DEPARTMENT 20023 t PAPEERS PAPER NO. 69 TOWARD ENVIRONMENTALLY AND SOCIALLY SUSTAINABLE DEVELOPMENT CLIMATE CHANGE SERIES Transportation and CO2 Emissions: Flexing the Link - A Path for the World Bank Lee Schipper C61ine Marie-Lilliu International Energy Agency, Paris, August 1998 September 1999 Environmentally and Socially Sustainable Development The World Bank ESSD THE WORLD BANK ENVIRONMENT DEPARTMENT and THE TRANSPORT, WATER, AND URBAN UNIT Transportation and CO2 Emissions: Flexing the Link - A Path for the World Bank September 1999 Papers in this series are not formal publications of the World Bank. They are circulated to encourage thought and discussion. The use and citation of this paper should take this into account. The views expressed are those of the authors and should not be attributed to the World Bank. Copies are available from the Environment Anchor, The World Bank, Room MC-5-128. Contents FOREWORD VII ExECuTIVE SummARY IX ACRONYMS AND DEFINITIONS XI Chapter 1 Trends in Energy Use and CO2 Emissions 1 Global trends in energy use and CO2 emissions 1 Trends in carbon emissions from energy use in IEA countries 5 Chapter 2 Challenges Facing GHG Restraint in Transportation 13 Driving factors 13 Facing carbon emissions from transport 15 Previous oil-saving and transport pollution control programs 16 Chapter 3 Approach-Tools and Methods: How We Hook Solutions to Problems 19 Flexing the link-Analytical approaches to transport trends 19 Flexing the link-Approaches to the policy challenge 22 Relationship to Bank policy and operations 24 Role of global overlays 24 Connection to Bank practices 24 Chapter 4 Tools for Flexing the Link - Better Practices 27 Better policies 27 Better practices: Technologies 28 Better tools for carrying out integrated policies 29 Interaction of policies and components of emissions 32 Expanding the knowledge base-Better analytical tools 35 Climate Change Series iii 11ansporlation and CO2 Emissions: Flexng the Link --A Path for the Wodd Bank Top-down macro approaches 35 Using a bottom-up approach to measure costs and benefits 38 Feedbacks/bouncebacks 39 Improving the knowledge base - Concrete steps in client countries 40 Chapter 5 Designing a Transportation/CO2 Strategy for the Bank 43 Overriding issues facing any transport CO2 strategy 43 Issues facing development of a strategy in each region, country, or project 46 Time frame and timing 46 Policy framework and the interaction matrix 47 First steps in a cooperative country assessment 49 Chapter 6 Conclusions 53 Annex I Transportation Activity, Energy Use, and Emissions in IEA Countries - A Brief Review 55 Vehicle ownership and use trends 55 Economic forces and vehicle fuel use 59 Annex 2 Technologies -Vehicles and Fuels: The Potential Is There, but What Does It Cost? 63 REFERENCES 67 BoXEs 1 Considering CO2 Reduction as a Collective Good 4 2 Decomposition of changes in CO2 emissions from travel or freight 11 3 Steps in a Transport GHG Mitigation Assessment-What We Need to Know 51 FIGURES 1 (a & b): Share of CO2 emissions (Mt C02), 1980 and 1994 1 2 Relative changes in CO2 emissions in 1980 and 1994 2 3 Growth in CO2 emissions in transport sector and total economy from 1980 to 1994 2 4 CO2 per capita, 1994 3 5 CO. emissions per unit of GDP and GDP, 1994 3 6 Per capita GDP and per capita CO, emissions from transportation, 1971-1995 6 7 Total carbon emissions per capita by major end use 7 iv Environment Department Papers Contents FIGUREs (continued) 8 Per capita GDP and per capita carbon emissions from travel sector in some IEA countries, 1970- 1994 8 9 Per capita GDP and per capita carbon emissions from freight transport in some IEA countries, 1970-1994 8 10 Breakdown of transport emissions per unit of GDP, 1973 and 1993/94 9 11 Car ownership and GDP 14 A.1 Automobile ownership and GDP 56 A.2 Car use and per capita GDP 56 A.3 Per capita domestic travel in OECD countries 57 A.4 Carbon emissions from passenger travel 57 A.5 Domestic freight and industrial GDP in industrialized countries, 1970-1993 57 A.6 Breakdown of transport emissions per unit of GDP, 1973 and 1993/94 58 A.7 Test fuel consumption per horsepower ratio 58 A.8 Evolution of car power 58 A.9 Car fuel prices and fuel use in 1993 59 A.10 Truck freight energy intensities in seven industrialized countries 60 A.11 On-road automobile fuel intensity in OECD countries 60 A.12 Changes in CO2 emissions from travel, 1973-93/5 61 A.13 Changes in carbon emissions for freight 1973-1992 61 Tables 1 Key trends in population, economic activity and CO2 emissions, 1971 and 1994 5 2a Changes in carbon emissions from travel, 1973-1995, Laspeyres Decomposition, 1990 Modal Structure, 1973=100 9 2b Changes in carbon emissions from freight, 1973-1994, Laspeyres Decomposition, 1990 Modal Structure 10 3a Interaction matrix: Which policies affect which components of travel related emissions? 33 3b (continued) The interaction matrix for travel: Estimating the potential for changes that might occur relative to A base case 34 4 Interaction matrix: Which policies affect which components of freight emissions? 35 5 Interaction matrix: Who cares about each policy? 36 6 Some potential strategies: Role of the World Bank and other actors 50 Climate Change Series V Foreword This paper will address the issue of reducing projects usually have secondary benefits in carbon dioxide (CO2) emissions from energy efficiency and local pollution reduction. transportation. We will focus on how the World Bank, through its analytical capabilities, lending It is clear that transport is a key link between practices, and policy influence, could contribute small isolated communities or societies and to significant mitigation in client countries and industrial economies, by permitting exchange of elsewhere. We will not cover the entire range of goods over distance and enabling socio-cultural greenhouse gas (GHG) emissions but rather interchange (Braudel 1992). Effective focus on CO2 emissions arising from transportation is also a key element in keeping transportation in developing countries (DCs). markets competitive and raising choices for We will use many examples from member both producers and consumers. Transport has countries of the Organization for Economic Co- historically been instrumental in allowing operation and Development (OECD) to people access to goods, services, and activities, illustrate important relationships often difficult and enhancing their opportunities for to quantify in other regions because of data and exchange, and hence economic growth. For measurement problems. We will suggest some most observers, therefore, transport has given options for GHG restraint as illustrations but society an enormous surplus. There is, not provide a full list by any means. Rather, we nevertheless, widespread concern over the costs will discuss the more generic advantages - and of externalities from transportation, which challenges - of these options, particularly as include safety, air, water, and noise pollution, seen from the perspective of the World Bank. competition for urban space, balance of payments problems, and risks associated with The goal of this study is to develop the first importation of oil as the main transport fuel. steps of a World Bank strategy for restraining How to internalize these costs, and how such GHG emissions from transportation. With changes would affect vehicles, transportation funding provided by the Global Environment activity, and the transportation infrastructure is Facility, the Bank's Global Overlay Program is to now the subject of considerable worldwide be extended to include the transportation sector debate. in the identification of climate change externalities in Bank Economic and Sector Work The emission of greenhouse gases, of which (ESW). While few developing country policy- CO2 is the most significant, is arguably of less makers are immediately concerned about immediate impact in monetary terms. Unlike restraining their own emissions, many have congestion, noise, or air pollution, CO2 come to realize that the costs of climate change emissions are not perceived as a problem that may well be significant for lower-income, affects a localized area or even present principally agricultural economies. They also generations enough to provoke major changes recognize that climate change mitigation in transportation or fuel use. Nevertheless, CO2 Climate Change Series vii lnspaitation and CO2 Emissions: Hexng the Link-A Path for the Wdd Bank emissions from travel and freight have This paper begins with a brief review of global increased in most industrialized countries faster trends in CO2 emissions, with a more detailed than population, and in many cases as rapidly analysis of emissions in International Energy as gross domestic product (GDP). Indeed, in Agency (IEA) countries provided in an annex. virtually all regions of the world, CO2 emissions Next, approaches and tools available to the Bank from transport are rising relative to total as part of the Global Overlays approach are emissions. Policy-makers in the major oil delineated. These tools come under the heading consuming countries are attempting to of"better practices" (Technology"better practice" understand and address this phenomenon, options are reviewed in Annex 2). The paper even though it still may not be a high-priority concludes by outlining a series of steps towards issue for policy makers in developing countries designing a strategy for the Bank in its (DCs) and the economies in transition (EITs). transportation sector work with client countries. viii Environment Department Papers Executive Summary Transportation is one of the most rapidly rising and more rapid development and marketing of sources of greenhouse gas (GHG) emissions, low-CO2 vehicles (including two and three often increasing faster than Gross Domestic wheelers in urban areas), and to develop Product (GDP) in developing countries (DCs). movement patterns that create access without Public and private authorities in these countries an excessive demand for kilometers. tend to place a low priority on the externalities associated with GHG damages, and are more The World Bank plays a key role in lending for immediately concerned by those damages transportation in many DCs and Economies in associated with safety, congestion or air Transition (EI). These projects, in the process pollution. This is largely because present of raising overall welfare and mobility, raise generations are exposed directly to these GHG emissions as well. A number of changes externalities at the local level, while policies in policy, as well as expansion of efforts into aimed specifically at reducing or restraining new areas, could GHG emissions contain elements of political and economic uncertainty or have few rewards * Reduce GHG emission increases implicit in from a national perspective, as the December many Bank transport projects 1997 negotiations in Kyoto revealed. Given this man Ba tra t re uncetaity,thestrtegi opionis o ~ * Lead to greater restraint or abatement in its uncertainty the strategic option is to align cin onre initiatives to restrain GHG emissions within cEncou nte overall transport reform.Vigorous research and fuEncourage t interat vehlgn fuel suppliers to make geater technolog marketing of new less fuel-intensive vehicles, by g sy and carbon taxes favoring low-carbon fuels can innovt for by helpi s ehe market for low-carbon motorized vehicles achieve significant restraint; stabilization or even reductions in emissions from transport in the rapidly growing DCs and the could occur by the second or third decades of restructured EITs. the next century. The Bank can achieve these objectives by For DCs, with significantly more rapid growth undertaking a strategic plan that contains the in vehicle stocks and utilization, the real policy following elements: challenge is to reform transportation policies and customs now, in order to eliminate obvious * Help establish a policy framework in which and hidden subsidies and make users pays full client country authorities and stakeholders social costs while boosting overall social can evaluate and debate the options for welfare. Even in rapidly growing countries, it improving the environmental performance will take decades for policies, technologies, and of transport alternative fuels to halt the rise in emissions * Encourage policies that allow cost recovery and ultimately to reduce emissions. The most and price externalities into transportation attractive option for DCs is to encourage wider costs (fuels, road use, and so forth) Climate Change Series ix liansportation and CO2 Emissions: Flexing the Link -A Path for the Wrld Bank Accelerate development and share Economic and Sector Work, and to identify deployment of low-CO2 cars and trucks, as GHG-reduction friendly options that could well as"clean"two- and three-wheeled then be financed through the Global alternative vehicles Environment Facility (GEF), the proposed Finance development of infrastructure that Prototype Carbon Fund, or the Clean supports innovative and financially viable Development Mechanism of the Kyoto Protocol. collective transport systems (for example The ASIF methodology described in this paper the system in Curitiba, Brazil reduces offers an analytical framework that is in line automobile use in a town with the highest with these objectives. By decomposing trends in car ownership in the country) emissions into transportation Activity modal Link CO2 emission reduction efforts to Shares, the energy Intensities of each mode and major initiatives to reduce air pollution, the Fuel mix of each mode with its GHG congestion, and other severe local problems emissions characteristics, the key components created by rapidly growing volumes of of change in transportation activity are traffic analyzed. For example, interventions in I and F Assume a proactive role, working directly (technologies and utilization) have the largest with vehicle suppliers, technology promise for restraint, while policies that affect developers, and client country policy- A and S through broader transport reform will makers to broker agreements among these also restrain emissions. stakeholders to develop new markets with low-emissions transportation options To achieve meaningful results, the Bank must Provide Technical Assistance (and in- look beyond individual project planning country capacity building) for basic towards a strategy where sequential projects passenger and goods movement sunreys, and policy planning is viewed in a longer-term fuel-use and emissions testing of new and perspective. Policy actions must be few but dear existing vehicles, as well as land-use in nature and strong in impact to reduce the development models. risks of having no impact or perverse outcomes. Taking this longer-term perspective ensures an Te Global Overlay Program represents an active Bank role during a significantly long excellent opportunity for Bank initiatives to period of development (one to two decades). embrace a full range of low GHG options. The Such an approach is required if low-GHG Program's objective is to integrate global vehicles and systems are to be developed and cimate change externalities into Bank successfully implemented. X