The Return of the Itinerant

By José Viegas

Autonomous road vehicles are attracting a lot of interest and  investment these days. It’s fair to predict that both the public discussion and the flows of money will keep growing. Attention is focused mainly on autonomous vehicles for passengers (think Google car, Tesla Autopilot) and automated road freight transport (think truck platooning, Otto).  Availability of those vehicles will lead to disruptive change in two other domains: private mobility on the one hand and professional transport services on the other.

Itinernat LibraryThe profound technological change implied by autonomous driving will inspire radical innovations in the way vehicles are used – as happened with phones, which have become much more than just devices to make calls since they became mobile. This innovation happens like a wave that feeds on itself until mature usage patterns emerge after something like 10 or 15 years. We must humbly recognise that nobody can claim today to have a clear vision of what those usages will be in one or two decades.

But that shouldn’t stop us of thinking boldly today about what might happen. Personally, I believe that itinerant services will be a new important usage area for autonomous vehicles. Such itinerant services were very popular in the 1950s and 60s in many countries, particularly with libraries. Those vans were serving areas that had few or no public libraries or bookshops, but still had many potential interested readers. I was an intensive user of a library van during my summer holidays for some years and have fond memory of the value it provided in terms of access to varied reading.

Changing places

Post offices or banks on wheels as well as rolling points-of-saleFood Truck grass for vegetables or clothes were also common in many regions, and sometimes still are. Recently, this phenomenon has seen something of a revival with the appearance of food trucks that bring high-end cuisine literally to the streets of hip urban quarters – in principle a modern, upmarket take on the Kebab or ice cream vans of yonder.

Automated vehicle will create a real opportunity for the resurgence of itinerant services, I believe. There seems to be a particularly strong case for them where the self-driving vehicle can provide some form of sophisticated equipment to which clients otherwise would have to travel. The most obvious examples that come to mind are in the health sector. The collection of medical samples for diagnostics purposes, for instance, could probably be organised with specialised self-driving vehicles, very likely with remote human support from a medical professional.
Vehicle autonomy not only reduces the cost of provision of those itinerant services and makes them more accessible to its users. Self-driving vehicles also make it much easier to change locations during off hours – during night time or on public holidays, say. Entrepreneurial spirit, associated with technological innovations in other sectors than transport will have a quite field to explore. The whole field of “experiencing”, presently a key target of the travel industry, comes to mind in association with virtual reality and possibly differentiated catering evoking the places thus visited.

Mobile Post officeUltimately, marrying a time-honoured service idea with
modern self-driving technology could help bring a wide range of
sophisticated services that currently can only be accessed in more time consuming and often costly ways to people everywhere. The space of opportunity for business innovation is clearly there.


Forever circling

So my bet is that we will see the re-emergence of itinerant services, but possibly on a much larger scale and with greater variety than the good, old fashioned library on wheels I knew. Unlike my bookish van, which returned to its depot in the evening and left from there again the next morning (with a good night’s sleep for the driver in between), the trips of a self-driving itinerant service will no longer have a clear origin or destination. It will be forever circling around, with “destinations” simply a succession of events along the way. Some of its functions could probably be performed without even stopping.mobile hair cut

From a transport policy perspective, this will be a more efficient and less travel-intensive way of providing certain services. For other business models,  this approach will generate new markets and probably additional vehicle kilometres on the road.

What the combined effect of all this will be nobody can say. What we can say is that autonomous vehicles will spawn new forms of mobility, and that it will pay off to carefully monitor this development – to spot new business opportunities, but ultimately also to enable them to thrive in a transport system that is efficient, safe, user-friendly, not only once we reach a future steady state, but throughout the radical transformation transport is entering.

José Viegas is the Secretary-General of the International Transport Forum

Why it pays for cities to fight road deaths – and how they can get better at it

By Alexandre Santacreu, International Transport Forum

Every minute of every day, someone loses their life in a traffic crash on a city street. With cities growing rapidly and urban motor traffic also increasing dramatically in many cities, the situation is likely to get worse, not better in years to come.

More and more city authorities are realising that dangerous traffic conditions on their streets have a toll that goes beyond the human tragedy and economic loss caused by road deaths and crash injuries. Dangerous traffic makes people feel unsafe, and people who feel unsafe will refrain from doing normal things – letting their children walk to school or cycling to work, for instance.

Four pedestrians waiiting to cross traffic
Waiting to cross traffic (Flickr/Serakatie)

Thus,  a high level of urban road safety is more and more seen as a critical component of a liveable city.  It improves citizens’ quality of life, it increases choices, it opens up opportunities. Ultimately, safer city streets are about enhanced personal freedom.

