Decarbonising Transport

by José Viegas, ITF Secretary-General

Humans don’t enjoy being stuck somewhere. We like to move, go places. In fact, man values this mobility so much that he created extraordinary tools to get from A to B, starting with the wheel and not ending with the airplane.

We value our freedom of movement because it generates such incredible value for us. Imagine for a moment that all the means of transport you’re using have disappeared. Not that easy to get to work. No fresh groceries in the supermarket. You’ll need to walk to the doctor despite the sore knee.

Conjecture? For you. But for millions, lack of access to transport – and therefore to the things that transport provides access to – is a reality. There are still children that don’t go to school because they can’t get to school. It’s the same for health services and jobs.  And it’s true for the larger economy as well – well-connected countries tend to thrive; those that do not struggle to bring their goods to world (or indeed national) markets.

The freedom to hop in a car

We won’t be easily persuaded to give up the freedom to hop in a car or on a plane. On the contrary, billions of people in the emerging economies are discovering the advantages – and joys – of modern-day mobility. If anything, global demand for transport will grow.

In itself that is not a bad thing – but only if we manage to, among other improvements, decarbonise transport.  Today, our mobility is almost completely driven by fossil fuels. Even the electricity for electric cars or for trains often comes from coal or oil-powered plants. Compared with other sectors, transport emissions make up almost a quarter of all CO2 emissions from fuel combustion (pdf) – by 2035 it could reach 40%, which would make transport the world’s largest emitter.

The link between mobility and harmful CO2 emissions must be broken if we want to continue to remain as mobile as we are. If governments were forced to limit mobility in order to save the planet, the economic, political and human costs could be huge.

Back to the future

The better way is to provide carbon-free transport. In around 1900, the majority of cars in New York City were electric – let’s go back to the future. Improved or new technology alone will not solve the problem. To decarbonise transport over the next 35 years or so, all the levers we have at our disposal need to be aligned towards this goal, many of which are outside the transport sector: digital connectivity and 3D printing may make some passenger and freight transport superfluous in the future, and urban land use policies can be improved to reduce the need for urban motorised travel.

The International Transport Forum is launching a major initiative to help achieve this alignment. Anchored in the ITF’s Corporate Partnership Board (CPB), our Decarbonising Transport project will provide decision makers with an effective tool to develop a road map towards decarbonisation, and then help to navigate it. It will allow governments and enterprises to test and gauge the impact of individual actions in a highly complex and interdependent reality.

Quantitative and inclusive

There are three core elements on which the Decarbonising Transport project builds: First: COP21. The Paris agreement of December 2015 doesn’t actually mention transport. But it creates a framework in which countries will review their emissions reduction targets in five-year cycles, starting in 2020. Others, like the transport sector could follow this lead, creating synchronicity with countries.

Second: the data. The Decarbonising Transport project will evolve around in-depth quantitative analysis. Our ambition is to federate existing data and knowledge on transport to create the most comprehensive model of global transport activity to date.  ITF has strong in-house modelling, and we are already reaching out to potential partners to link up existing models and leverage their collective power to become more than the sum of the parts. Decision makers will be able to use the simulations to calibrate their emissions reduction actions.

The third characteristic of the Decarbonising Transport project is that it will be inclusive. The modelling will serve dialogue and mutual learning among a broad set of partners who are joining forces to design the roadmap towards carbon-neutral transport. Governments, corporations, universities, multilateral institutions, foundations, NGOs will all have their place and contribute knowledge, data or money. 19 major international companies are already involved through the CPB.

Getting ready for 2020

The Decarbonising Transport project will be officially inaugurated on 19 May, at the ITF’s 2016 Summit in Germany. We plan to present intermediate results a year later. And by May 2019, we want the modelling to be robust enough to provide effective support to the 2020 reviews of COP emissions reduction commitments.

This is an open project, and very much a work in progress. All who have an interest in helping to make our mobility, and therefore our way of life, sustainable are invited to become part of the effort. Join me on Periscope (Twitter’s live stream app) for a Q&A session on Decarbonising Transport on Wednesday, 2 March at 15:00 Central European Time (CET) if you want to know more.