Environment Department Papers Acronyms and Definitions IEA assessments, and there are other substances The International Energy Agency, whose which in the atmosphere can increase the participating countries are: Australia, total warming effect. In this study, we refer Austria, Belgium, Canada, Denmark, principally to CO2 emissions and count Finland, France, Germany, Greece, Hungary, them as carbon that is burnt as fossil fuels. Ireland, Italy, Japan, Luxembourg, the Further, we count available carbon, since Netherlands, New Zealand, Norway, only careful measurements determine how Portugal, Spain, Sweden, Switzerland, much carbon in fossil fuel combustion is Turkey, the United Kingdom, the United fully oxidized to carbon dioxide. States. Energy Use and Carbon Emissions OECD This study considers emissions arising from The Organization for Economic Co- final energy uses in transportation operation and Development, whose including the average emissions associated countries include those of the IEA as well with generating a unit of electricity in a as Iceland, Poland, the Czech Republic, country. We generally count carbon, rather Republic of Korea and Mexico. than CO2, since we do not know exactly how much carbon that is combusted really DC winds up as CO2. Developing Countries Full Fuel Cycle Analysis EIT We do not consider emissions associated Economies in Transition, which includes with the fuel cycle of making other countries of the Commonwealth of transportation fuels. These are much Independent States (CIS), and countries of smaller than those associated with Central and Eastern Europe, including for production of electricity from fossil fuels. this discussion those that have joined the However, the differences in full fuel-cycle OECD or IEA. emissions from transport fuels must be carefully considered in the future as GHG alternatives are offered that may indeed Greenhouse gases. As defined by the IPCC release fewer GHG in vehicles while being (IPCC 1990), these include a variety of associated with greater GHG emissions in gases that increase the atmosphere's ability preparation, of the converse. Diesel fuel, for to trap infrared radiation and thus warm up. example, releases more carbon per unit of The most important of these is carbon- energy contained (and holds more energy/ dioxide (CO2), but methane (CH4), nitrous liter) than gasoline, but has much smaller oxide (N.O) are also counted in many carbon releases associated with its Climate Change Series xi M1ansportation and CO2 Emissions: Flexng the Link -A Path for the World Bank production. So-called renewable ethanol * Avoidance connotes growth in a particular from corn, as produced in the United States activity that by design or accident is not for blending with gasoline in gasohol, associated with increasingly higher GHG represents at best a 10 percent decline in emissions. Development of a transportation net carbon emissions per unit of energy system based only partly on automobiles, compared with gasoline, and possibly even with low-CO2 fuels (relative to gasoline an increase (Delucchi 1997). This is because and diesel fuels) and high access of people of the fuels used to harvest and process the to each other and goods to markets with ethanol, release so much carbon. In each relatively low distances involved is the country full fuel cycle analysis must be "ideal system", but such a system does not applied to truly see the GHG implications exist today. of alternative fuels. * Restraint in GHG emissions means active policies designed to increase the size of the GHG Reduction wedge between growth in GDP and growth in emissions. In some IEA countries this Three inportant concepts are associated with could mean a decline in the absolute (or per the general goal of GHG emissions reduction. capita) level of emissions. In developing countries this in practice means increasing Abatement means quasi-permanent the gap between economic growth absolute reduction, particularly in the short (measured by GDP) and emissions growth. or long term. Abatement might occur if In EITs, restraint could well mean falling there is a rapid switch in fuel to one with emissions and rising economic activity as lower emissions per unit of energy, rapid the least efficient power plants, factories, enough to outweigh overall increases in the and most CO2 intensive fuels (coal and size of the economic system or the output lignite) are simply abandoned. or activity for which that fuel us used, xii Environment Department Papers Trends in Energy Use and CO2 Emissions The following sections present a brief global and the Middle East. Indeed, in the OECD, overview, followed by detailed analysis of emissions from energy-related sources other trends in IEA countries. Similarities between than transport in the early 1990s were barely IEA countries'transport sectors and those of higher, or even lower, than they had been in high income DCs suggest many of the forces 1973. Normalized per unit of GDP, emissions in that affect transport trends in lEA countries are every major IEA country for all sectors but important for DCs. These trends reveal many transportation fell significantly. In other words, important variables and forces that must be all sectors of the economies of IEA countries understood, if transport policy and Bank action is to affect the future of transportation and Figure I. Share of C02 Emissions (Mt C02), resulting GHG emissions in non-IEA countries. 1980 and 1994 The section concludes with a description of the 1980 ASIF methodology, which is a useful analytical Afi 2% amn Ameri 3% framework for analyzing past changes in / Gu. 2% emissions and essential for confronting Non-OEC Europe 5% possibilities for the future. In this section, we principally refer to Carbon ------ r.USSR 13% Dioxide (CO2) as the major gas listed under the oEcM s7 - definition of Greenhouse Gases (GHG). Asi, euingdf Chlna 5% Global trends in energy use and CO2 emissions Figure 1 reviews important trends in carbon emissions. While the OECD countries still account for the vast majority of world CO2 1994 2 AIHea ~3% Lannmei 4 emissions, the developing countries are MkdI Ef. 4% responsible for most of the growth. Figure 1 Non-OEM Eum 3% shows share of emissions both in 1980 and 1994. Figure 2 shows the relative changesAr between 1980 and 1994. Clearly emissions in DCs are growing. Transportation itself is a OEM 1% major source of energy-related emissions, As ecdinZ Cina 10% growing in most regions more rapidly than emissions on average (Figure 3). The most notable exceptions to this pattern are China Ching 13% Climate Change Series 1 Transportation and CO2 Emissions: Flexing the Link - A Path for the World Bank Figure 2. Relative changes in CO2 emissions in 1980 and 1994 1980-100 3W0 200f 100,~- -- -- Africa Latin Middle Non-OECD Former Asia China OECD America East Europe USSR excl. China Figure 3. Growth in CO2 emissions in transport sector and total economy from 1980 to 1994 Increase rate 1980-1994 140% 120% 100% so% 60%- 1Transport Sector 4o% IH Total Non-OECD Former Europe USSR 0%I Asia Africa Latin Middle excl. China OECD -m% America East China -40% -60% except transportation have become less energy Figure 4. However, relative to real gross intensive over the past 25 years. domestic product (GDP, converted to a common currency using purchasing power On a per capita basis, GHG emissions, as parity), emissions in DCs tend to be higher, in represented by CO2, are far lower in the non- cross section, than in developed countries OECD than in the OECD world, as shown in (Figure 5). Clearly, if OECD countries begin to 2 Environment Department Papers Trends in Energy Use and CO2 Emissions Figure 4. CO2 per capita, 1994 12 10 El Rest of Economy C *Transport 2X 4 X N .. 2 0L 00 restrain their emissions, while developing emissions from the DCs will overtake those countries-whose economies are growing more from the OECD within a fairly short time rapidly than those of the OECD--do not, total period. Politically, however, GHG mitigation in Figure 5. CO2 emissions per unit of GDP and GDP, 1994 0.9 * Transportation Sector a Chnn g Others Sectors of the Economy 0.8 X Asia Excuding China 0.7 a Foner USSR 0.6 & 0. 3OEC 0.4 0 8 Aftlea 0.3 0.2 o 0.2 Middle East * OECD Asia exdudig China 0.1 U Non-OECD Europe * AMca Middle Eas W Latn America chrormer USSR Latin Aniedca 0 Non-OECD Europe 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 Per Capita GDP (90 PPP US$) Climate Change Series Transportation and CO.Emissions: Flexing the Link -A Path for the World Bank DCs has a negative connotation today because relationship between per capita GDP and per it is perceived as a denial of the basic right to capita CO2 emissions from transportation for growth in human services and economic various world regions. Unlike those from activities. The key to changing this perception stationary uses of fuel, emissions from is both to link GHG mitigation to policy transportation grew strongly, pausing in all but initiatives in other sectors with goals that are a few countries only briefly after each of the perceived to be of far greater immediate two oil shocks of the 1970s. This coupling is in relevance than GHG mitigation, and to try to part a reflection of the constancy of emissions uncouple, or at least "flex,"the heretofore rigid per unit of energy for transportation, which is link between economic growth and GHG almost entirely based on oil products with little emissions, as IEA countries have done outside variation in CO emitted per unit of energy their transportation sectors. The transportation contained. 2 sector provides many opportunities for the former, and many challenges for the latter. Figure 5 showed emissions from transport and Table 1. summarizes key trends in populaon, from other sectors in cross section. What is economic activity (real GDP), primary energy striking from these two figures is how the use, and CO2 emissions. The latter two are emissions per unit of real GDP fall as income based on submissions to the IEA by member increases for non-transport sectors, but seem to countries and other authorities, with emissions remain constant for transport. We shall refer from energy tabulated according to IPCC constantly to this apparent constant or practice. inflexible link. The challenges from the transport sector are The goal of CO2 mitigation, of course, is to"flex" hinted at in Figure 6, which shows the this link. To do that, however, we have to Box 1 Considering CO2 reduction as a collective good CO2 emissions reduction has the characteristics of a"collective good"- that is, the benefits are transnational and are non-excludable (that is, they accrue to everyone, even to those not restraining emissions). The problem of"free- riding,"therefore, is integrally bound up in the CO2 emissions reduction problematique. With most of the present industrial-age carbon emitted by the wealthy countries, the rest of the world does not feel an obligation to moderate this burden. Ironically, the consequence, in terms of climate change, might hurt the agriculturally oriented develop- ing economies of the South more than the industrial economies of the North. Determining how emissions can be reduced or restrained in all economies through techniques and policies that are low in cost to the growing economies is a necessary component of any CO2 reduction strategy. In doing so, however, developing economies may find that through the larger process of economic reform and growth, their economies become far less energy-intensive (in terms of energy use per unit of activity) than today. Similarly, through struc- tural reforms in particularly energy-intensive sectors, such as electricity, industry, and transport, these economies might reduce energy- and carbon-intensity. In short, they may find unique development paths that lead to overall less energy- and carbon-intensive development patterns, at a given level of real income, than is (or was) the case for the older economies of the North, which developed when carbon emissions were not a concern.1 Ironically, gradual but large success in restraining carbon emissions in northern countries could lead to somewhat lower prices for fossil fuels than otherwise because of the restraint in world-wide demand growth that would follow. All else equal, this would stimulate demand for the same fuels in DCs. At the same time, improvements in energy efficiency forged by the North as part of its restraint strategy would be available to the South for free. While we do not argue here that lack of world agreements on a global strategy to restrain emissions means actions must halt, it must be acknowledged that the picture of participation is complicated. 4 Environment Department Papers Trends in Energy Use and CO, Emissions Table 1. Key trends in population, economic activity and CO2 emissions, 1971 and 1994, except China: 1980 and 1994 J5 90 PPP Mt of kg CO2 per Unit of Year Millions US$ Mtoe CO2 kg CO2 pe r capita GDP (90 PPP US$) Total ITransport Total Transport Africa 1971 370 1560 76 251 677 157 0.43 0.10 1994 694 1526 221 684 984 164 0.65 0.1 I Latin America 1971 235 5043 143 391 1,665 511 0.33 0.10 1994 379 6917 308 770 2,029 710 0.29 0.10 Middle East 1971 67 4370 54 147 2,195 377 0.50 0.09 1994 151 3548 297 823 5,435 1,136 1.53 0.32 Non-OECD 1971 89 4762 178 606 6,785 737 1.43 0.15 Europe 1994 103 5128 202 638 6,168 510 1.20 0.10 Former USSR 1971 245 4891 768 2,433 9,909 1,065 2.03 0.22 1994 294 3373 936 2,488 8,450 545 2.51 0.16 Asia ex China 1971 1095 977 171I 551 503 105 0.52 0.11I 1994 1772 2181 709 2,050 1,1/56 216 0.53 0.10 China 1980 981 1755 413 1,481 1,510 84 0.86 0.05 1994 1 190 3247 791 2,835 2,380 122 0.73 0.04 OECD 1971 813 10644 3,249 9,116 II,2H1 2,245 1.05 0.21 1994 992 16148 4,521 10,968 1|,046 3,036 0.68 0.19 Source: Interational Energy Agency, Energy Balances of Member Countries, Energy Balances of Non-Member Countries, and IEA Secretariat calculations. understand the apparent inflexibility. We do the predominant reasons for the decline in this by examining more closely some countries emissions, relative to GDP, were lower energy of the IEA, for which data allow finer analysis. intensities, that is, the amount of energy used per unit of activity. In the IEA, these lower Trends in carbon emissions from energy intensities were particularly apparent for use in IEA countries2 manufacturing (branch by branch,0 wer energy input to either material or per-sub-sector GDP), Schipper and others (1997) reviewed trends in space heating in homes and other buildings emissions from energy end-uses in nearly a (energy per square meter of space-heated), dozen IEA countries. The analysis indicates that electric appliances, and for some countries, the Cimate Change Series 05 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank Figure 6. Per capita GDP and per capita, CO2 emissions from transportation, 1971-1995 Per capita C02 Emissions from Transport sector (kg C02) 6- --Africa Latin America 5 - - Middle East Non-OECD Europe -"-Former USSR 4!