Safer streets equal more liveable cities

This was recognised in the United Nation’s Sustainable Development Goals in 2016. There, governments agreed (in goal number 11) to “make cities and human settlements inclusive, safe, resilient and sustainable” and as part of that committed to “improving road safety,… with special attention to the needs of those in vulnerable situations”.

The link between the different objectives is easy to spot: improving road safety makes cities not only safer, but also more sustainable because it enables people to walk or cycle without having to fear for their lives. It also makes them more inclusive because those who cannot afford cars can be mobile without running lethal risks.

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But in practical terms, what can mayors and city authorities do to enhance traffic safety in their city? One obvious answer is: Do not reinvent the wheel – learn from what others are already doing. Many good practices for urban road safety exist around the world and only wait to be copied. A second, maybe less obvious answer is: Get your data in shape. Measure what is happening on your streets and how it changes, so you can base policy decisions on evidence, not assumptions.

When cities learn from each other

These two thoughts are the driving ideas behind Safer City Streets, the global traffic safety network for liveable cities. Little more than six months after its launch in October 2016, a total of 38 cities are working together in the Safer City Streets network, ranging  from Astana in Kazakhstan to Zürich in Switzerland and including global metropolises such as New York City, Mexico City, Rio de Janeiro, London,  Berlin, Melbourne, Buenos Aires, Montreal and many others.

Safer City Streets brochure cover page w framThe Safer City Streets network, which holds its first meeting in Paris on 20 and 21 April (with more than 50 participants expected to attend),  provides the first global platform for cities and their road safety experts to exchange experiences and discuss ideas. At the heart of Safer City Streets activity will be efforts to improve the collection of data about urban road crashes to enable cities to compare themselves with others and base policy decisions on reliable evidence. A methodology for the database has already been developed and many of the cities have started feed it in their numbers.

The flying start has been helped by the fact that Safer City Streets itself is building on previous experience: It is modeled on the highly successful International Traffic Safety Data and Analysis Group (IRTAD), the International Transport Forum’s permanent working group on road safety, which brings together countries and national road safety stakeholders. Fittingly, the annual IRTAD meeting is held back-to-back with the inaugural meeting of Safer City Streets – which will also include a joint workshop with POLIS,  a network of European cities and regions, on how to bring cities from both networks together in order to find the best solutions for data collection.

Cities who are interested in finding out more about Safer City Streets are invited to contact the author. They should also know that membership of  Safer City Streets is currently free, thanks to a very generous grant from the Fédération Internationale de l’Automobile (FIA).

Alexandre Santacreu is a policy analyst for road safety at the International Transport Forum and the project manager of the Safer City Streets network. More information at http://itf-oecd.org/safer-city-streets. This post also appears on OECD Insights.

Are Zero Road Deaths Possible?

safe-system-report-coverBy Hans Michael Kloth, International Transport Forum. This post is jointly published with the OECD Insights blog.

Every year around the globe, 1.25 million people are killed in traffic – about the population of a city like Munich, Stockholm or Dallas. Up to 50 million are seriously injured. Road crashes kill more people than malaria or tuberculosis and are steadily working their way up the top ten causes of death worldwide, forecast to rise from currently ninth place to fifth by 2030. Among the 15 to 29-year olds, they are already the most common cause of death. The human tragedies behind these stark figures are as dramatic as the economic impacts: Road fatalities and serious injuries cost many countries an estimated 2 to 5% of their GDP.

Clearly, this situation is unsustainable. The United Nations’ “Decade of Action for Road Safety”, launched in 2011 with the aim of stabilising the number of road fatalities and then beginning to bring them down by 2020, was an important step to acknowledge that action is required at a global level to stop the daily carnage on the world’s roads. Then, last year, the UN upped the ante by including an even more ambitious road safety target in the Sustainable Development Goals (SDGs): Goal 3.6 calls on the international community to halve the number of road deaths and injuries by 2020.

road-deaths-trend-target

But in order to meet this target, more than 400 road deaths would have to be prevented every single day for the next four years; not to even speak of injuries. Yet with the number of cars growing rapidly in many emerging economies, so is the death toll there: Powerful, vehicles on inadequate roads, drivers with little training, inadequate rules and weak enforcement form a deadly mix that is not going to disappear easily.

A reboot for road safety policies

In developed economies, meanwhile, the downward trend that marked the past three decades (and saw the death toll in the UK, for instance, fall in 2015 to almost 20% of the 1966 peak) seems to be coming to an end: Fatality rates in many of the best-performing countries are levelling out and in some cases rising again, notably among vulnerable road users such as pedestrians, cyclists or seniors. A reboot for road safety policy is thus urgently needed, as the approaches that brought success in the past do no longer deliver the returns they once did, or are overwhelmed by an avalanche of cars.

