 90 GDP [bil EURO, const. Prices] Gross Energy Consumption [PJ] 80 CO2-Emissions [mil t] 70 Final Electricity Consumption [PJ] 60 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Indices 1985 = 100 Sources: EC, Prognos prognos 2000 4.6 D1: Identification of the key linkages between transport intensity and economic growth Looking at electricity consumption a different development has to be noted. There is no sign of de-coupling from economic growth in recent years. Technological progress (e.g. IT), economic structural change and increasing welfare lead to a comparatively high growth of consumption of electricity. As a first result of this analysis, concerning the transport sector, two important points should be kept in mind: – It has to be clearly defined what impact, of an input or output, is being targeted in seeking to de-couple the input or output of a sector from economic growth. – If measures are taken for de-coupling input from GDP, it has to be assessed whether effects occur that are not measured within the concept of GDP. If as a result of a measure losses of welfare arise, it is possible that de-coupling is not really successful because no improvements of efficiency compared to welfare are made. 4.1.2 Developments by sector In the following the reasons for de-coupling energy consumption will be analysed not for the economy as a whole but on a sector level. It will be shown which development of the sectors contributed to the increase of efficiency. First energy intensity by sector related to GDP is shortly discussed, thereafter three examples will be presented. These examples are related to developments in Germany only, but are in principal valid for all countries in the EU. The development of energy intensity by sector is significantly different for industry, transport and the tertiary/domestic sector (Figure 4.3). In the industry sector intensity decreased comparatively steadily because of increasing efficiency of production technologies. Furthermore the intra-industrial structural changes had a positive effect. In the sector tertiary/domestic energy intensity also decreased significantly. The main reasons for this development were improvements of the efficiency of heating systems and building insulation. The fluctuations of energy intensity result from changing climate conditions. In the transport sector a reverse development must be noted. During the last 15 years energy consumption for transport has grown even faster than the economy. The reasons for this are on the one hand the sizeable increase of transport and on the other hand the relatively low efficiency increase (see below). From the energy policy point of view the transport sector has a lot of catching up to make it’s contribution to decreasing energy intensity. Figure 4.4 shows the development of steel production and related energy consumption in Germany (Prognos/EWI, 1999). Since 1980 the comparatively energy intensive production of steel in Germany decreased by more than 10% while industrial production in total increased significantly. Experience of de-coupling output from economic growth in other sectors 4.7 Figure 4.3 - Energy intensities by sector in the EU15, 1985-97 120 110 100 90 80 Industry [MJ / EURO GDP] 70 Transport [MJ / EURO GDP] Tertiary/Domestic [MJ / EURO GDP] 60 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Index 1985 = 100 Sources: EC, Prognos prognos 2000 Figure 4.4 - Energy intensity of steel production in Western Germany, 1980-94 105 100 95 90 85 80 75 70 Production [mil EURO, const. Prices] Energy consumption [PJ] 65 Energy Intensity [MJ / EURO] 60 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Indices 1980 = 100 Sources: German Statistical Office , Prognos prognos 2000 4.8 D1: Identification of the key linkages between transport intensity and economic growth One reason was that subsidies for steel production in Germany were reduced. Additionally energy efficiency also increased strongly because of technical improvements of oxygen steel mills and because of a switch to electrical steel production. An advantage of electrical steel production is that a higher ratio of scrap can be used in production which lowers the energy demand. In this case energy saving policy made profit of other policy areas, especially of the financial policy and the environment policy postulating more scrap recycling. A quite different situation is shown in figure 4.5, an example showing the energy consumption of electrical appliances in the household sector. The number of dishwashers in use tripled in the last 20 years in Germany because of higher income and (relatively) decreasing prices for these appliances. Though average energy efficiency increased by about 100%, energy consumption grew significantly. Obviously dishwashers have a comparatively high – non-monetary - benefit for households although energy consumption for cleaning the dishes is usually higher when dishwashers are used. This shows that prosperity improvements sometimes lead to changes in behaviour with increasing energy consumption as a consequence. Considering the concept of energy intensity related to GDP it is important to note that under ceteris paribus conditions the usage of dishwashers leads to increasing energy intensity because the usage of these appliances has almost no effect on GDP but does increase energy consumption. Nevertheless relating energy intensity to welfare, there would be no effect because increasing energy consumption comes with increasing welfare. Figure 4.5 - Energy consumption of dishwashers in Western Germany, 1980-98 300 Dishw asher [1000] 250 Energy Consumption [TJ] Energy intenisty [MJ / Dishw asher *a] 200 150 100 50 0 1980 1985 1990 1995 Indices 1980 = 100 Sources: German Statistical Office, Prognos prognos 2000 Experience of de-coupling output from economic growth in other sectors 4.9 The energy consumption of freight transport increased by about 100% whilst that of passenger transport increased by 50% over the last 20 years in