- Asia Excluding China -+- China -UAustralia + NZ -"Japan 3 - -0- US + canada --OECD Europe 2- 1 __ 0- 0 5000 10000 15000 20000 25000 Per capita GDP C90 PPP US$) freight sector (energy per ton-kilometer of occupant), and the travel sector (more cars per goods moved). Only in the United States and person, and more car usage relative to other Canada did energy intensities for travel--- modes). energy per passenger kilometer-fall significantly. Overall, the intensity declines in IEA countries were quantitatively more important than the Structural changes within sectors-that is, structure changes when all sectors are taken changes in the underlying composition of together; consequently, emissions per unit of activity within the sector-also contributed to GDP fell. Changes in the mix of raw fuels used some reductions emissions in some sectors for to produce energy in IEA countries acted to certain countries; for example, changes within reduce CO2 emissions in some countries, the manufacturing sectors of West Germany, particularly where coal and oil yielaed to the United States, or Japan, or the overall natural gas. In other countries, however, where decline of manufacturing in the United coal-based electricity increased its share in final Kingdom, led to some restraint in GHG energy use, fuel mix changes actually increased emissions. However, structural changes equally CO2 emissions. In the electricity sector itself, enhanced emissions in some sectors in many increased use of hydro, nuclear, natural gas, and countries, notably the residential and buildings renewables in a few cases, and overall sectors (more space and more appliances per improvements in generation efficiency reduced 6 Environment Department Papers Trends in Energy Use and CO2 Emissions the emissions associated with a kWh of uses more in the non-IEA countries. The one electricity used in every economy. common element of increase is transport. Figure 7 taken from a recent IEA book Within the IEA countries studied, carbon (Indicators of Energy Use and Efficiency), emissions per capita between 1973 and 1994/5 shows the 1973 and 1994 profiles by end-use of for both travel and freight rose as a share of per capita carbon emissions in five IEA total emissions everywhere, and in absolute countries, each related to GDP. The reduction in terms everywhere except the United States and the carbon intensity of most parts of the Canada. The primary driver of this growth in relative and absolute emissions level was a economy is clear. Equally clear is the lack of growth in the overall level of travel and freight large reduction from transportation. The activity in each country in turn driven by higher transportation share of emissions in most incomes. This coupling between transportation developing regions increased over this period, activity and income is not necessarily one to and the decline in the ratio of emissions to one, but the momentum of growth is strong. In GDP was smaller than in the IEA countries addition, the mix of modes shifted towards cars depicted in Figure 7. This differential was (or household light trucks) and air for travel largely because energy intensities outside of the and to trucks for freight. All else equal, this shift IEA countries fell less than in the IEA countries also raised energy use and emissions because and because structural changes boosted energy the aforementioned modes require more energy Figure 7. Total carbon emissions per capita by major end use 5.5 5.0 .Other Industry 1Other Manufacturing 5 Other Freight GRaw Materials Manufacturing MTruck Freight OServices 4.0 - Other Travel 0 Other Household End Uses 3.5 . Air Travel E Household Space Heat MAutomobile Travel . 3.0 CL p2.5 2.0 1.5 ' 1.0 0.5 i Cn Si 7o 0 Un CD a, M, -, a, a; 0) a,M a T .4 T. - T -,;1 3 2! 2 f d L N e 2 2 4 Chimate Change Series 7 Tnsportation and CO2 Emissions: Flexing the Link -A Path for the World Bank Figure 8. Per capita GDP and per capita carbon emissions from travel sector in some IEA countries, 1970-1994 1200 + U.S. * x U.K. 1000 o France 4 * 4 * * *W.Germany A Denmark + Sweden AJapan * Netherlands W 600 75010000 0 15000~ 170 200 20 Per capita GDP ('90 US$) Figure 9. Per capita GDP and per capita carbon emissions from freight transport in some IEA countries, 1970-1994 500 +.U.S. 450 X U.K. * o France Freight 4 400 * W.Germany A Denmark * 350 + Sweden -- so ** - i 750 100 204M170 00 20 Per captaGDp0 n$ 3 e Nethedlands E m c 250 o 200 AA A A A A A * .S 50 0 7500 10000 12500 15000 17500 20000 22500 Per capita GDP (90 PPP US$) 8 Environment Department Papers Trends in Energy Use and CO, Emissions Figure 10. Breakdown of transport emissions per unit of GDP, 1973 and 1993/94 o100.0 Q Other Freight a 90.0 ETruck Freight 80.0 . -0 Other Travel r- 70.0 60.0IIIAirTravel IL 60.0- a o 50.0 DAutomobile Travel a 40.0 C ~,30.0. 20.0 *10.0. W 0.0 LU Wi LULU w0 ~ W (and release more carbon) per passenger or The above analysis expresses in words a more ton-kilometer. Finally, while there were some detailed analysis conducted by Lawrence reductions in specific intensities in many Berkeley National Laboratory, using an index countries-for trucking and air travel in most decomposition of the multiplicative factors countries and for car travel only the United underlying changes in CO2 emissions from States and Canada-these intensity reductions both freight and travel. (Schipper, Steiner, Duerr, An, and Stroem 1992; Schipper and were too weak to reduce, and could therefore others 1996; Scholl, Schipper and Kiang 1996; only restrain, the emissions caused by activity Schipper, Scholl and Price 1997) This growth and structural shifts. When all these decomposition framework is useful not only for changes are counted, per capita emissions from analyzing past changes in emissions but also freight are higher in every country in the 1990s for confronting possibilities for the future.3 It than in the 1970s, and per capita emissions are forms the basis of our proposed analytical rising everywhere, as shown in Figures 8 and 9. methodology for the Bank and, for that reason, Table 2a. Changes in carbon emissions from travel, 1973-1995, Laspeyres Decomposition, 1990 Modal Structure, 1973 = 100 Countries US (95) Japan (95) Australia (95) W. Germ. (93) Sweden (95) Emissions 95/73 119 226 174 158 136 Activity effect 148 189 190 ISO 124 Structure effect 101 125 161 104 101 Intensity effect 78 97 93 100 110 Fuel mix effect 100 101 99 99 99 Climate Change Series 9 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank Table 2,b. Changes in carbon emissions from freight, 1973-1994, Laspeyres Decomposition, 1990 Modal Structure Countries US (95) Japan (95) Australia (95) W. Germ. (93) Sweden (95) Emissions 95/73 163 157 172 113 105 Activity effect 162 137 166 138 106 Structure effect 124 140 116 113 104 Intensity effect 89 85 61 88 95 Fuel mix effect 101 105 103 99 100 we explore it in some detail here. The principal emissions, multiplying an 89 percent increase components of overall transport-sector from travel alone. Since intensity and fuel mix emissions are taken to be Activity (in ton- or had almost no effect, the result was a huge passenger-kilometers), modal Structure (that is, increase in emissions (+126 percent!). As can share of ton- or passenger-kilometers occurring be seen, European Countries (represented by on each mode.), the modal energy Intensity of Sweden and W. Germany) behaved in an intermediate way, while Australia showed a eacmoenger-km)andher buedtoan io larger growth in total travel (on cars and air) passenger -kmn) and the Fuel-to-carbon ratio than Europe but a somewhat more important (7 (carbor released per unit of energy burned). percent) decline in emissions from lower We refer to this decompositional approach intensities. throughout this paper as the ASIF methodology. A more technical exposition is Freight patterns were different. All regions saw presented in Box 2. Tables 2a and 2b increased activity and shifts towards carbon- summarize the results for a number of IEA intensive trucking. With freight, however, many countries showed important declines in countries and country groupings for the years emissions frow itnstanges im 19731995(199 forEuroe).emissions from intensity changes (primarily 1973-1995 (1994 for Europe). trucking, which carries the greatest weight). All regions experienced greater emissions from fuel It is important to remember that the numbers shifting to diesel, because diesel holds more in this table represent indexed 1995 (or 1993) carbon per unit of energy released. values, relative to 1973 levels. For example, Americans experienced a 19 percent increase in The same framework can be used for emissions. Total travel increased emissions by comparing reference case with reform cases as 48 percent, and shifts towards cars and air set out in the Global Overlays Guidelines, travel multiplied this by an additional 1 percent. because the elements of ASIF that policy- Changes in modal intensities (cars and air makers want to affect are more or less the same. travel) lowered emissions 22 percent, while the A planner must decide which levels of each fuel mix changed emissions very little. The component are appropriate, either by running a base-year mode mix was 1990,4 by which time complex model, or by sheer judgement. By air and auto travel had nearly the same energy examining each of these components in turn, intensities,5 with bus not far behind. As a the policy analyst can help identify unwanted result, the shift from bus or rail to cars and air, consequences from a given policy strategy. He and from cars to air, had very little impact. In or she can also help identify more clearly what Japan, by contrast, the shifts towards autos and aspects of a given country's transport energy air had a 25 percent upward impact on system are not well enough understood. 10 Environment Department Papers Trends in Energy Use and CO2 Emissions Box 2 Decomposition of changes in CO2 emissions from travel or freight6 Consider that G = A * Si * * F.. (1) where G is the carbon emissions from the particular transport sector, A is total travel or freight activity (in passen- ger- or ton-kilometers), S is a vector of the modal shares, and I is the modal energy intensity of each mode i.The last term, F represents the sum of each of the fuels j in mode i, using standard IPCC coefficients to convert fuel (or electricity) used into carbon emissions. Each of these terms responds-at different rates-to different underlying forces (incomes, prices, policies, new technologies, and so forth). The modal energy intensity term itself is composed of several components: I = El. * C * U. (2) where E. is the technical efficiency of mode i (the energy consumed per vehicle kilometer),7 G is the vector of vehicle characteristics for mode i, and Uj is the inverse of capacity utilization for each mode i. Ei * C, is the energy use per vehicle-km and is called vehicle fuel intensity. Technical efficiency is the energy required to propel a vehicle of a given set of characteristics a given distance, and is affected by the motor, drive train, frictional terms (including drag), and so forth. For cars, characteristics could be represented by vehicle power (or gross weight), and technical efficiency by energy use/km/unit of power (or gross weight). Capacity utilization would be measured by people/vehicle, tons per vehicle, or as a dimensionless ratio of actual load (in people or tons) to potential load for every km a vehicle moves. All three of these components share in determining how much energy is used to transport a person or one ton one kilometer by each mode. Fuel choice affects efficiency because some fuels, particularly diesel, are burnt more effi- ciently in their respective engines than others. Thus some terms in this decomposition that are nominally"techni- cal"-energy intensities-actually have important behavioral components. Since all components of intensity are affected by policies, technology, and behavior, all must be considered as elements of a future GHG restraint strategy. The components of emissions are not independent of each other. Total travel A depends on speed, so naturally a greater share of auto or air travel in S is associated with greater travel. Both A and some components of I (larger cars, lower load factors) increase with incomes, and, to the extent that increases in A also cause increased congestion, A can also directly affect I. Some fuels are associated principally with certain modes-for example, buses use almost exclusively diesel fuels now, as do almost all heavy trucks-so there is strong interaction between S and I. Finally, I and F determine the marginal fuel costs of using vehicles. To the extent I falls or F shifts towards lower-cost fuels, transportation variable costs could fall and transport demand could increase. In practice, it may not always be possible to quantify these interactions, but it is important to be aware of them. The relationships illustrated by Equations 1 and 2 can be used to study changes in energy use or emissions over time, and the results expressed as indices marking the changes in each component. Numerous indexing techniques are available, including Laspeyres or Adapted Weighted Divisia (AWD). (See Greene and Fan 1992 or Greening, Davis, Schipper, and Khrushch 1997 for more discussion.) Endnotes certainly aided their development. Energy prices are not necessarily a brake on 1. Note, however, that the northern economies economic growth. "developed"when energy was far more 2. Together with LBNL, the IEA has now studied expensive-in terms of real, internalized the transportation patterns, fuel use, and CO2 costs-than it is today. Before the first oil emissions from fourteen member countries: crisis, real fuel and electricity prices had fallen US, Japan, Canada, New Zealand, and for the entire period since World War II, which Australia in the Asia Pacific region; Denmark, Climate Change Series 11 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank Finland, France, W. Germany, Italy, the National Research Council, US NAS, Netherlands, Norway, Sweden, and the Washington DC (Feb. 27/28 1997). United Kingdom in Europe. 