Inspiration comes from a group of countries that have broken with the traditional paradigm in road safety, which is to fix crash hotspots and try to make road users behave more responsibly with a lot of stick and a few carrots. Nations like Sweden or the Netherlands, but also metropolises like New York City, have made it their official policy to try to eradicate road deaths. This approach, known as “Vision Zero”, starts from the premise that the loss of human life as the price for mobility is unacceptable – and that the mobility system should function in a way that poses as little deadly risk as possible.

This approach has been followed for decades in areas like occupational safety, where machinery has long been designed in a “forgiving” way, so that if the operator makes a mistake it will not kill or maim him – think of a circular saw that stops automatically if a limb gets too close for comfort. This “Safe System” approach is not new to transport either – aviation and rail operations would be unthinkable without it, as we would not want a single person’s mistake make a plane crash or trains collide.

Where humans err

Road traffic has yet to embrace the Safe System. Media stories regularly remind us that “human error” was the involved in this or that horror crash. Subtext: While all systems functioned, unfortunately the human didn’t, so there was nothing that could be done. Based on this view, governments spend billions on enforcement and the education of road users. But what is the price tag to get every single citizen to behave correctly all the time? Achieving 100% compliance is of course impossible. Humans make mistakes even if they are well-trained, willing to follow rules and capable of doing so. All of us who have turned our head while at the wheel to see what the kids are doing on the back seats know this to be true.

The Safe System approach that underpins “Vision Zero” accepts that humans will fail. From that principle, the challenge becomes to organise the traffic ecosystem in such a way that human mistakes do not cause serious harm. Here a second principle of the Safe System comes into play: The human body can only absorb a certain amount of kinetic energy before serious injuries occur. Again, a simple truth, too often disregarded. Taken seriously, it has wide implications for speed management, mixing traffic or designing infrastructure.

fig-2-4_conceptualisation-of-the-safe-system

The third principle of the Safe System is shared responsibility. If the aim is to avoid serious harm, it’s just not good enough to blame the driver who hit a tree, or the elderly lady who stepped on the pedestrian crossing without looking. In a Safe System, the agency managing afforestation understands that its actions can have an impact on road safety, as does the urban planner who will foresee speed bumps that force cars to slow down at crosswalks.

Will self-driving cars solve the road safety problem?

The fourth and final guiding principles for traffic as a Safe System is as straightforward: You cannot address road safety piecemeal. All parts of the system need to interlock to reinforce each other, so that when one part fails in the chain of events leading to a serious incident, the others will still protect humans from injury or worse.

Technology will go a long way to make road traffic safer. Alco locks, automatic braking, intelligent speed assistance, electronic stability control and the like will make lethal errors less likely, no doubt. Self-driving cars, many hope, will solve the road safety problem by making error-prone human drivers superfluous. But autonomous driving is not a silver bullet. Forecasts put sales of self-driving vehicles at 11.8 million or about 2.7% of the global car fleet in 2035. And the vast majority will be sold in developed world, while fully 90% of road fatalities occur in low- and middle-income countries. The impact of self-driving cars on road safety will hardly be noticeable for another generation or more

There are other misconceptions about how Vision Zero works. It does not mean, for instance, that there will be no more crashes. There might even be more, because the Safe System is focused on avoiding serious injuries, not necessarily accidents. Take roundabouts: It is not rare that there are more collisions at roundabouts than at standard intersections. But because they rarely involve impacts at a 90-degree angle and occur at lower speeds, far fewer severe injuries result.

Ultimately, can there really ever be zero road deaths? On a global level, probably not. But looking at individual segments it is already happening: There are at least three European cities with more than 250 000 inhabitants that have not had a single road fatality in over a year, according to German safety specialist Dekra. In Sweden, not a single child was killed in a bicycle accident in 2008. On this level, zero road deaths as a target is not utopian – and then: if it can be done for one group or region or car make, it can probably also be done for others as well. If governments take the political lead and bring all those together who can and should make it happen, it can work.

Let’s give the Safe System a chance to save lives.

pm logo and strap_newThe International Transport Forum (ITF) at the OECD recently published “Zero Road Deaths and Serious Injuries: Leading a Paradigm Shift to a Safe System” (2016), which reviews the experiences of countries that have adopted Vision Zero and the Safe System and provides guidance for leaders who seek to drastically reduce road deaths in their communities. For this report and its global road safety work the ITF is today being awarded a Prince Michael of Kent International Road Safety Award.