Germany. While energy efficiency in freight transport increased by about 20%, mainly because of a structural change from light to heavy duty vehicles, there was almost no change in the efficiency of passenger cars. Technical progress lead to improvements of the cars, though these were mainly related to safety and convenience. Improvement of motor efficiency and air resistance were compensated by the trend to bigger and heavier cars with more appliances on board (e.g. air-condition). The simple benefit of a car – being able to move from point A to point B at any time at relatively low variable costs – is obviously supplemented by benefits of e.g. convenience during the trip. Again these benefits are not represented within measured GDP as they have only non-monetary benefits for the consumers. Figure 4.6 - Energy consumption and energy intensity of road transport in Germany, 1980-94 200 Freight Energy Consumption [PJ] 180 Freight Energy Intensity [MJ / tkm] Passenger Energy Consumption [PJ] 160 Passenger Energy Intensity [MJ / Pkm] 140 120 100 80 60 1980 1985 1990 1995 Indices 1980 = 100 Sources: German Statistical Office, DIW, Prognos prognos 2000 The examples above show that the developments within the energy sector are very heterogeneous. In particular, they show that the transport element of energy use has modified the overall improvement in energy intensity because increases in efficiency have been more than cancelled out by increases in distance travelled and also changes in vehicle design for passengers. In order to develop a strategy for de-coupling transport growth, analyses on a detailed level are necessary. Besides transport policy also other policy fields have to be assessed with regard to their impacts on transport development. In the end it should be kept in mind that increasing prosperity may have a positive impact on growth in energy consumption. But to this additional consumption often positive benefits are 4.10 D1: Identification of the key linkages between transport intensity and economic growth related that are not accounted within the concept of GDP. Nevertheless they may be important for the welfare of society. 4.2 Implications for the Transport Sector Between the energy sector and transport significant differences exist, nevertheless some developments leading to a de-coupling of energy consumption can have parallels in the transport sector. Both energy and transport are derived demands in the sense that they are needed to provide more basic needs, e.g. heat and lighting in case of energy or access to work or shops in case of transport. The situation of transport growth is comparable with the situation of energy demand at the beginning of the 1970s. It is hard to imagine that transport demand can be decoupled from economic growth as time series analysis show no evidence of such a trend. In the energy sector an external shock (oil crisis) was the trigger for increasing efficiency and reducing demand growth. As the transport sector has almost no international influences a shock from outside the economies cannot be expected. A psychological shock like the one of the oil crisis leading to a willingness to save energy all over society is not expected to appear under these circumstances for the transport sector – unless the potentially adverse consequences of climate change can be considered as such a shock. Nevertheless some projections of transport development show tendencies of decoupling transport demand from economic growth. For example the European Union Energy Outlook to 2020 (European Commission, 1999) forecasts that the transport intensity of passenger and freight transport will decrease in the next two decades. For passenger transport the main reasons mentioned are a limitation of the growth in the average speed of transportation combined with a constant mobility time budget and restrictions on, for example, inner city travel. For freight transport the main reason for de-coupling is seen in the structural change of economic activity. Industrial production will increase more slowly compared to services leading to a decrease of physical transport demand. In opposition to this view other authors (Rommerskirchen, 1998) forecast that e.g. freight transport intensity (related to GDP) stagnated or even increased during the last two decades though economic structure changed significantly. Consequently they argue that there is no evidence for a change of this development in the next two decades with an ongoing structural change of economy. However, it is common sense that efficient measures have to be implemented in order to reduce transport intensity and the related negative impacts of transportation. The first step in developing a strategy for de-coupling transport growth is to evaluate the benefits of transport. The principal benefit is the accessibility of products in the widest sense. For passenger transport the product is mobility, for example ‘visiting friends’ or ‘accessing work’ etc. To a large extent the benefits of mobility are not accounted for within the concept of GDP. Here the difficulties shown in the example of dishwashers would occur reducing this consumption. Additionally positive indirect Experience of de-coupling output from economic growth in other sectors 4.11 effects related to passenger transport would have to be mentioned like the (monetary) benefits of tourism. On the other hand freight transport is necessary for the exchange of goods and services. Looking at economic development over recent decades it has to be recognised that foreign trade grew significantly faster than GDP, one indicator for the general trend of globalisation. Economic growth depends to a large extent on an increasing division of work at the international as well as at the national level. Against this background, reducing trade between regions might have negative impacts on economic development. As trade is usually directly related to transport of goods, at this stage there seems to be no way out unless economic