4. That is, the modal shares as of 1990 were used 3. Index decomposition is a useful technique for to project emissions both in 1973 and 1990. studying the influence of underlying 5. These energy intensities, however, are based multiplicative factors on a variable of policy on observed passenger occupancies. The interest. Indeed, a recent US National potential energy intensities of the two modes Academy of Sciences Workshop considered are still quite different. the same methodology applied to population, 6. This summary is taken from Schipper and water use, and other important quantitative others (1997). measures of resource use or pollution: "Workshop on the Decomposition of 7. More specifically, it is the utilization-weighted Complex Issues in Sustainable Development" average of the technical efficiencies of the Board on Sustainable Development, US different types of vehicles used in mode i. 12 Environment Department Papers Challenges Facing GHG 2 Restraint in Transportation Driving factors transportation context. This means that these choices-today's slowly-evolving transportation This section examines attempts and causes for patterns-may be difficult to stop simply historical restraints of transport use, primarily because of CO2 concerns. Natural limits in IEA countries. Efforts to restrain transport (saturation of distance or time of travel, fuel use per se were weak and largely limited to potential saturation of the distance physical the effects of higher oil prices (or economic goods are sent around) or local constraints stagnation) brought on by the oil crises. (congestion, parking problems, local pollution) Empirical evidence suggests that with GDP may slow or reverse some of these trends. rising, the only way to achieve a decline in CO2 Nevertheless, most national transport plans still emissions is a combination of transportation foresee increases in personal and goods policy reforms in the near term, technological transportation with GDP without policy changes in the longer term, and consumer/ intervention. shipper responses to both forces. What is required is a more integrated transport/ It is significant that emissions from freight, in pollution & GHG reduction strategy that contrast to those from travel, show restraint attacks a broad front of transportation from lower energy intensities in roughly half of externalities. the countries studied. We speculate that this Changes in the amount people (and goods) may be because structural effects on freight demand are more intense and also because travel are the dominant cause of rising emissions. Technical factors (vehicle and modal freight services, unlike private transport energy intensities) led to some restraint of consumption, respond to business needs and emissions in a few cases for cars and trucks but competition. Although the importance of fuel only gave net reduction in per capita emissions costs to total freight costs, or to the total costs (for travel) in two major countries. Behavior and of products delivered is small, there is dearly system optimization factors (that is, modal always room for saving fuel at the margin, choices and utilization), as well as increases in subject to the constraints imposed by costs for activity coupled to GDP, boosted overall equipment, labor, and maintenance. emissions. The same is true for air travel, which showed These developments are intimately related to uniform and deep reductions (50-60 percent) in the nature of transportation-comfort, fuel use or emissions per passenger-km in all convenience, speed. Distance as well as modal countries from both improved technology and choice is related to individual and societal higher load factors. In this case, however, fuel choices about housin& work and leisure accounted for as much as 20 percent of location. The same is true for freight. And the operating costs and even in 1997 remains a choices noted here are deeply-rooted in a source of cost pressure to airlines. Thus the Climate Change Series 13 Transportation and CO, Emissions: Flexing the Link -A Fath for the World Bank distinction between enterprises and private use capita incomes associated with at least 200 cars/ may be important for explaining differences in capita in IEA countries. Indeed, Figure 11 also the evolution of fuel intensities and CO2 depicts projections made by the IEA of car emissions from these different branches of ownership in China, India, and Indonesia, transportation. This has implications for assuming only continued economic growth at expected results of policies in developing slightly below recent rates but a ratio of car countries: fuel taxes and other instruments ownership to GDP that rises to the present applied to the transport sector will have ratio for South Korea. different impacts according to the sector. Whatever the actual number, we expect these he analysis shown in Annex 1 applies only to basic factors driving transportation activity to some IBA countries. For developing countries, grow, with the corresponding increase in GHG motorization is much lower. Of course, DC emissions. Indeed, in some Economies In inCOMes are lower. As Figure 11 shows, Transition, car ownership picked up even however, car ownership in a variety of during the years of economic decline, as developing countries (and EIT countries) g y appears to be following in the path defined by illustrated by Poland (Meyers and others 1994) apear and Estonia (Martinot and others 1995). This t at of the TEA countries depicted in Figure 8 masw uta es suea h usd see also Dargay and Gately 1997). Indeed, the means we must at least assume at the outside logarithmic scale in Figure 11 compresses that transportation emissions represented an entirely the gap in car ownership at a given even stronger force for growth outside of the income between the United States and Japan or IEA than they do in the IEA. But is this bleak Denmark. This emphasizes the important outlook inevitable? Will the trends suggested by possibilities for growth in the population of cars Figure 11 be broken? We review the possibilities in the developing world by more than an order in the context of development, transportation of magnitude over the next thirty years, during reform, and Bank strategies in the remainder of which many of these countries will achieve per this paper. Figure II. Car ownership and GDP Cars J'$ 1000 GDP 1990 JSD PPP -+- Indonesia 10.001 0p India IN-X-- China -K~- Korea Mexico Denmark U.S. 1.00-- Japan 10c9 1980 2000 2005 2010 1UWGermany 4 Environment Department Papers Challenges Facing GHG Restraint in Transportation Facing carbon emissions from transport port sector should be set in the context of devel- opments in the transport sector, and emissions The couplings between emissions from travel or possibilities both linked to wider transport re- freight and GDP illustrated by Figures 8 and 9 formi(slchis chane i g ans fe are daunting. In IEA countries, fuel prices have fr sc scagsi euain,fe n pricing, emissions standards, and so forth) as well proven to have limited impact on the strength as to emissions specific strategies related tofu- of this correlation. For the freight sector, part of els,fuel efficiency, vehicle type, and vehicle use. the reason for this limited impact is undoubtedly due to the relatively low amount CO2 policy in transport, therefore, must be of input-in monetary terms--of freight energy flexible, broad-based, and synergy-seeking. into the overall costs of production. For the travel sector, changes in urban form and Other important lessons can be drawn from distributions of populations in metropolitan IEA experience. First, carbon emissions areas are also an important contributor to the themselves have no natural limiting feedback inflexibility of this link. In short, fuel prices may mechanisms as long as the prices for fuels or need to rise significantly higher than the costs per km of using fuels remain roughly populations and governments have a tolerance constant. By contrast, other changes in for in order for prices alone to begin to transport conditions or prices-safety, influence CO2 emissions. Consequently, a CO2 congestion, tolls, parking costs, vehicle policy that is oriented to the transport sector acquisition, yearly registration, or use costs, and will need to focus on transportation policy so forth-represent potentially important reforms in the short-run, technological changes sources of feedback on the volume of in the medium term, industrial and urban transportation or to authorities who control planning measures in the long-term, and policies and technologies. consumers'and producers'responses to all of these. Pricing, where politically feasible, should Second, and suggested somewhat by the above be used to support these other efforts. considerations, stand-alone transportation strategies which seek to reduce CO2 are The findings of Pearce and others (1996) probably less politically and socially feasible support such a broad-based CO2 strategy, based than those which can be coupled with other on finding linkages with other policy objectives transport policy goals, such as congestion or in the transport sector: noise reduction, or local air quality improvement. Local authorities, for example, CO2 and fuel use represent a small influence on might be more successful enacting policies overall transport patterns, except during the fuel encouraging shifts to public transport as part of crisis years 1973-1985, when the fuel intensi- a congestion-reduction, rather than a C02- ties of vehicles fell and concerns over fuel prices reduction, package. CO2 reduction as a strategy affected vehicle use and transport planning a needs to find synergies with other, more locally well. Some of that decline in vehicle intensities pressing, policy needs. persisted into the early 1990s, but emissions are rising because transport activity is rising. Since Synergies, such as the modal shift example another key transport trend, modal mix, acted above, frequently exist in the transport sector, almost universally to raise emissions this means but they do not always. Some policies designed that the main technological ways of reducing to improve local air quality, for example, may emissions, by changing fuels or making vehicles increase greenhouse gas emissions from cars. less fuel intensive, have to be accentuated in strat- Oxidation catalysts, for example, reduce the egies that focus closely on carbon per se. Other amount of carbon monoxide and volatile strategies aimed at GHG reduction in the trans- organic compounds released into the Climate Change Series 15 Tansportation and CO, Em-issions: Flexing the Lik -A Path for the World Bank atmosphere, but at the cost of increased 1."Ox, introducing new fuel systems that are which is both itself a greenhouse gas and a intrinsically lower in carbon (Sperling 1994; carbon dioxide precursor. Three-way catalysts, IPCC 1996; IEA 1997b; NAS 1997; Peake 1997). which also remove NOx, do so at the cost of That few of these have come to market may be reduced engine efficiency, resulting in ark a function of the lack of economic demand (that increase in CO 2 emissions per vehicle kilometer. is, low fuel prices) and the lack of time to see Some policies may also backfire on themselves, developments from the 1990s come to fruition. For example, a policy to improve local air Recent announcements by Peugeot of their quality (and reduce CO 2 emissions) by allowing entry into the electric scooter market, traffic to move at free-flow speeds-through, acquisition by Daimler Benz of an important say, traffic management schemes or event interest in Ballard, which makes fuel cells, and roadway capacity enhancement-may induce other developments are serious reason to more traffic (Downs 1993) than might believe technologies may be there soon. And otherwise have occurred. The CO 2 and local the seriousness of some European country pollutant emissions from the increased overall transport reform packages now on the market activitY including the newly induced traffic may (Feake and Schipper [IEA 1997a]) suggests that be more significant than the intensity in some countries, transport pricing and reductions caused by the new free-flow traffic regulatory reform may be acceptable to a wide conditions. enough spectrum of governments to permit them to truly stimulate technological The third lesson from the IEA experience is that development. There is a very real possibility the apparent rigidity of many of the curves that policy, behavior, technology, and possibly shown in the preceding section contains both a even lifestyles could change in ways that truly warning and several points of optimism, de-couple growth in emissions from growth in particularly for countries with presently low incomes for a long enough period to allow truly levels of motorization. The warning is, as has low-CO 2 vehicles and fuels to be developed. On been rioted above, that the demand for this more optimistic note, therefore, we turn to transportation services grows strongly with elements of a CO2 reduction policy agenda in incomes, particularly in high-income countries. general, and specific actions for the World Bank. This is because transportation is a derived demand; it is derived from the demand for Previous oil-saving and transport accessilbility to goods and services (Gorhaim pollution control programs 1996). This demand for goods and services itself Until 1973, the only concern limiting use of oil grows with income, and the nature of the in developing countries was paying for imports. accessilbility -undergoes a structural shift, as After the price of imports skyrocketed and populations relocate from relatively dense, supplies were thought to be insecure, worries urban centers to outlying areas (ECWvI 11998b). about oil use multiplied, but few developing countries took concerted action to restrain The potential points for optimism stem from imports. Important exceptions were Brazil, with the fac:t that the observed periods of high fuel its alcohol program, and Korea and Taiwan, prices and national concern over fuel saving which tried to develop integrated energy were rather short and hardly allowed analysts policies with an eye to reducing dependence on to test either policies or technologies. There imported oil. Korea and Taiwan in particular may indeed be many options for significant took measures to limit urban air pollution from GHG restraint still available. Certainly, the cars and even promote somewhat more literature is replete with possibilities for b:oth efficient vehicles, but these were exceptions in greatly, improving fuel efficiencies and the developing world. By the 1990s, many of 16 Envirornent Department Papers Challenges Facing GHG Restraint in Transportation these concerns faded and fuel prices for some without other compensating measures, products were often below market levels. Not unpriced congestion reduction amounts to an surprisingly, vehicle ownership (as represented increase in roadway capacity, which Downs by figure 11 for cars) and transportation oil use (1993) shows will lead to an overall increase in increased with economic activity. traffic using the facility, all else equal. In short, the overall coupling between transport control Urban air problems increased with greater use pollution programs has been weak or negative. of motor vehicles, however. The World Bank has been involved in the study and promulgation of Only recently have analysts begun to tie some air pollution control programs. These pollution control and CO2 together. In many include promotion of the use of unleaded fuels cases, there are small but important synergies and stricter air pollution controls in cities like between CO reduction and air pollution Mexico City (Eskeland 1994). None of these control strategies that either lead to reduced programs had as its main purpose improvement traffic or lead to improved operating efficiency of fuel economy of vehicles, reduction of fuel of vehicles (although the danger pointed out in use, or restraint of CO2 emissions. In fact, the the previous section that these two strategies first generation of controls on U.S. cars may work at countervailing efforts should be probably led to a slight increase in fuel borne in mind). Eskeland and Devarajan (1996) consumption per km, although that effect argue that if a pollution control strategy uses disappeared as technology improved. Most both pricing/taxation and regulations, a balance transport pollution control