 

Driving from a distance

How remote-controlled trucks could pave the way towards fully automated driving

José Viegas, Secretary-General, International Transport Forum

driving-distance-remote-controlled-trucksAre we going to be comfortable letting go of the steering wheel? Many car makers and technology companies are betting on it. A flurry of recent announcements is predicting that driverless cars and taxis will be on our cities streets within five years. Uber just began a pilot of self-driving taxis in Pittsburgh, Tesla’s latest business plan clearly targets “fully self-driving” vehicles, and Ford is gearing up for mass market driverless car production by 2021.

Much less media attention has been devoted to a related issue: the possibility that driverless trucks will soon be roaming our roads. For this scenario the key question is a slightly different one: Are we ready to share the roads with dozens of tonnes of steel when there is no human in charge?

Once it becomes available, the operating flexibility and cost reductions from driverless operations offer trucking companies and their customers a strong carrot for its adoption. The International Transport Forum estimates that on long-distance routes driverless trucks could be operated with a cost advantage of 30% or more compared to conventional manned trucks. The advantages for hauliers are obvious: Drivers represent the biggest chunk of operational costs and at the same time a constraint on using trucks at full capacity – they do need breaks to rest, after all. Taking humans from the cabin means trucks could operate all day and night without having to stop, except for refuelling.

When machines take over

There are many issues that need to be solved before driverless technology can be cleared for use on public roads. Some are technical and need to be resolved by engineers and computer scientists. Others are public policy issues: Governments need to make the call as to when the machines can take over. This involves deciding how and when driverless truck systems demonstrate lower (real and perceived) risks of crashes than the current situation with humans doing the driving – and especially that they do not fail in situations that humans would normally handle well.

No driving system can ever be 100 per cent safe, whether humans or computerised systems are in charge. But in well-defined situations – for instance on motorways, where there is no crossing traffic and speeds are similar – automation technology may soon safely handle driving tasks for 99.9% or even 99.99% of driving time. But can there be a clear-cut percentage or success rate for allowing operation without a driver in the cabin that would satisfy the safety concerns of regulators (or of road users, for that matter)?

In the United States, the National Highway Traffic Safety Administration recently published guidelines on automated vehicles. These provide an early indication about how it will judge when the machines are ready to take over. The US approach appears to be that driverless vehicle developers will be required to set out clearly how their vehicles respond to given situations (such as a loss of communications) and how they comply with each road rule.

A matter of feelings

Yet accepting robot trucks is not solely about rule compliance and crash probabilities. It also has a highly subjective dimension. That humans systematically overestimate their own driving skills is a well-documented fact. The result of this, among other factors, is 1.25 million road deaths every year on the world’s roads. Objectively, machines will probably be able to do better soon. Yet public acceptance may well depend more on how people would feel if they heard on the news that a 32-tonne semi-trailer with no human driver in the cabin had been involved in a fatal crash. Regardless of the actual crash performance of driverless trucks, the idea might well be scuttled if the public’s perception is dominated by unease, fed by rare but highly publicised crashes.

It is thus worth thinking about ways to move towards driverless trucks and the benefits they provide while reassuring the community that machines haven’t taken over. Three options warrant consideration.

The first is so-called platooning. In a truck platoon, several vehicles form a closely-spaced convoy in which only the lead truck has a human driver who navigates traffic. The following trucks are linked to the lead truck by wireless data links and automatically maintain a safe distance with the vehicle in front. If the trailing vehicles were allowed to operate without driver, quite significant cost savings would be possible. Although platooning has received a great deal of attention, e.g. from the European Union, the need to co-ordinate drivers and vehicles may make it less attractive than fully automated driving. Controlling “centipede” configurations of vehicles will also introduce new challenges for truck drivers as well as the other drivers on the same road.

Handing over control

A second transition option is that of part-time human control: Drivers remain obligatory on all trucks, but their role is reduced to taking over from computerised systems when unexpectedly difficult driving situations arise. Such passive driving technology is well-advanced: Truck manufacturer Daimler is testing driver-assisted automated trucks on the highways of Nevada in the US.

This will help build experience with autonomous driving, yet the approach also has its limitations. Most importantly, the hand-over between machine and human is particularly risky. The driver still needs to pay full attention and be ready to act at all times – so while his task may be less strenuous, he will still need rest. With machines in charge most of the time, there is of course the risk the driver will not always be ready to take over quickly enough. Not least, the need to have drivers on board means there is no significant reduction of operating costs, making this option less attractive to hauliers.

A third option is remote driving. Imagine control rooms where professional drivers are set up in a cabin-like environment that closely mimics the information and tools available in a real truck. These drivers would remotely monitor and control a number of otherwise self-driving trucks and intervene, taking manual control of steering, indicating, accelerating and braking, when and where needed. The relatively low complexity of driving on a motorway would make it possible to operate a fleet of trucks with a much lower number of drivers than that of the trucks under their control.