 

The Sharing Economy: How shared self-driving cars could change city traffic

by Sharon Masterson, International Transport Forum Corporate Partnership Board

Click to download the report
Click to download

In 2011, TIME Magazine named collaborative consumption (or the sharing economy as it is often called) as one of the top 10 ideas that will change the world.

Four years on, this prediction seems to be holding true. The number of companies operating in the sharing economy is rising rapidly in the transport sector alone, and includes household names such as Uber, BlaBlaCar, Lyft, Zipcar, etc. The public seems to be embracing this phenomenon as we witness users flocking to join these platforms across the globe.

Given that a typical car lies idle some 23 hours a day, car owners are investing in something that they barely use, so this untapped potential is at the heart of the sharing economy in personal transportation. With automated, self-driving cars only around the corner (and some precursor components already in the market in the form of adaptive cruise control, lane assist and self-parking), we decided to look at how combining the shared economy aspect (shared vehicles) with developing technology (automated vehicles) can be applied today, by asking “What if all conventional cars in a city were replaced by a fleet of shared self-driving vehicles”?

The results of this exercise were very interesting.

We carried out a simulation on a representation of the street network of the city of Lisbon, using origin and destination data derived from a fine-grained database of trips on the basis of a detailed travel survey. Trips were allocated to different modes: walking, shared self-driving vehicles or high-capacity public transport. We set a constraint that all trips should take at most 5 minutes longer than today’s car trips take for all scenarios, and assumed all trips are done by shared vehicles and none by buses or private cars. We also modelled a scenario which included high-capacity public transport (Metro in the case of Lisbon).

We modelled two different car-sharing concepts, “TaxiBots”, a term we coined for self-driving vehicles shared simultaneously by several passengers (i.e. ride sharing), and “AutoVots”, cars which pick-up and drop-off single passengers sequentially (car sharing).

For the different scenarios we measured the number of cars, kilometres travelled, impacts on congestion and impacts on parking space.

The results indicate that shared self-driving fleets can deliver the same mobility as today with significantly fewer cars. In a city serviced by ride-sharing TaxiBots and a good underground system, 90% of cars could be removed from the city.

Even in the scenario that least reduces the number of cars (AutoVots without underground), nearly half of all cars could be removed without impacting the level of service. Note: TaxiBots replace more cars than AutoVots since the latter require more vehicles and much more re-positioning travel to deliver the same level of service.

Even at peak hours, only about one third (35%) of today’s cars would be on the roads (TaxiBots with underground), without reducing overall mobility.

No matter what the scenario, on-street parking spots could be totally removed with a fleet of shared self-driving cars, allowing in a medium-sized European city such as Lisbon, reallocating 1.5 million square metres to other public uses. This equates to almost 20% of the surface of kerb-to-kerb street area (or 210 football pitches!)

These findings suggest that shared self-driving fleets could significantly reduce congestion. In terms of environmental impact, only 2% more vehicles would be needed for a fleet of cleaner, electric, shared self-driving vehicles, to compensate for reduced range and battery charging time.

So what are the policy insights from this study?

  • The impact of self-driving shared fleets is significant but is sensitive to policy choices and deployment scenarios. Transport policies can influence the type and size of the fleet, the mix between traditional public transport and shared vehicles and, ultimately, the amount of car travel, congestion and emissions in the city. For small and medium-sized cities it is conceivable that a shared fleet of self-driving vehicles could completely obviate the need for traditional public transport.
  • Actively managing freed capacity and space is still necessary to lock in benefits. Shared vehicle fleets free up a significant amount of space in the city. However prior experience indicates that this space must be pro-actively managed in order to lock in benefits. Management strategies could include restricting access to this space by allocating it to bicycle tracks or enlarging sidewalks, or also to commercial or recreational uses, as well as to delivery bays. For example, freed-up space in off-street parking could be used for logistics distribution centres.
  • Road safety will likely improve; environmental benefits will depend on vehicle technology. Despite increases in overall levels of car travel, the deployment of large-scale self-driving vehicle fleets will likely reduce crashes and crash severity. At the same time, environmental impacts are still tied to per-kilometre emissions and thus will be dependent on the penetration of more fuel efficient and less polluting technologies.
  • Public transport, taxi operations and urban transport governance will have to adapt. The deployment of self-driving and shared fleets in an urban context will directly compete with the way in which taxi and public transport services are currently organised. These fleets might effectively become a new form of low capacity/high quality public transport. Labour issues will be significant but there is no reason why public transport operators or taxi companies could not take an active role in delivering these services.