measures are only could be obtained that both reduces use of weakly linked to GHG reduction technologies vehicles and cleans them up, leading to lower or strategies because they do not reduce fuel total GHG emissions than if only a clean-up is use explicitly through either technology or ordered but no taxes or other fees are applied pricing and only tend to reduce vehicle use to raise the cost of using"unclean"vehicles. slightly. Indeed, Eskeland shows how the policy Pollution control per se can in a few cases raise in Mexico City "Hoy no circulan" prohibiting GHG emissions. For example, switching to use of a given car on one day (depending on Liquefied Petroleum Gas (LPG) vehicles, which the last digit of the license number) led to consume more fuel per km than gasoline or acquisition of extra vehicles and increased diesel vehicles; or switching to Compressed gasoline use (Eskeland and Feyzioglu 1995). Natural Gas vehicles, the fuel delivery system Ironically, it is possible that some transport for which is susceptible to methane leaks, control measures aimed at reducing congestion probably raises slightly GHG emissions, all else also increase total traffic by their success. being equal. The extent to which such increases Keeping vehicles from penetrating the town are tolerated depends on the primary policy center as a congestion control strategy might goal, and the nature of the alternatives. A small cause some vehicles to take longer routes to increase in GHG may be a reasonable price to their destinations, for example. Similarly, pay for a big increase in local air quality. Climate Change Series 17 Approach -Tools and Methods: 3 How We Hook Solutions to Problems This section introduces ways of quantifying Of particular importance are past and transport flows, energy use, and resulting anticipated future rates of change of each of emissions to identify solutions. It also discusses these components. Analysts should think about briefly the policy landscape. Ways of actually the speed with which each of these reducing carbon emissions-so-called"best components change, and the kinds of policies practices"-need tools for evaluation. Finally an likely to influence that rate of change. This is economic framework is needed to begin to particularly important in developing countries, evaluate costs and benefits and, more where growth in the vehicle stock is far more important, to estimate the changes in transport important than turnover as a source of new trends that new policies and technologies might vehicles entering the vehicle stock. bring about. A varies at a rate determined largely by income, Flexing the link-Analytical approaches but during periods of rapid acquisition of cars to transport trends (for example, W. Germany in the 1960s), A can The analytical approach discussed here involves grow faster than incomes, propelled principally understanding how equations 1 and 2 from the by car ownership. In many eastern European end of chapter 1 (see Box 2) apply to the countries during this decade, in fact, car country or region of interest. Analysts should ownership expanded rapidly, even while incomes stagnated or even declined. During try to understand how activity (A), structure (S), intensity (I) and fuel choice (F) have varied periods of rapid motorization, S also naturally m the past, how they are changing at present, shifts rapidly towards cars but can shift by what the likely influences of incomes, prices, several percentage points back to collective technologies, and policies (transport, industrial, transport during periods of higher fuel prices, planning and other policies) affect those doubts about fuel availability, or other changes, and how these components are likely constraining factors. The French press, for to change in the future. These are the example, reported about 20 percent more riders ingredients in scenarios that will be used in the on Paris commuter lines on 1 October 1997, Global Overlays methodology. when a pollution alert led the government to put into effect an odd/even restriction on Small changes in all of these over present driving in Paris. values could multiply to give a large overall change in emissions. More specifically, shifts in The various components of I can cha.nge at S, combined with a significant decline in I and different ways. The stock of cars takes nearly 20 shifts in F towards less carbon-intensive fuels, years to be completely replaced, while that for combined with restraint in the likely growth in heavy trucks and buses can take longer, and A, could hold carbon emissions down to little aircraft last typically more then 30 years. Safety or even no growth. or emissions regulations can accelerate stock Climate Change Series 19 Transportation and CO, Emissions: Flexing the Link -A Path for the World Bank tumover by making it expensive, difficult, or be"correct"in an environmental economics illegal to use highly polluting, unsafe, or older framework. But it is very important to see if this vehicles that generally have higher fuel is the case. If there are large subsidies, do these consumption per kilometer than newer ones. essentially promote travel and a kind of sprawl Sudden fuel-price shocks also can speed this (Budapest system)? If automobile use is turnover. Changes in transport infrastructure underpriced, either because fuel taxes or other also affect I both in terms of how well facilities revenue do not really cover road building and are maintained (physical deterioration of road maintenance costs, or because there are and rail surfaces are generally associated with a significant externalities ignored, financing of loss of vehicle fuel efficiency) and in terms of other modes may be a losing cause unless the the growth in traffic competing to use given client government agrees to deal directly with facilities at particular levels of infrastructure automobile use. deployment. For aircraft acquisition, where fuel costs play a large role in choices, this effect is Geographical distribution of transport activity strong and even feeds back on producers to has an important impact on travel and freight. improve their technologies. With few How much of A and S occurs in cities, suburbs, exceptions, F cannot change more rapidly than or between cities? How much traffic is between the stock of cars can change. cities or otherwise distant locations because of the intrinsic location of certain resources? This A and S are affected by incomes, by the will affect valuation of different kinds of material content of the economy and distances externalities as well as the kinds of solutions goods travel between primary material that can be imposed or grown from technology. gathering (or importing), assembly, wholesale Danish and Swedish studies try to estimate and retail sites, and ultimate markets. Personal some of the externalities split this way. If most travel depends in part on distances between of the activity and resulting emissions arise work, home, leisure, and services. All of these near or in cities, then transport policy distances depend on the spatial distribution of approaches may have a big impact on CO. If each kind of destination, which in turn is most CO2 is emitted in intercity traffic, where influenced by the speed and cost of congestion, pollution, and noise are arguably transportation as well as land, and structures. less significant, then there is less pressure to Put simply, in low income societies with little impose changes for these problems that would motorized travel and unsophisticated freight also reduce CO2 in many modes. The only systems, or societies where congestion or other exception is where roads are badly damaged or factors makes movement of people or goods there are other externalities proportional to expensive or slow, things are close together or road-use that require attention. Here imposing individual radii of action (and market sizes) are road-user fees could have an important effect small. Where travel is cheap or rapid, markets on traffic cover much wider areas, and so do people. All of these dimensions are expanded by higher incomes. Vehicle fuel intensities (E*C are a question of both technology and vehicle characteristics, The World Bank promotes increases in A by such as weight, engine size, horsepower, vehicle financing urban transport systems, roads, rail loading capacity, and so forth. In most systems, ports, and airports. This even includes countries, new (and sometimes existing) bikeways (Lima, Peru Transport Rehabilitation). vehicles are taxed according to these To the extent that the facilities and modes are characteristics in ways that indirectly affect fuel priced correctly, modal mix and total travel will consumption. In the United States itself, fuel 20 Environment Department Papers Approach-Tools and Methods: How We Hook Solutions to Problems consumption is affected by the Corporate energy intensive bulbs and tubes while Average Fuel Efficiency Standards, by which the eliminating the more energy intensive ones U.S. Government assesses a fine to an from the market. Thus the Bank has to play an individual car manufacturer by the amount its active role in helping client countries face models' sales-weighted test fuel consumption international suppliers of vehicles and other sold in a given year rises above a certain value equipment, suppliers with interests other than (currently about 28 MPG or 8.3 1/100 km). The GHG emissions reduction. Danish government has just imposed a yearly "green owner fee"on all cars in the stock U, the capacity utilization term, converts vehicle purchased after mid 1997.9 Neither the US nor intensities to modal intensities. It has come Danish approach specifies technologies or under scrutiny as an important policy element. affect car characteristics directly, but because In the United States, many cities and regions smaller (that is, lighter, less powerful) cars tend have reserved some lanes of traffic during rush to use less fuel, these kinds of policies hours for vehicles with two or three occupants inevitably have some effect on car characteris- (or more). Alternately, such lanes are reserved tics and not simply on technological efficiency for buses, which increases effective capacity of a alone. While most of the pre-CAFE particular lane to move people. Some countries characteristics of the U.S. fleet (except fuel use have introduced off-peak rail fares to boost per km) have returned by the 1990s because of capacity, and some cities (Washington DC) have technological improvements made by U.S. and peak and off-peak pricing on metros as well. foreign car producers, it is not clear how Similarly, load factors (both the total load that Denmark (or modest developing countries with can be carried and the actual utilization factor) neither car producers nor large car markets) will for trucking and rail have a great impact on the fare unless consumers begin to buy less modal intensity of these freight modes, much powerful cars. greater than the efficiencies of the vehicles themselves within a given country. Better The Bank has begun to deal with vehicle capacity utilization reduces vehicle movement intensities by assisting regions purchase new, for a given amount of people or goods moved, cleaner and more energy efficient buses reduces pollution, and generally improves (Budapest Urban Transport). But as more and carrier costs. Therefore, this component of more of the transport activity and resulting emissions reduction should be scrutinized emissions are associated with private cars and carefully. trucks (or mini-buses), the Bank has to find ways of influencing the fuel intensities of these A key to better capacity utilization is in part not modes. Better maintenance and better traffic to overbuild or over-extend the system. control will have a small effect, but the real Between 1970 and 1994 the average CO2 improvements are up to both vehicle suppliers intensity of travel on a city bus in the United and buyers. The Bank could influence the States almost doubled, largely because market by working with government entities government aid flowed to cities to put more contemplating fleet purchases (this includes buses on the streets, while little was done to buses, locomotives, trucks, and aircraft). More discourage private car use. At the same time, appropriate might be assistance with continued growth of distant suburbs raised the governments to negotiate with providers of physical dependence of families on cars for vehicles to the private sector, much in the way day-to-day life, even if rapid rail helped that the International Institute for Energy establish the viability of the suburbs Conservation worked with lighting suppliers in themselves. In financing large transport Bangkok to get them to agree to supply less systems, the Bank should be sure that the Glimate Change Series 21 Transportation and CO2 Enissions: Flexing the Link --A Path for the World Bank project will be run efficiently and effectively representatives, and feedback from local and once the infrastructure and vehicles are in international interest organizations might put place. Working with urban planners to the Bank in a central position. One step in encourage that new housing is coordinated breaking or flexing the transport CO2-GDP with existing or new transit lines is another key link, then is to consider the divergence of to success here. Even a good bus or rail system interests that represent the main stakeholders will lose riders to cars if housing and jobs are in transportation. not where the buses go. While planners cannot force location on housing or jobs, poor Vehicle producers have been the principal planning can isolate a potentially good target of policies aimed at saving fuel and transport system from key destinations and reducing local/regional pollutants like CO, leave the system-both public and private NOx, in the past (or particulate matter (PM) transport-with low vehicle occupancy. For today), and reducing CO2 tomorrow. Indeed, freight, it is important to ask whether regulatory their incentives to make"clean"vehicles arises policies discourage filling up vehicles or largely from regulation or markets induced by returning home with a load. regulation or pricing. Fuel producers, principally the multi-national oil companies, F, the carbon content of a given fuel, has not have been drawn into the policy debate varied much in the past. The Brazilian ethanol principally to provoke improvements in program is one example of a relatively low CO2 gasoline and diesel fuels (Peake 1997), but in source of renewable fuels, but it is not clear some cases in opposition to various moves to whether that can be repeated elsewhere with stimulate non-petroleum fuels, such as biomass real costs comparable to the wholesale costs of or electricity as well. gasoline or diesel. However, the Bank could carefully consider whether local conditions, Vehicle producers most active in the DCs today, costs, labor markets, and so forth, might make a and oil companies supplying most of the world truly renewable fuel profitable in a giver region crude oil and products, are based in IEA or country. In any assessment of alternative countries, with few exceptions. Thus fuels, it is