Truck driving as an office job

What sounds like science-fiction is already being tested in the real world, albeit in different contexts. Drones are just the most obvious example: the US Navy is currently in advanced tests of a remotely controlled fighter jet. In maritime shipping, Rolls Royce is working on freight ships controlled from land. In Australia, enormous trucks operating in the iron ore mines of Western Australia are being controlled by drivers in a centre 1 200 kilometres away. In the Netherlands, the remote control room approach is being used for the operation of low-speed driverless WEpod minibuses that operate on the five-kilometre route between the University of Wageningen and the city of Ede. And an Estonian firm is testing small robot vehicles for urban delivery in Washington, London and Hamburg that will be overseen from a control room in Tallinn, thousands of kilometres away.

Driving from a control room has obvious advantages. For the driver, trucking becomes a regular office job similar to that of an air traffic controller. Rather than having to sleep in the truck cabin somewhere in a parking area with no facilities, he can go home to the family at the end of the day. Compared to full automation, the remote driving approach also ensures some continuity of skills, as the best truck drivers redeploy to control centres that offer more stable and comfortable job conditions.

Herding trucks like sheep

In the control room, remote drivers would be alerted by the on-board systems when difficult situations arise on road in which computers perform less well than humans – such as bad weather that hampers sensors, or ambiguous situations a computer cannot easily adjudicate. Initially, the threshold for human intervention would be set low, but with growing experience and self-learning systems it could be raised to a level where the control centre steps in less and less.

A control room (perhaps owned by a truck manufacturer) could begin trials with a high ratio of drivers to trucks, even one-to-one. It would collect data (and share it with the regulator) on how often and under what circumstances drivers have to take over (and how often this occurs simultaneously). If the data shows that interventions from the control centre are sufficiently rare, its operator could gain regulatory approval to gradually bring more trucks under the control of each remote fall-back driver, depending on the risk aversion of the regulator.

Finally, remote controlling does not require the co-ordination of trucks as in the platooning approach; it could be operated anywhere with suitable communications coverage. This raises the challenge for control room operators: They will need to invest in the facilities, on-board systems and communication technology necessary to support remote interventions in a given area. As one-to-one remote operation would not be profitable (but a likely first step), investors would need to be confident that regulators will allow higher truck/driver ratios once safe performance has been demonstrated. But for vehicle manufacturers, the investment as such is easily within their means. And given the cost reduction and performance increase they would offer, the potential demand for remote-controlled trucks is evident.

A feasible path

The control centre model for driverless trucking on motorways seems to be a feasible path towards fully-automated trucks. It would also be directly applicable to other areas currently relying on professional drivers, such as taxis and buses. The significant cost savings would be attractive to operators, while the availability of drivers as a fall back in case of system failures could allay concerns about giving full responsibility to a robot.

If we knew that a highly skilled human driver was always ready at a moment’s notice to take control of the vehicle, wouldn’t we be more willing to share the road with it?

Rough waters for container shipping. Why Hanjin, the world’s seventh largest container line, went under

13100_teu_class_hanjin_sooho
End of the line

Olaf Merk, Ports and Shipping Project Manager, International Transport Forum. We are co-publishing with the OECD Insights blog.

Sad news. After months – even years – of pain and suffering, the South Korean container shipping company Hanjin finally sank and passed away. Not just any casualty, but the largest shipping bankruptcy in history: Hanjin was the world’s seventh biggest container line with a fleet of 90 ships. Was this an accident, an isolated case of bad luck, or is something more structural going on?

Like with any bereavement, there are the immediate arrangements to make. Terminal operators and maritime service providers were not paid for their services and need their money, so they have seized Hanjin ships in ports to have some sort of guarantee. Hanjin’s clients are eager to know that their goods will be delivered and not be stuck on ships. Competitors are circling around the deceased to pick up some of the ships that Hanjin leaves behind.

At the same time, people start to wonder how all this could have happened. Forensic analysts talk about the sluggish demand for container transport, hit by declining trade from China, the overcapacity in container shipping and the resulting low ocean freight rates that have made it very difficult to make profits in container shipping. All this sounds very logical, but also pretty abstract, and – more fundamentally – it obscures an uncomfortable truth: This was not an accident, but market forces at play – and it will happen again.

The story starts – in a way – in a corporate boardroom in Copenhagen in 2010. Then, the world’s largest container shipping company, Maersk Line, decided to order a set of new container ships that were larger than the world had ever seen, able to carry 18 000 standard containers. Putting more containers on a more fuel-efficient ship would save costs and thus give it a better position in a very competitive market.