Useful links

As well as this study, the ITF Corporate Partnership Board has released additional studies looking at Autonomous Driving: Regulatory Issues and Mobility Data: Changes and Opportunities

This article first appeared in the OECD Insights blog

Subsidies in Aviation: The elusive flight towards fair competition

aviationby Alain Lumbroso

Subsidies in aviation are almost as old as air transport itself. Most if not all countries at one point or another have provided public funding to some parts of their aviation value chains, be it air carriers, airports or air navigation services such as air traffic control.

This year, much attention has been focused on three Gulf carriers. Their strong growth and increasing market share, especially between Europe and points east and south, has generated concern from competitors that they are being unjustly subsidised and thus distorting the marketplace. Is this a legitimate concern or simply old-fashioned protectionism?

Although each side makes an eloquent case in the ongoing debate, some arguments do not pass muster. For example, while operating in a labour union-free environment can certainly reduce costs, it is by no means a subsidy. Airports the world over receive generous public subsidies which are passed on to their customers, the airlines. Although airlines who hub at a subsidised airport benefit most from the subsidy, it’s tenuous to affirm that a specific airline gets a subsidy and not others. Likewise, benefits accorded under US bankruptcy laws to any company that places itself under its protection should not be considered a subsidy, nor should provisions in competition law that permit the issuance of anti-trust immunity to help companies perform better together. A key point to remember here is that sovereign jurisdictions have the right to set their own labour, fiscal, bankruptcy and competition policies and legislation and, of course, as they vary country by country, they will confer comparative advantages or disadvantages to companies operating in those countries.

As accusations fly back and forth, it’s worth considering what actually constitutes a legal subsidy in aviation. Or what constitutes a balanced and fair competitive landscape, often referred to as a “level playing field”. Or fair competition for that matter. Unfortunately, none of these terms are actually defined for aviation, and simply adopting a commonly-accepted definition from other sectors may be an effective intellectual shortcut but has no basis in law.

What constitutes an acceptable subsidy is clearly defined for other industries. For example, the General Agreement on Trade and Tariffs defines what a subsidy is for the international trade of goods, but it is mute on what constitutes a subsidy in air transport, or any other service for that matter. The General Agreement on Trade of Services has so far failed to define what constitutes a subsidy and, in any case, specifically excludes air transport services from the agreement. Thus, reasonable people can disagree on what constitutes fair competition, especially when no competition law is broken.

The Chicago Convention of 1944, the key legal foundation of international aviation, speaks of equality of opportunity but not equality of outcomes. In that respect, operating in a low cost, low-taxation, non-unionised environment is opened to all airlines operating in the Gulf, with the local carrier benefiting the most simply because it has a higher concentration of flights there. The Chicago Convention only makes a single mention of subsidies, in Article 54i, where it tasks the International Civil Aviation Organisation (ICAO) Council to collect and publish information about public subsidies in aviation but fails to put an obligation on countries to report them or to set any kind of boundaries as to which type of subsidies are permitted and which are not.

While much focus has been on monetary subsidies, one cannot discount the impact of public policies and how they can favour domestic carriers. A prime example of this is how nearly all countries in the world outlaw cabotage, meaning that the domestic market is reserved for domestic carriers only, or, in the EU, that the intra-EU market is reserved for EU carriers. This can be a significant advantage for US, EU, Chinese, Japanese and Canadian air carriers, while remaining meaningless for carriers from smaller countries. A second example is how a number of countries negotiate air services agreements in a way to try and favour their home carriers rather than simply improving connectivity for travellers and shippers. Defending the interest of national carriers can arguably be a reasonable policy goal, but such a policy does have a very positive value for home carriers which does not show up in any accounting balance sheet.