crucial to undertake a full fuel cycle technologies and ideas tend to flow from the analysis of both the GHG emissions from developed world to the DCs. While retailing combustion as well as those in the preparation and in some cases refining is often controlled of fuels to be sure that an alternative is truly by state oil companies in DCs, the multi- low in overall emissions (Sperling and Deluchi nationals still have a dominant role in 1993; Deluchi, private communication of results production, sales, and, most important underway, 1997). technological developments in both vehicles and fuels. Both industries are keenly aware of Flexing the link - Approaches to the the burgeoning markets represented by DCs policy challenge (and EI7s), and aware of the gaps in vehicle The Bank may find that, in developing a loan or technology, fuel quality, road quality, and so assisting with policy, it is in a position to bring forth between North and South. Because of various actors together to define common their central importance to both vehicles and interests. It might serve as an impartial umpire fuels around the world, both industries must be of sorts to help all sides weigh the advantages considered as partners in any attempt to change or disadvantages of technologies and policies the path of GHG emissions by altering trends vis-a-vis GHG emissions. Interactions with in vehicle ownership, vehicle use, fuel efficiency, vehicle and fuel providers, closer relations with or fuels themselves.Yet until recently World vehicle and system users and their Bank activities relied principally on outside 22 Environment Department Papers Approach-Tools and Methods: How We Hook Solutions to Problems consultants for expertise on vehicle and fuel Europe, Japan and a few Asian countries, 1990s issues, and had little direct interaction with the in some countries in Eastern Europe and main suppliers to study these actors' roles in the elsewhere), they have begun to regulate the present situation. The Bank could take a more vehicles beyond safety concerns, or the quality active role at this stage. of fuels such as lead content. National governments act as intermediaries between In particular countries where the Bank is active, vehicle or fuel producers and transportation local producers are also important (particularly system users or household consumers. Local Brazil, India, and China.) Many of these governments usually administer collective industries operate in protected environments, transport systems, while other authorities run contemporary holdovers of import-substitution ports, airports (and control air traffic), and so development strategies. In many cases forth. National governments are the ones most (particularly for India and China) they represent closely associated with Bank activities, but important national symbols of economic increasingly transport policy must be carried development-an indigenous automobile out by local governments, and Bank activity has industry is a sign both of self-reliance and a tended to focus on local problems related to certain level of economic development. The transport system expansion (such as metros or Bank should use its unique position vis-a-vis buses) and more recently vehicle emissions (for these countries, and their automotive example, Mexico City). To the extent that GHG industries, to insure that they are as much problems are global and emissions arise included in global discussions of technological everywhere, they require at least modest carbon advances which may bring down vehicle carbon taxes on fuels. These have to be brokered with intensities as their OECD counterparts. national governments, most likely as means of Vehicle importers are important players in raising general revenue. many non-producer countries. National Individual and business consumer interests. fleetwide strategies must be devised with active These are the people who use the vehicles on input from importers, since many operate under the infrastructure, otherwise known as a the same commercial pressures and need to "commons."Their interests are diverse, but their anticipate and respond to demand as vehicle enormous number is what gives transport its manufacturers in vehicle producing countries. unique character vis-a-vis environmental Finally, the role of the informal sector in vehicle problems. By contrast, GHG emissions from the supply in many DCs and EITs must be energy sector can be pinned down to a acknowledged. These represent a potential relatively small number of well-identified weak link in any GHG reduction strategy which power plants, refineries, coal beds, and so forth. may be devised, since the vehicles the informal In countries where there is significant voter sector provides to a country's vehicle stock are power, public interests are constrained by what outside of official mechanisms for control. The authorities can impose on the public. What may extent of informal sector participation depends seem to be an economically"correct"policy may on macro-economic factors out of the scope of be difficult to impose because of social/ this paper. distributional constraints, as the Bank and others have learned by examining the stories Public and government actors. Public actors behind ending subsidies for energy and other are involved in the definition and design of basic commodities. public transport infrastructure in all countries, and in many, are also responsible for delivering Special interests. Lobbies or political groups it. They are also involved relatively recently composed of configurations of the above (1960s/70s for the United States, 1980s for groups appear regularly to favor or fight various Gimate Change Series 23 Transportation and CO2 Emissions: Flexing the Link - A Path for the World Bank policies: Raising diesel prices even in "global"because they incorporate into Bank environmentally conscious countries of Europe procedures an accounting for a benefit of a encounters the trucking and shipping lobby; project that accrues to the entire world, and not raising fuel taxes in the United States just a particular client country. As we will show encounters the consumer and highway-users briefly, the ASIF methodology presented above lobbies; imposing carbon taxes has run into the provides a useful framework for carrying out energy industry lobbies in IEA countries; the bottom-up analysis that is part of the developing European Union goals for Global Overlay tool. automobile fuel economy improvements has encountered a long series of difficulties with Connection to Bank practices automobile interests; plans for roads or How much influence can the World Bank have? infrastructure are always being proposed by Under present policies, the answer is little. To regions and private interests that would benefit some extent present projects probably make greatly from such development. Each of these existing transportation systems work with groups has its point to make, often with slightly lower CO2 intensity, but this effect is justification. No GHG strategy can ignore them, m howeer orrct te sepspropsedsee onmore than offset by the gains in total activity however correct the steps proposed seem on that Bank projects provide. Those gains often, paper. but not always, represent real welfare improvements. To increase its influence, The goal of Bank actions should be to help however, the Bank must actively seek out true cement the above line up of interests, to reserves of"negacarbon," that is, low carbon encourage better investments, better fuels, very efficient vehicles, and patterns of technology, better policies, and more settlement and activity participation that lead to enlightened approaches as undertaken by each lower movement-but higher welfare-per unit of the interests named above. Working directly of GDP Unfortunately, there is little the Bank with stakeholders in the client country, as well as the international commercial interests that c ote inlte ay ofinesmets ue both technologies and policies match the supply the meat of the transport system, is an problems at hand. important new role the Bank could play. Relationship to Bank policy and All of these policy initiatives presume we have found the"economically efficient"allocation of operations resources, the"best practice" solutions. Have Role of global overlays we? Have we overlooked expanding what is economically efficient through stepped up local The recently initiated Global Overlays Program R&D, by reducing true market barriers or is designed to add an extra dimension to Bank failures, or by finding how Bank actions can Economic and Sector Work (ESW) and the influence policy and markets by smoothing Country Assistance Strategy (CAS), and thus some of the political difficulties a country or ultimately to Bank lending policies. Global region faces? This is a particular challenge to Overlays represent"a new analytical tool for the Bank project leaders: use conservative integrating greenhouse gas (GHG) externalities technologies and existing relationships, or push into the Bank's economic and sector work." for development of both new technologies and (World Bank 1997,"Guidelines for Climate underlying market relationships. Change Global Overlays,"Environment Department Paper no. 47), thus allowing the For achieving the goal of GHG reduction, we task manager to estimate the GHG reduction need ways of measuring and valuing both benefits from proposed activities. They are externalities (not just from C02) and the real 24 Environment Department Papers Approach-Tools and Methods: How We Hook Solutions to Problems costs of options. In order to develop best peak-load tariffs designed to discourage use practices we need a much better view of how at beginnings and ends of long weekends or technology can change, how people can key holiday periods. Furthermore, the Dutch change, how vehicle markets work, and so Minister of Transport has announced inter- forth. To see how people can change, we need city road pricing to be implemented shortly to know about elasticities and preferences, after the turn of the century, because even the technology costs, R/D expectations, and so intercity roads in that country are congested forth, to see where a small bit of influence at peak hours. Compared with France, the through policy formulation or lending could traffic volumes are higher but distances have a big influence on technology uptake and shorter. The French system probably spreads behavior. traffic rather than discouraging it. 9. This fee rises with a car's original test fuel use, Endnotes replacing the previous weight-related yearly tax. Gradually the steepness of this rise could increase, encouraging car buyers to seek ever 8. There is still a case for congestion pricing in less fuel intensive cars. intercity traffic. The Autoroutes in France offer Glimate Change Series 25 Tools for Flexing the 4 Link - Better Practices Because there are such great differences in speed, externalities. Indeed, one element of flexibility, and comfort between modes of transpor- "sustainable transport" may well be that system tation, no mode can be classified as "best"simply users pay their full social costs without leaving because it may lead to lower GHG emissions. This any to future users. This is implicit in one of the section suggests a range of "better" policy goals, goals of "Sustainable Transport," prepared by policy tools, technologies, and analytical approaches the Bank in 1996. to dealing with transportation problems and GHG emissions. These can be used to understand options In the Bank study, sustainability as the basis of in both the objective technical sense, as well as in transport policy is defined as follows: the sense of consumer or firm preferences as set out Economic sustainability ("efficient above. In this sense, "better"means more economi- cally efficient when externalities, including CO2, are responet s") valued.Environmental sustainability (promoting valued. more livable settlements and reducing Better policies adverse external effects * Social sustainability (reducing poverty). "Best" policies may be hard to define and measure, because of the many objective There are difficult trade-offs among these three functions to be considered, including"welfare." goals, but synergies as well. Certainly better Nevertheless, it is generally agreed that proper public transit, less air pollution and noise, pricing of the use of the transport reduced risks of accidents (particularly where infrastructure, the pricing of externalities, the vehicles hit walkers), and better provision of. matching of variable and fixed taxes to the non-motorized transport opportunities or clean appropriate direct costs and externalities two- and three-wheeled transport advances all represent the elements of overarching"best" of these goals. transport policies. Land-use planning and other elements of However, many have begun to question this physical coordination that influence assumption. The goal of public sector transport infrastructure belong to "better" overarching policy was traditionally to provide for the policies, even though effective coordination is demand for mobility by making infrastructure often difficult to bring off in practice (OECD/ available, while the role of the vehicle industries ECMT 1995). Land-use planning to reduce the is to sell vehicles at a profit. But it is recognized overall need to travel, while maintaining access that providing these tools of transport without to goods, services, and activities is essential, but a framework that offers feedback to users when it is difficult to show at a global level the affects problems arise seems to lead to growth in of such planning policies on travel or freight activity beyond all forecasts, with the associated movements, to a great degree because there are Climate Change Series 27 Transportation and CO.Emissions: Flexing the Link -A Path for the World Bank so many confounding factors. Land-use policy, Improvements in technology are not only however, is probably an important long-term reserved for motorized vehicles. For urban influence on the price-elasticity of demand for freight movements, improvements to both car-use, and as such, cannot and should not be traffic management and pavement technologies ignored (ECMT 1998b). and management can make non-motorized movements in urban centers more viable. For Better practices: Technologies shipping, high technology" clipper" ships (that is, high-tech sailboats) have also been revived Broadly,"better' technology practices can be as a potentially viable non-motorized divided into those that affect vehicles (C:*E) technology (Hansen 1996), as have the concept and those that affect fuels (F). Annex 2 of dirigibles for long-distance air shipping of discusses some of the alternatives for each. The bulky goods. More efficient designs of metros, literature shows that there are enormous buses, and rail cars (particularly engines) could potential reductions in the fuel intensity of a reduce energy use per unit of distance traveled given car (20-50 percent) or aircraft (20-40 for these vehicles as well. Technological percent) (Greene 1996; IPCC 1996). The precise advances in motive delivery (how power is amount of savings depends