For a weekly container service between Asia and Europe – the route on which the largest ships are deployed – ten to eleven ships are needed; a lot of capital that smaller companies would not be able to collect. As the order for the new mega-ships was placed while the global economic crisis was still unfolding, banks were unwilling to lend much to a risky business like shipping, especially the smaller ones with high risk profiles. Timing was excellent, with ship prices low due to overcapacity in shipbuilding yards. The new mega-ships were smartly marketed as “Triple E” ships, providing economies of scale, energy efficiency and environmental performance. They also provided a life-time opportunity for the market consolidation that big players hoped for.

Yet things worked out differently: Other firms reacted by ordering similar mega-ships and by organising themselves in alliances. They agreed to share slots on each other’s vessels, which means they can offer networks and connections that they would not be able to offer if they would go it alone. Alliances had existed before, but the Triple E-strategy involuntarily resulted in stronger alliances in which more carriers were involved. These consortia were also used to share newly acquired mega-ships, so individual carriers would only need to buy a few of these, instead of having to shoulder a whole set of ten ships. Consequently, many carriers were able to rapidly catch up and also order mega-ships, many more than expected. The alliances became such powerful mechanisms that even the largest companies found themselves forced to find alliance partners.

This gave a different twist to the play, but with a similar outcome. The combined mega-ship orders in a period of sluggish demand created a sensational amount of overcapacity: way more ships than were needed. This overcapacity resulted in lower freight rates, lower revenues and several years of losses, of which we have not started to see the end. Who has the longest breath and biggest pockets will survive; the others won’t and will suffer death by overcapacity, like Hanjin.

There will very likely be more Hanjins. Hardly any container shipping line is making profit nowadays and the perspectives are bleak. Sputtering trade growth and gigantic ship overcapacity will continue to depress ocean freight rates. Banks, creditors and governments might well get impatient with some of the liners and cut life lines again.

Economic theory champions the notion of “creative destruction”, in which inefficient firms are replaced by more efficient ones. So, even if it is hardly any comfort for employees that lose their jobs in the process, one could consider it a natural thing that weaker shipping firms disappear.

There is just one problem. If this process continues, it will soon lead to a very small group of powerful carriers dominating an already concentrated market, enabling them to put a lot of pressure on clients and ports. We are starting to see what the results of this are: less choice, less service and less connections for shippers, the clients of shipping lines. The ports that accepted the offer they could not refuse and invested in becoming mega ship-ready may find out that they placed their fate in the hands of a few big players who frequently change loyalties at fast as the wind.

Hanjin is gone; the problem is still very much there.

Useful links

The impact of mega-ships Olaf Merk on OECD Insights

The Hanjin case is a practical illustration of the complexity of sectors such as international shipping. The OECD is organising a Workshop on Complexity and Policy, 29-30 September, OECD HQ, Paris, along with the European Commission and INET. Watch the webcast: 29/09 morning29/09 afternoon30/09 morning

Of taxis and smart phones: balancing innovation and regulation

Sharon Masterson, Corporate Partnership Board, International Transport Forum

app-based-ride-taxi-servicesNecessity is the mother of invention – or is it? It could be argued that the time-honoured adage only holds when we know what we want or need. But what if we don’t? “If I had asked people what they wanted”, Henry Ford famously quipped, “they would have said ‘faster horses’.”

While the car was a revolutionary innovation, it was not immediately disruptive. Early cars were expensive luxury items, so the market for horses and carts remained intact until the Ford Model T created a mass market by making the new technology affordable, thanks to more efficient production methods.

What the transport sector is facing today in many areas follows a similar pattern. True, this time around, innovations are not as disruptive to the eye as motor cars replacing horses. Instead, current disruptive forces in the mobility sector hide under the hood of largely familiar-looking vehicles and in the invisible “cloud” – for instance in the shape of autonomous driving, electric mobility or app-based transport services.

But there are parallels. Take ride-hailing via smart phones: The technology has been on the market for several years. Not even the leading players like Uber or Didi Chuxing, its Chinese rival, have come to dominate the provision of mobility. They are rapidly gaining ground against the traditional forms of moving about in a car, however, and within a decade or two could well become dominant. In a recent survey in China, 8 out of 10 respondents aged 18 to 35 said they had already used a car-hailing app.

The potential of app-based transport has certainly fired up investors: Uber recently received USD 3.5 billion from Saudi Arabia’s sovereign fund, and Didi Chuxing raised USD 7 billion from investors and lenders, including 1 billion from Apple. Today, Uber is the world’s most valuable start up, with a market capitalisation of USD 62.5 billion. Conversely, the Nasdaq-listed Medallion Financial, a huge provider of loans to buy taxi licenses, has lost well over 50% of its stock value since December 2014.