Finally, one should note that most countries inject some sort of public funding into international aviation and that there exists no law, convention or treaty that forbids it or sets boundaries for country interventions, with the exception of the EU which has a legal framework for State-Aid of the air transport sector but applies only unilaterally to EU member countries, airlines and airports. While much of the attention has been on two countries and three carriers, most if not all countries have a rich history of public financing of the air transport value chain which continues to this day. Applying the remedies suggested by the Partnership for an Open and Fair Skies to all countries who have financially supported in some way their air transport industry, including the US, would significantly dampen efforts to liberalise global aviation and curtail the benefits that come from operating in an open and free market. And even when all public funding has ceased, the stock of subsidies has enabled the creation of the same global carriers and global hubs who are today calling for an end to subsidies in order to restore fair competition to the air transport industry.

So what could be done? Three things:

  1. In the absence of a clear legal framework defining acceptable and unacceptable behaviour, the first step is somewhat obvious: defining rules of conduct of what actually constitutes fair competition. Most likely through the auspices of the ICAO, countries must first define what is an acceptable and an unacceptable subsidy, a concept that right now is left wide-open to the interpretation of parties with a vested interest.
  1. Countries should agree on a mandatory, transparent and uniform reporting system for public subsidies that would inject some much needed transparency to the issue and avoid the volleys of accusations and counter-accusations we have witnessed this year.
  1. A binding arbitration process, preferably through ICAO, will need to be put in place and permit one country to file a complaint against another. Arbitration could lead to a monetary penalty paid by the country who granted unfair subsidies to the country whose carriers suffered from unfair competition. This monetary penalty would avoid the present situation where perceived wrongdoing is punished through traffic rights restrictions, in effect imposing a quota on the international trade of service, the most harmful of outcomes.

About the author
Alain Lumbroso is the aviation expert of the International Transport Forum (ITF). The International Transport Forum at the OECD is an intergovernmental organisation with 57 member countries. It acts as a policy think tank and organises an Annual Summit of transport ministers. The ITF is the only global body with a mandate for all transport modes.

Useful links

ITF work on air transport

ITF Discussion Paper: What do we mean by a level playing field in aviation?

ITF Research Report: Liberalisation of Air Transport. Summary: Policy Insights and Recommendations

ITF Country-Specific Policy Analysis: Air Service Agreement Liberalisation and Airline Alliance

The Impact of Mega-Ships

by Olaf Merk

Ever bigger container ships inspire awe and fascination, and are one of the hottest topics in maritime transport. They are also a headache for ports and terminals – mainly because of their vast size.

mega-shipsA new publication by the International Transport Forum (ITF) at the OECD assesses the impacts of these giant container ships. First of all, let’s get a hook on how big these ships really are. They are big! Mega-big! These are true giants, bigger than houses, bigger than apartment buildings and bigger than skyscrapers. They are bigger indeed than whole urban neighbourhoods. Now at up to 400 metres long, these ships are longer than Eiffel Tower (301 metres).

This size increase has been exponential; ships doubled in volume in 20 years between 1975 and 1995, and then almost doubled again in the following decade, doubling yet again between 2005 and 2015. And it ain’t over yet! Plans are afoot to continue increase size to 21 100 TEU* by 2017. (TEU: twenty foot equivalent unit – a small transport container – is a standard volumetric transport measurement)

 

When is big too big?

Although economies of scale allow vessel costs per volume transported to decrease with bigger ships, the on-land costs of handling those volumes increase. Together, these two costs determine the total costs for the transport chain. At a certain point increasing ship size becomes sub-optimal as cost savings become marginal. While a doubling of container ship size reduces costs by a third (vessel costs per TEU), making sea transport cheaper, the savings decrease with increased size.