structural change leads to significantly less transport intensive products. Regarding this issue there is a parallel to the energy sector, because energy also is a essential factor for production. In the case of energy not the consumption of usable energy was the objective of de-coupling but the primary energy consumption. On a more sophisticated level this differentiation is also possible for the transport sector. One concept is the differentiation between gross and net mass movements that is comparable with primary and final energy consumption. Beside problems resulting from weakness of transport statistics (the statistical bases of transport in this differentiation is very poor and very complicated), differences between energy and transportation in this context are in a physical manner. While it is possible for example to reduce the primary energy input for heating (usable energy) by insulation of houses, it is more complicated for physical reasons to reduce significantly gross mass movements of car travel. A next important task is to define which impacts of transport should be de-coupled. As shown above transport is essential for economic growth, a simple reduction would not be sufficient. The negative impacts, for example environmental loads, have to be matched with a certain quantity. On this basis measures could be implemented to increase the efficiency of transport. But as in the energy case, detailed analyses of the implications and repercussions of any measures have to be carried out. Finally transportation has to be evaluated whether it is superfluous or not and whether measures taken in other policy fields lead to a creation of transport demand. Especially this point seems to be important at the European level as, for example, regional policy often intends to strengthen external trade of the regions. Summarising this chapter the following table shows the implications from the energy sector for the development of a de-coupling strategy for the transport sector: 4.12 D1: Identification of the key linkages between transport intensity and economic growth Table 4.1 – Implications for transport sector de-coupling, drawn from the energy sector Energy sector 1. Analysis of benefits of consumption ─ Essential production input 2. Definition of input/output to be de-coupled ─ Primary energy consumption, CO2 emission 3. Increasing efficiency ─ Technological progress Transport sector ─ Accessibility ─ Transport performance, net mass transport ─ Technological, e.g. decreasing fuel consumption per vehicle km ─ Organisational, e.g. increasing load factors spreading of peak demand of infrastructure use 4. Technology switch ─ Substitution of oxygen steel mills by electrical steel ─ mills 5. Decreasing of demand ─ Change in economic structure Substitution of private car travel by public transport ─ Substitution of physical transport by electronic transport ─ Change in economic structure to less transport intensive products ─ Considering transport questions in all political fields e.g. EC regional policy, land use policy prognos 2000 Conclusions 5.1 5. Conclusions 5.1 Transport and economic activity This report has been concerned with the linkages between transport and economic activity. In most western European countries, a close correlation has existed between the rate of growth of economic activity and growth in transport of both people and goods. Transport and economic activity are interrelated; economic activity can influence the demand for transport but, at the same time, changes in the transport system can also influence economic activity. 5.2 Transport trends Reviewing recent transport trends across Europe, the most important points to note are that: - growth in passenger car travel has been far more rapid than that in other surface modes and has also outpaced the rate of growth of economic activity; - the main growth in car travel has not been in congested city centres but in the less congested outer suburbs and the surrounding areas outside cities – areas in which public transport is currently unable to compete cost effectively with the car; - the major proportion of past passenger travel growth across all modes has arisen from increases in the length of trips rather than in the overall number of trips; - the quantity of freight moved by road has grown far more rapidly than that moved by other modes and has also outpaced the rate of growth of economic activity and - increases in the average length of haul have been the predominant source of growth in freight tonne-kilometres in recent decades. The main factors that have encouraged the observed growth in car travel can be summarised under the following headings: Changes in relative costs The costs of travel by private car have tended to be fall, over time, relative to the costs of travel by other surface modes. Increased incomes Increased income levels have encouraged people to travel further and by more luxurious modes of transport. They have also increased the demand for goods and services, including leisure, which has also contributed to an increase in the movement of people and goods. 