on the starting converted to motion) can also be applied to point, the price of fuel, the time frame for non-motorized land-modes, potentially developing the larger savings potentials, and increasing their relative attractiveness as an the timing of the entry of such technologies on alternative to the car or truck. the market. The potential may be lower for larger than smaller trucks because the former There are many uncertainties that affect the real are already relatively efficient, but there isstl estimates of how much GHG reduction a muc toreay beavey ( eent) utparticular transport technology really offers. Finally, there are rapid changes occurring both These potential savings are not simply to technologies themselves, and to the two dominant markets for vehicles, namely those theorndhetia l; auttivey coan cess y for cars and trucks. These changes alone favor around the world are actively and successfully lagrndmepo rflcs,nthoe invovedin te dvelpmen ofthelarger and more powerful cars, on the one involved in the development of the hand, but smaller trucks that carry less freight technles tAtnex ma brin cothueaut,s oper unit of fuel on the other. Both changes raise discussed in Annex 2. The cost uncertainties of the energy use per unit of transportation such development, however, are equally real, as services (I) even as technology (E) leads to is the eventual acceptance in the marketplace. reduced fuel use. The key dilemma for any Many companies are finding that those project team is how to make an honest techncologies that help consumers get features evaluation of not only todays options, but they want (which is not necessarily fuel tomorrow's as well. Folding into this efficiency for its own sake)-such as turbo-direct uncertainty the rapid expansion in total activity injection diesel in Japan-are easier and quicker (A) and in many cases the shifts away from (and, for the car companies, less controversial) to collective modes (S)-so often the focus of bring to market than those which focus Bank Projects-makes it even harder to specifically or exclusively on energy efficiency. evaluate the benefits of technological options. Car manufacturers may publicly state a desire to advance technology in the service of fuel Given these uncertainties, the Bank should play efficiency, or reducing carbon intensity, but in a stronger role in the evaluation of private, they are worried about costs and market technological measures and options for acceptance, as business people should be. transport. This can happen directly, by building 28 Environment Department Papers Tools for Flexing the Link - Better Practices in-house capability for its own analysis or Bank (World Bank 1996) itself have been indirectly, by supporting development of testing increasingly aware of the need to address the facilities, research and development, and behavioral choices of system users in various supporting exchanges and transfers of ways, instead of relying heavily on technologies, in client countries. In addition, infrastructure policy. Car technologies are a the Bank could play a strong role in identifying significant part of these behavioral choices. barriers to technology adoption, including technical (fuel quality, road quality), An important issue, therefore, is how the Bank institutional (trade barriers, monopolies), should approach its technology policy. Should it political, or market failures within a client push particular alternatives or kinds of country. vehicles? Or should it focus on generalized research and development? Should it focus on Alternative fuels present a similar dilemma. As local technologies-that is, those that can be Sperling and Delucchi (1993) show, there is a produced locally and optimized to local wide range in the estimated variable or life conditions-or should it focus on those which cycle costs of different fuels. This variation reflect best practices internationally? presents a critical problem for the Bank; the true costs and benefits of alternative fuels in the In"better"practice terms, technology holds out real world are not well known. Experience with some promising technologies to reduce low-cost diesel, LPG or subsidized farm emissions. Nevertheless, at present, there are ethanol mixes shows that low prices are an no miracle cures just over the horizon, no important component in bringing new fuels to technologies that promise to radically reduce the marketplace. Whether such low costs can GHG emissions. Dramatic action may be and should be sustained in the long-run is needed, and the Bank may be in a key position unknown. There are no real examples of a long- to support the search for truly low-carbon term effort to promote alternative fuels, save alternatives to present vehicles and fuels in perhaps the sugar-ethanol program of Brazil, client countries and across national and which has played to mixed reviews. Even where corporate boundaries. alternative fuels are significant, it is often difficult to measure the real change in the Better tools for carrying out fleetwide carbon component of fuel. Much integrated policies more experience with alternative fuels is A full review of policy tools for transportation needed, and the Bank could support reform is beyond the scope of this paper (see experiments in a variety of countries. Barde and Button 1990; CEC 1995a). However, several important policy tools might effectively The foregoing discussion highlights an influence near and medium-term emissions, important consideration for the Bank's overall both by influencing the specific carbon- approach to transport policy, a consideration intensity of vehicles, and by influencing the which should allow the Bank itself, in addition extent to which these vehicles are used. to its client countries, to undertake"better" practices. Individual transport system users Fuel taxation is one such policy. In the near matter, both in terms of how they use the term, higher fuel prices probably have a system, and in terms of the vehicles they negligible effect on car or truck use (A, S, or U) choose. Until recently, much of the Bank's and perhaps an even smaller effect on the use transport strategy has focused on infrastructure, of other modes of travel or freight, because of that is, the physical facilities for movement. the relatively low own- and cross-price Outside observers (IIEC 1996) as well as the elasticity (Oum and others 1995) That this Climate Change Series 29 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank effect is"negligible," of course, is an aggregate threatening, and the risk of recession relatively result; location, income, family situation, life small, introducing a fuel tax might not only cycle stage, and other influences can affect make sound environmental sense, but might individual or localized short-term responses to also be good economic policy.12 Whether fuel higher fuel taxes. (Greening and others 1997). taxes slow the economy in the medium and In the medium term, however, higher fuel long-term is the subject of some debate; to a prices do encourage car buyers to choose cars large degree, the ability of an economy to thrive with better fuel economy than they otherwise in a period of high energy prices depends on would have (such as reducing I). They may do the ability of its actors to access goods, services, this either by trading off that fuel-economy and participate in activities. This, in turn, against other features, or by demanding depends on the economy's ability to deliver technological improvements from suppliers such access in a less energy-intensive manner. which allow them to enjoy the same set of car characteristics at lower specific consumption Taxing motor fuels because of health costs has a levels. Manufacturers, for their part, will potentially large impact on driving costs. Small respond to such consumer demand, if they and Kazimi (1995) indicate that health costs of believe fuel prices will remain high enough for air pollution arising from the use of gasoline by long enough to make it worth their while. automobiles in the Los Angeles region could be Higher fuel prices may also discourage as high as 2 cents/km (3 cents/mile) or 60 cents/ additional individual driving in the longer term, gallon at a fleet average of 20 miles/gallon (11.8 by stimulating demand for structural changes 1/100 km). That rate is close to the wholesale (for example, lifestyle or urban planning price of gasoline (untaxed) in many countries. decisions) which are less car-intensive.10 Such health costs would fall as new technology cleans the fleet in the region even more because Many governments are reluctant to consider tax the reduction in pollution would outweigh measures to raise the price of fuel for any but modest growth in traffic over the coming revenue purposes. The reasons are threefold. decade or more. (At the same time the costs First, it is often difficult to understand how car would rise if traffic increased because smog use changes with changes in prices. Energy concentrations and frequencies would rise.) A prices have almost unceasingly fallen over the recent internal report of Experts assembled by past thirty years (while car and truck ownership ECMT gives similar figures for Europe: the and use has expanded), and the relatively brief marginal costs to health of an additional unit of periods of energy price increases have been too fuel emitted are currently large in many short to be able to glean long-term consumer locations (ECMT 1998a). and producer reactions from the experience. Second, political resistance is nearly ubiquitous. Health costs are perhaps the most dramatic The magnitudes of fuel price changes required because they affect so many people beyond to give big changes in car use in the short run those who drive. World Bank reviews indicate are simply too large to be acceptable in most very high health costs from diesel and gasoline countries." Third, many countries are worried fuels arising in cities such as Mexico City, about the macro-economic effects of such a tax, Santiago, and elsewhere. These may be reduced particularly the fear that it would slow GDP through new technology as well, but the growth. Indeed, part of the justification for a prospects of further traffic increases in cities Danish gasoline tax in 1995, was specifically to such as Beijing suggest that the health costs of slow the economy and keep it from air pollution from motor vehicles will remain overheating. Thus, consideration of the timing high. It is likely that these two would yield high of a fuel tax is important. Where inflation is taxes per km of travel. In all cases, the tax on 30 Environment Department Papers Tools for Flexing the Link - Better Practices the fuel could have a rather significant effect on Carbon taxes, however small, could play a the use of vehicles. Indeed a recent Bank potentially important role here, affecting in document questions where such taxes should some way every component of ASIF. In theory, be imposed when alternatives are not available. a carbon tax is the most economically efficient Yet there may be a chicken and egg problem: policy mechanism for reducing CO2 emissions, without the tax, drivers have no incentive to since it specifically internalizes the external switch to cleaner fuels and refiners have no "bad"which is the policy goal; in practice, like incentive to make cleaner fuels. Regulation fuel taxes, the amount of the carbon tax could clean up the fuels and vehicles too necessary to change behavior significantly may (through retrofit, as in Mexico City). But a well be at politically unacceptable levels. A significant welfare loss remains if unimproved realistic carbon tax, therefore, likely would be vehicles continue to be driven at fuel prices that smaller even than the present total tax burdens do not reflect the damage imposed. Thus a on fuel. Nevertheless, they might be quite combination of regulation and taxes is required effective at providing differential price signals to achieve an efficient solution (Eskeland and for different kinds of fuel, as experience in Devarajan 1996). Europe with diesel and unleaded fuel pricing has shown. And taxes on all fossil fuels play an Fuel taxation is one method of"variabilizing" important role in making carbon transparent in the costs of driving, which is considered an any comparison of alternative fuels. By placing important step in effectively internalizing the the equivalent tax on all fossil fuels, external costs due to transport (ECMT 1998a). governments can assure themselves that the A second method involves charges for use alternative fuel is not cheaper because there is a ,such as road or parking pricing. carbon subsidy hidden in the fossil fuels used tfacilities to prepare the alternative. Carbon taxes on all chaoessbe osum sonslydie ro m e fossil fuels, therefore, are an essential element charges are substantially different from fuel o n aktbsdatraiefe taey chares,sinc chngig veicls orvehcleof any market-based alternative fuel strategy. charges, since changing vehicles or vehicle technology does not affect consumption of the Vehicle ownership taxation has long been an taxed good. Road pricing is often associated with congestion pricing, that is, choosing locales ire th characteristics o the vehicle fleet, characteristics which in turn affect to price and setting rates with the specific fuel consumption. As reviewed by Schipper and policy goal of reducing congestion. In principle, Eriksson (1995) or the OECD (OECD 1995), road pricing could apply per kilometer charges to these instruments tax engine size, power, or car road use, either through periodic toll facilities, weight, parameters that affect both consumer or through electronic pricing methods; in choice and ultimately producer supply. Vehicle practice, though, it is more often enacted via a taxation can apply at both acquisition and cordon around a pay-to-enter zone, such as a registration, the latter being a recurring tax on central business district. To the extent that road the owner every year. Acquisition taxes have pricing is enacted as a congestion mitigation been used by some governments to control or policy-that is, to alleviate congestion in restrain rates of motorization. Such a use is particular areas-it might have the perverse tricky and dangerous, since it might have the effect of actually inducing more travel, as drivers perverse effect of retarding fleet turnover; car take longer routes to avoid the toll cordon. In owners are reluctant to replace their aging countries where value-of-time is lower vehicles with newer ones because of the tax (generally speaking, those with lower levels of burden they may have to bear. The result is an GDP per capita), this avoidance behavior is older (and usually dirtier and less fuel-efficient) probably more important than elsewhere. car fleet overall. Climate Change Series 31 Transportation and CO2 Emissions: Flexing the Link --A Path for the World Bank Registration charges, however, are a potentially 1970s, there may not have been much effective way of influencing the vehicle leet alternative. The relative importance of CAFE vs. mix, through differential pricing of different the higher prices of fuel from 1979-1985 will