Policy makers in many countries have been caught somewhat off guard by the rapid rise of app-based ride-hailing platforms. In many countries, regulation has been lagging and policymakers struggle in balancing the need to ensure public safety, consumer protection and tax compliance with the potential benefits: higher efficiency of transport, better service, more transparency and the simple fact that consumers like the convenience of pushing a smartphone button to order a ride.

What has not been lagging is the response of those who could possibly to lose out. Legal action by traditional taxi operators has led to some app-based services being banned, operators fined, executives taken into custody, and even violence.

Against this backdrop, a reasoned debate about principles that can serve as a basis for regulators to set frameworks is urgently needed – and this is what we have been working for at the International Transport Forum with key actors. Uber and the International Road Transport Union (IRU, globally representing taxi drivers, among others) are both members of the ITF Corporate Partnership Board (CPB),  and we brought the two together at our 2015 summit of transport ministers. For the first time ever, Uber’s chief strategist David Plouffe and Umberto di Pretto, Secretary-General of the IRU, shared a stage to discuss what the rise of the shared economy means for transport. They agreed that new regulation was needed and just disagreed about how to move forward until that happened – demonstrating that constructive dialogue is possible, even invaluable in such a process.

As a next step, as part of the Corporate Partnership Board’s programme of work, a workshop was convened. Representatives from Uber and Lyft, the taxi industry, regulators, academics and other stakeholders came to Paris in November 2015 to seek points of consensus on regulation and identify persistent points of tension that need focused attention to resolve. The report emanating from that meeting, entitled App-Based Ride and Taxi Services: Principles for Regulation, will make fascinating reading for regulators. Among other things, it offers them four pieces of concrete advice:

  • Focus policy regarding for-hire transport on the needs of consumers and society. This will enable the development of innovative services which could contribute towards public policy objectives such as equitably improving mobility, safety, consumer welfare and sustainability.
  • Keep the regulation framework as simple and uniform as possible. Avoid creating different categories for regulating new mobility services. Regulators should seek to adapt frameworks to better deliver on policy objectives in innovative ways and not simply preserve the status quo.
  • Encourage innovative and more flexible regulation of for-hire transport services. Use data and the findings from data analysis for more timely intelligence to inform the policymaking process. Today’s data accuracy and availability mean that more than ever before, policymakers have tools at hand which enable them to take a more flexible approach to regulation and through monitoring, evaluate how these regulations are working, and adapt or streamline as necessary.
  • Work more closely with operators to achieve data-led regulation.. The emergence of digital connectivity and wireless communications has opened the possibility of new types of instruments that could allow better control of the efficiency and provision of services as well as giving authorities a completely new and transparent way of pursuing policy objectives.

The emphasis on the role of data here is particularly interesting. Do app-based transport services increase congestion or reduce it? Do they provide better mobility for people without cars or access to public transport, or not?  These questions, among the most hotly debated issues around the arrival of these services, can only be settled with enough relevant data. (“In God we trust, everyone else, bring data”, former New York City mayor Michael Bloomberg often said, quoting the eminent statistician W.E. Deming).

If regulators learn to work with those who have the data, and learn how to harness the power of this data, it will be for the benefit of businesses and citizens. We have also just published another report on data-driven transport policy. But – in the immortal words of Rudyard Kipling – that’s another story!

Useful links

The reports mentioned above are part of a series of Corporate Partnership Board reports. For more information, please contact either Programme Manager sharon.masterson@itf-oecd.org or Project Manager philippe.crist@itf-oecd.org

Recent ITF reports:

The sharing economy and new models of service delivery

Ministers, the business community, civil society, labour and the Internet technical community will gather in Cancún, Mexico on 21-23 June for an OECD Ministerial Meeting on the Digital Economy: Innovation, Growth and Social Prosperity

This article is co-published with the OECD’s Insights Blog.

Carbon emissions all at sea: why was shipping left out of the Paris Climate Agreement?

This article, by Shayne MacLachlan of the OECD Environment Directorate, is co-published with the OECD Insights Blog.

surfNewcastle, Australia has the dubious honour of being the world’s largest port for coal exports. There’s even a coal price index named after it: The NEWC Index. Surfing Novocastrian beaches not only means “watching out” for great-white sharks, but also “being watched” by the lurking great-red coal ships out beyond the breakers, waiting to come in to port for their fill (see photo). Growing up accustomed to these ever-present leviathans, I never questioned what ships did to the environment and to our health apart from when they crash and leak oil. This all changed recently as I discovered a raft of statistics about the shipping industry that indicate we’ve been sailing too close to the rocks since the engine started replacing sails and oars in the early 1800s.