5.2 D1: Identification of the key linkages between transport intensity and economic growth Increased car availability Partly as a response to increases in income and falling relative costs of motoring, car ownership levels have increased. Evidence suggests that the number of journey made by a household increases substantially when a car is acquired and some existing journeys transfer from other modes to the car. Increased speeds Improvements in both vehicle and infrastructure technology together with improved transport networks have served to substantially increase travel speeds. This has enabled people and goods to travel further without increasing the amount of time spent travelling. The cost effectiveness of car travel has increased more rapidly than that of other surface modes. Land use effects including changes in migration and commuting patterns In many countries the population has been migrating consistently from the most to the least urbanised areas. Travel distances per person increase with decreasing settlement size and it is also more likely, as settlement size decreases, that a car will be used for this travel. As population patterns become more diffuse it becomes increasingly difficult for areas to be efficiently served by public transport. Turning to freight transport, as well as the changes in relative costs and the effect of increased incomes noted above, the following factors have also contributed to the observed growth of road freight transport. Changes in commodity structure Economic change within industrialised economies has meant that bulk commodities such as coal, iron and steel have become less important relative to ‘emerging commodities’ such as manufactured goods, machinery foods and chemicals. The characteristics of the transport requirements of these ‘emerging commodities’ have tended to favour road over other modes of freight transport. European integration and globalisation The ongoing process of European integration and globalisation has increased both the volume and the distance covered of trade between EU countries and between EU countries and the rest of the world. Road has gained a higher proportion of this increased trade than other freight modes. Changes in the operational behaviour of companies Modern production techniques have led firms to seek to reduce their stock levels, shorten turn around times and generally improve their flexibility to react quickly to the needs of the market. The most well-known example is Just-in-Time production. Such an approach requires a quick, reliable and highly flexible transport service of the type which only road can currently provide. Conclusions 5.3 Application of advanced information and communication technologies (ICT) Application of ICT has improved the efficiency and reliability of freight transport. Since ICT has, to date, predominantly been introduced in the roads sector, road freight has gained a further competitive advantage against other modes. 5.3 The de-coupling debate To date there is little evidence to suggest that the growth of transport demand has been or ever can be separated or ‘de-coupled’ from the rate of economic growth. Moreover, in some countries certain types of transport have historically grown at a much faster rate than that of the economy in general. De-coupling can be said to have occurred in some other sectors of the economy. For example, taking the energy sector as a whole, it can be seen that the energy intensity of the EU economy has been systematically decreasing since at least the mid-1970s. Within the energy sector, the experience of individual sub-sectors has, however, been more varied. Though significant differences exist between the transport and energy sectors, there may be some lessons that can be drawn from experience gained in the energy sector. De-coupling there occurred chiefly as a result of: - sometimes sharp increases in the cost of primary energy inputs; - economic restructuring, leading to a relative decline in the economic importance of high energy using industries and - regulation, driven by environmental pressures. The response to these pressures and trends, by both households and firms, was to seek more energy efficient ways of meeting their own needs in terms of consumption or production. Firms also responded to regulatory and environmental pressures by switching to ‘cleaner’ energy producing or using technologies. Should the political will exist, there is no reason why similar pressures could not be applied in the transport sector. The problem is that transport is different. To begin with, it is not straightforward to define exactly which transport ‘outputs’ should be de-coupled from economic growth. After all, the ability to travel easily and cheaply is essentially an economic benefit to individuals and firms. Should policy therefore be concerned to minimise travel only by private car and for leisure purposes, for example? Alternatively, perhaps it should just focus on travel at certain times of day and/or locations? These are questions that go to the heart of the ‘de-coupling’ debate. One of the questions that SACTRA (1999) were asked to address is whether, ‘… it is possible to ‘de-couple’ growth in traffic levels from growth in the economy, in order to obtain the positive benefits of greater wealth, while reducing some of the negative effects of congestion and environmental impacts?’. In addressing this question, SACTRA noted that it was important to bear in mind that transport policy also has many other objectives, including the improvement of safety, the environment, travelling conditions, accessibility, integration and social inclusion. 5.4 D1: Identification of the key linkages between transport intensity and economic growth SACTRA separated the question into two parts: (i) Is the volume of traffic subject to influence by available policy instruments? (ii) If it is, would doing so have a favourable or unfavourable economic effect? In response to the first question SACTRA concluded that whilst income does have a strong effect on traffic growth, the latter is also influenced by the price, speed and quality of transport, hence policy instruments do exist which should be able to influence the volume of traffic. In responding to the second question an apparent paradox was raised: if reducing transport costs should improve economic performance, how could it be that raising transport prices could be good for the economy? The paradox is resolved by recognising the difference between transport prices and the real resource costs that transport imposes on the economy. Reducing traffic levels can contribute to improved economic performance where transport prices are currently below their true marginal social costs. That is, where current transport prices do not adequately reflect the full external costs of transport. 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