To find out where we are on the cost curve, we tried a thought experiment. Imagine that instead of ordering 19 000 TEU ships, shipping companies had ordered 14 000 TEU ships giving the same total fleet capacity. In that scenario, land-side costs would have been approximately $50 lower per transported container. This might seem little, but it is actually substantial when compared to freight rates for transporting a container from Shanghai to Rotterdam – now at less than $400 and the thousands of containers ships can carry. Hence, as ship sizes continue to increase we find ourselves heading towards overall increasing costs.

 

Do we really need this capacity?

Our research casts serious doubts over whether this capacity can in fact be filled. We found a disconnect between what is going on in the boardrooms of shipping lines and the real world. The growth of containerised seaborne trade is no longer in line with the growth of the world container fleet. And shipping companies have created alliances (only four in total worldwide) which dominate container shipping. So the little guys can get to the big toys, but this has also leads to overcapacity.

There are also several supply chain costs and risks related to mega-ships. There are adaptations needed to infrastructure and equipment: the ships are longer, wider and deeper which has consequences for cranes, quays, access channels and all that. Mega-ships stay on average 20% longer in ports – quite an achievement for most ports as this requires massive efforts to accommodate these longer-stay guests. The higher risks associated with mega-ships are linked to difficulties in insuring and salvaging in case of accidents. Furthermore, mega-ships mean that more cargo is concentrated on a single ship, leading to lower service frequencies and lower supply chain resilience – all your eggs in one basket.

Mega-ships have redefined the meaning of the word “peak”. Massive truck movements, train movements and yard occupancy are all related to the arrival of a mega-ship. There is a requirement to manage this huge capacity on arrival which may lead to more port congestion.

 

Where are we heading?

We looked at three scenarios: one in line with market demand growth projections, two others above these growth projections, one with 50, another with 100 ships with a 24 000 TEU capacity (and a length of 430 metres), which currently do not exist or have not been ordered – but that could be operational by 2020. The results are pretty scary. We could see 24 000 TEU ships in Europe – both in Northern Europe and the Mediterranean. All other regions would be impacted as ships what used to be the biggest ships serving Europe are reassigned to other routes. So we might see 19,000 ships in North America, 14,000 ships in South America and Africa in a few years. Whatever the scenario, mega-ships will be the new normal in Northern Europe very soon. In just a few years 19 000 TEU ships will be seen every day in major ports. One thing is sure – this will lead us to a decade of port gridlock if nothing is done.

 

What needs to be done?

Mega-ships are a fact of life, so there should be policy support to use them effectively: for innovation, for more labour flexibility, optimisation of existing infrastructure (spreading use over day and night), releasing peaks (e.g. by “dry ports” – inland transshipment centres), and upsizing of hinterland transport units (larger trains, trucks and barges).

On a more fundamental level, decision-making by ports and countries should be more balanced. Many public policies stimulate mega-ship use, but public benefits are limited whereas public costs can be high. This should change, first by aligning incentives to public interests. For example, not to have port tariffs that cross-subsidise mega-ships, to clarify state aid rules for ports, increase their financial transparency and possibly link state aid for shipping companies to commitments to share in certain costs (e.g. dredging).

Another way would be to increase collaboration at regional level, between countries, ports and regulators. This might include coordination of port development and investment, possibly port mergers and more national or supra-national planning and focus. For example, the number of core ports in EU trans-Europe transport network (TEN-T) corridor networks could be reduced.

Finally, there should be a clear discussion on what the future direction should be. A forum for liners, terminals, ports and other transport actors should be facilitated to discuss about the desirable container ship size in the future. The International Transport Forum (ITF) at the OECD is there and willing to facilitate such a discussion.

 

About the author
Olaf Merk is the ports and shipping expert of the International Transport Forum (ITF). The International Transport Forum at the OECD is an intergovernmental organisation with 57 member countries. It acts as a policy think tank and organises an Annual Summit of transport ministers. The ITF is the only global body with a mandate for all transport modes.

Useful links

ITF work on maritime transport

ITF Homepage