A stern warning for climate change, and our health

Shipping brings us 90% of world trade and has increased in size by 400% in the last 45 years. Cargo ships, tankers and dry-bulk tankers are an essential element of a globalised world economy, but they are thirsty titans and they won’t settle for diet drinks. There are up to 100,000 working vessels on the ocean and some travel an incredible 2/3 of the distance to the moon in one year. Some stats floating around state that the 15 largest ships emit as much as all the 780 million cars in the world in terms of particulates, soot and noxious gases. The International Maritime Organization (IMO) says sea shipping makes up around 3% of global CO2 emissions which is slightly less than Japan’s annual emissions, the world’s 5th-highest emitting country. Ships carry considerable loads so they’re reasonably efficient on a tonne-per-kilometre basis, but with shipping growing so fast, this “broad in the beam” industry is laying down a significant carbon footprint. And local pollution created by ships when they are moored and as they rev hard to get in and out of port can be severe as most use low-grade bunker oil, containing highly-polluting sulphur. Ships also produce high levels of harmful nanoparticles, but encouragingly we’ve seen IMO collaboration to raise standards on air pollution from ships.

Mal de mer with rudderless regulation

A recent estimate forecasts that CO2 emissions from ships will increase by up to 250% in the next 35 years, and could represent 14% of total global emissions by 2050. This could wreck our hopes of getting to a well-below 2°C warming scenario. Even though many, including Richard Branson, called for emission reduction targets for international aviation and shipping to be included in the COP21 Paris Climate agreement, we failed. The IMO has introduced binding energy-efficiency measures so by 2025 all new ships will have to be 30% more efficient that those built today, but in my view there are questions about stringency and seemingly they don’t go far enough.

projected-annual-co2-emissions-from-the-shipping-sector_9ecd-768x662

http://www.grida.no/graphicslib/detail/projected-annual-co2-emissions-from-the-shipping-sector_9ecd

Navigating alternative routes to <2°C

As the Arctic ice sheet melts, a route across the North Pole would be about one-fifth shorter in distance than the Northern Sea route. But this isn’t what I have in mind for reducing shipping fuel consumption and emissions. We need to develop a copper-bottomed response to the challenge by further boosting investment in innovation and research. It’s great to all these sustainable shipping initiatives in the offing:

  1. Fit wind, wave and solar power such as kite sails, fins and solar panels. There’s some research into other energy sources underway such as nuclear cargo ships, but of course that presents another element of risk if something goes wrong.
  2. Increase carrying capacity of ships and future proofing of ships for a further 10-15 years with increased fuel efficiency by retrofitting vessels with more technologically advanced equipment.
  3. Use heat recovery technology to harness waste energy from exhaust gases to create steam, then mechanical energy, then electrical energy to power elements of the ship’s systems.
  4. Construct ships with sleeker design to reduce drag and install more efficient propellers.
  5. Use Maritime Emissions Treatment Systems (METS) in the form of a barge which positions large tubes over ships’ smoke stacks and captures and treats emissions from berthed vessels.

Let’s sink fossil fuels

Innovation and efficiency is hardly a “cut and run” approach. And typically when an industry reduces fuel costs they use the savings to increase activity, meaning carbon reduction is limited. This “rebound effect” could happen in maritime shipping. Truly green shipping will require vessels that are 100% fossil-fuel free. To help drive down fossil-fuel use, a carbon charge for shipping (and aviation) has been proposed. The International Chamber of Shipping (ICS) queried the carbon price of $US25 per tonne. Indeed this is higher than the price on CO2 for onshore industries in developed countries. What’s needed is a system where emitters that aren’t linked to a country’s climate policies are accountable. At COP17 in Durban, delegates discussed a universal charge for all ships that would generate billions of dollars. The money could be channelled to developing countries’ climate policy action. Phasing out subsidies on bunker fuel used by ships is also needed to get us on the right course.

You can’t cross the sea by standing and staring at the water

Following Paris it’s time for specific shipping emissions targets. It appears we know the co-ordinates but the fuel tanks are full of the wrong stuff. Earlier this month, the Marine Environment Protection Committee (MEPC) of the IMO discussed emissions targets but only got as far as approving compulsory monitoring of ship fuel consumption. This is a key step if one day we introduce market-based mechanisms to reduce shipping emissions. What’s needed is accelerated action consistent with the Paris agreement.

In the doldrums of COP21, it seems shipping (and it’s by no means the only sector) is rather like that surfer, sitting on their board waiting for the next wave. At the same time it’s trying to avoid the lurking great white shark.

Useful links

International Transport Forum work on maritime transport

Did shipping just fail the climate test? ITF’s Olaf Merk on Shipping Today