cars'registration fees depending on their green always be a subject of debate. One of the more characteristics. Many policy analysts, however, controversial aspects of the standards is that are beginning to recognize the need to those for vans and light trucks are less stringent variabilize as many of the costs associated with that those for cars; as a result, buyers tending cars as possible-that is, taxing use, not toward large cars, who are less demanding of ownership--(Eskeland and Devarajan 1996, fuel-efficiency as a characteristic, have tended ECMT 1998a). The reason is that up-front to switch to vehicles in the van and light household (and firm) capital costs become a category (for example, sport utility vehicles). justification for use of the vehicle. ("I spent so This shift has caused the real average new car much money for the car, I might as well use it.") vehicle fuel economy to rise only very slowly So while registration charges are potentially during the 1990s. Nevertheless, CAFE had a effective, it may make more sense to transfer fundamental effect on car manufacturers, these fees to a pay-as-you-drive basis. pushing them forward into deploying fuel saving technology, rather than riding out the Finally, there is the possibility of regulaling short period of higher prices by simply selling new car fuel economy (C*E). Soft regulations smaller cars. Whether measured per household, or voluntary agreements (VAs), that is, non- per capita, per car, per kilometer, or per dollar binding targets agreed to by manufacturers or of income, the average American household importers and governments, were put in place owning a car used less automobile fuel in 1994 in the mid 1970s in Sweden, Germany, and than in 1973. Japan. These were recently offered by the German car industry (a 20 percent fuel intensity Which of the above policies might be reduction, per press release in 1995),Volvo (a 25 appropriate for developing countries? The percent fuel intensity reduction, per press answer is all and none. Imposing higher car release 1996), the French carmakers (a target of usage charges fuel prices, differentiated fuel 125 grams of COlkm [Peake 1997]), and Fiat taxes or carbon taxes, may be politically difficult (Press release 1997). What is not clear is today. Imposing high purchase taxes seems to whether the VAs represent real efforts by be more politically acceptable, although, as manufacturers or just validation of what they noted this solution does not match the tax to already believe they can do. Not surprisingly, the externality, places a greater share of car German producers and Volvo both say quietly costs in the fixed, rather than variable, category, that they need support through fuel taxes to and may tend to discourage fleet turnover. make sure consumers do not simply demnand Room to maneuver even on this relatively acceptable policy, however, may be limited by larger cars. the presence of a indigenous car industry. In In the United States, new car fuel economy has Europe, no car-producing countries impose nr heavy vehicle purchase taxes, although some been regulated, on a fleet-wide average, sincewihasmlonyaagtodti. 1975, under the Corporate Average Fuel Economy program. Debate has raged in the Interaction of policies and components United States ever since, both as to whether they are a good idea, and as to whether they have been effective. Given the unwillingness of The policies noted above affect different the U.S. Congress either to decontrol the price components of ASIF. The following tables of crude oil or to impose new fuel taxes in the summarize some of the more important 32 Environment Department Papers Tools for Flexing the Link - Better Practices interactions between policies and the reductions in the components of the carbon- components of emissions. One important step intensity of travel or freight could offer for Bank planners it to trace through this matrix anywhere from 20 percent to 80 percent lower to see where a project itself and the policies emissions per unit of activity, consistent with associated with that project are likely to affect what Johansson and Schipper (1997) found for the components of ASIF. car use in IEA countries. Not surprisingly, local authorities should be more interested in these Recall for example that the largest cuts in strategies because of their lasting effects, and emissions in time are likely to arise from a because, with technological progress, they combination of very high efficiency vehicles and could face far less political resistance than low-CO2 fuels, complemented by increases in packages emphasizing only higher costs of fuel prices. But increased fees related to using vehicles. distance driven (in part to compensate for distance-related externalities) might reduce From this table we could imagine that during a total vehicle use from 10 to 30 percent. These 20-year period in which per capita income reductions in vehicle use would eventually be doubled, we would expect a more than offset by increased numbers of vehicles and doubling of car ownership in a typical their use in most low-income countries, while developing country. Fuel use and emissions Table 3a. Interaction matrix: Which policies affect which components of travel related emissions? I (Veh. intensity, Component/ characteristics, option A (Activity) S (Modal share) load factor) F (Fuel mix) Vehicle Fuel Economy None except through Slightly encourage All Affected by fuel (e.g. Technology rebound modes with lower diesel has lower fuel running costs intensity) Alternative Vehicle Decrease for car Shifts from other Reduce fuel Depends on fuel: Technology (2, 3 users, increase for the modes intensity of 2, 3 electricity has great wheelers) un-motorized wheelers potential Overall Fuel Taxation Slight restraint, Favors modes with Encourages Neutral elasticity low low fuel intensities improvement in all comps. Carbon Taxation Slight restraint' Favors low carbon Same as above Favors lower carbon modes fuels Km Pricing (including Significant restraint. Favors modes with Little effect Little effect unless congestion pricing, Depends on extent, small footprints per unless permits cleaner fuels exempt etc.) costs, time of day, etc. passenger (i.e., bus, small vehicles rail) selectively Alternative Fuels: Little effect unless Little unless "clean Little, unless Potentially large development, pricing price of fuel forced up fuel " modes given clean fuel more (subsidies, taxes on priority efficient dirty fuels) Transit Development Increases activity Encourages its own Could take Could be developed among low income, use if supported by some hi- to use nat. gas, distance for all policies occupancy car electricity Non-Motorized Increases among those Reduce other shares None None Transport Initiatives w low activity Land use Planning Supposedly would Could increase transit Little Little reduce total activity share Climate Change Series 33 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank Table 3b. (continued) The interaction matrix for travel: Estimating the potential for changes that might occur relative to A base case I (Veh. intensity, Component/ characteristics, option A (Activity) S (Modal share) load factor F (Fuel mix) Vehicle Fuel Economy -20-75% less Technology fuel/km compared with 81/10 km today Alternative Vehicle -30% from ngas Technology (2, 3 -90% from true wheelers) biomass Overall Fuel Taxation Price Elasticity of Small shift to lower- Elasticity of fuel mobility wrt fuel cost fuel intensive models economy wrt 0.1--0.3 fuel price +0.6- 0.8 Carbon Taxation same as fuel taxation Very slight shift to less Same as above Evidence from carbon intensive diesel/gasoline modes? differences suggests potentially large effects would probably rise accordingly, perhaps even except where local conditions create a strong more rapidly if the average car became more demand for a certain fuel (pollution) or certain powerful. Imagine, however, that the real price vehicle (say, a very small vehicle because of of fuel also doubled during this 20-year period. congestion or parking problems.) We could estimate that this resulted in approximately 40 percent less fuel consumed/ The table suggests that there are significant km and 20 percent fewer km driven (leaving groups who would be opposed to fiscal or fuel costs/capita roughly constant, a falling regulatory measures. Vehicle manufacturers are share of household budgets for car fuel but a not opposed to improved fuel economy per se, rising share for vehicles). Suppose furthermore but, because of fears about market acceptance, that natural gas was introduced as the major are reluctant to commit themselves or their fuel and by the end of 20 years dominated the products to significant improvements. The overall vehicle fleet. Overall GHG emissions challenge for the Bank planner is to anticipate from the system could be lower in spite of the political opposition, economic difficulties, and doubling of transport activity by car in this case. other unforeseen problems and incorporate Transport measures might reduce activity them into sensitivity analysis to gauge the real growth even more. But is this a case costs of any development. For developing representing higher socio-economic welfare? countries, an additional political issue arises if a We cannot say because we cannot estimate the policy encourages use of a technology or real costs of these options nor the often-hidden product that must be imported. Conversely, the costs of implementing them. fact that some vehicle technologies are poor or old and outmoded in some countries may have A complementary approach can be taken to more to do with trade and industrial policies match actors or stakeholders and policies, than with any problems of local technical Table 5 suggests these matches with a matrix. A competence. India, where older models of key point is that vehicle and fuel-based British and Japanese cars were produced for strategies tend to be national and international, many years, even decades, comes to mind 34 Environment Department Papers T cis for .4exing the Link - Better Practices Table 4. Interaction matrix: Which policies affect which corponents of freight emissions? - ('Veb. notensity, Component/ characteristics, option A (Activity) S (Modal share) !ad factor) F (Fuel mix) Vehicle Fuel Little Slightly encourage Reduces fuel Affected by fuel Economy modes with lower use. (e.g. diesel has Technology running costs, but lower fuel intensity) so far shifts to trucking show weak effect Overall Fuel Slight restraint, Favors modes with Encourages Neutral Taxation elasticity low low fuel intensities rnprovernents in ail compsr Carbon Taxation Slight restraint' Favors low carbon Same as above Favors lower modes carbon fuels Km Pricing Significant restraint. Favors modes with Enco rages Little effect unless (including Depends on extent, small footprints per better vehicle cleaner fuels req'd congestion pricing, costs, time of day, unit of goods, i.e., oading, for city use etc.) etc. Affects delivery larger trucks, or rail utilization Alternative Fuels: Little effect unless Little unless "clean LiLle, rless Potentially large development, price of fuel forced fuel " modes giver desan fuq! more (subsidies, taxes on pricing up priority eficient dirty fuels) Information and Increases mobility More intermodalism Scheduling, Combine with Logistic among low income, favoring modes in higher load natural gas, electric, Development and distance for all their respective best factors, fewer fuel cell facilities to improved handling function backhauls, encourage alt fuels? Changing market Lower distances Could increase rail Uttle except Little structures, land use goods need to move share if more m provernents production located fr'om ess near rail _ongestion immediately, as do the former Soviet bloc to begin to take credits for projects that affect countries. local environment. The Global Overlays approach suggests how to take credit for GHG Expanding the knowledge base-Better reduction as well. In this section we will talk analytical tools about some of the difficulties inherent in Once transport and environmental policy goals quantifying and valuing the latter. are identified, technology and behavioral responses laid out, and both project and policy options discussed, the analyst must somehow Traditionally. changes in fuel use have been make cost/benefit estimates of one kind or estimated using econometric techniques that another. Previous Bank documents show how examine past behavior of the system. Price and Climate Change Series 35 Transportation and COz Emissions: Flexing the Link -A Path for the World Bank Table 5. Interaction matrix: Who cares about each policy? Actor/ National/local Stakeholders option government Vehicle makers Consumers and lobbies Vehicle Fuel Local: No influence Hold the Choose Mainly Car industry Economy except through technologies vehicles and opposing procurement. Nat how to drive regulations to influence through them. encourage or fuel prices, mandate. Less standards, taxes opposition to taxation Fuel Taxation Set by national or Mixed position; Oppose! Opposed in past by state governments accept if alternative many groups to regulation, but often defend status quo, especially through their industry associations. Registration, yearly, Set by national or Oppose when Oppose Opposed: by or Special Fees local governments aimed at new principal transport vehicles industries (e.g., airlines opposed landing fees, etc.) Km Pricing Local and national Few have thought Would oppose Probably opposed, (including favor for different through what unless particularly by congestion pricing, reasons significantly lower congestion truckers and other etc.) utilization/year benefits clear transport would mean for professionals sales and planning! Alternative Fuels: R&D, testing, Mixed reaction. Suspicious Lobbies for fuels development, pricing, introduction Could favor unless price develop quickly pricing into market differential Transit Crucial for planning, Some taking Urban All sides of issue Development financing, running (?) proactive stand interested; (Volvo) suburban not Land use Planning Local Gov. No view Take both Usually real-estate implements, but can sides interest, property be based on national owners organize to laws oppose income elasticities derived from econometric welfare changes, therefore (net social cost or analysis of revealed behavior have been applied benefit) are in principle possible. In their to future scenarios, including ones assuming analysis of the Mexico City "Hoy no circulan" fuel price rises due to policy levers. Welfa re program, Eskeland and Feyzioglu (1995) show losses, quantification of cleaner air and benefits that often such a macro-analysis yields associated with it, and estimates of overall important results. But this may be the 36 Environment Department Papers Tools for Flexing the Link - Better Practices exception, not the rule. The macro tools are Moreover, it is important to try to understand important, indeed, but have their limits. how vehicle ownership, vehicle use, and fuel consumption each varies among different These limitations are caused by inadequate classes of consumers. Each class imposes knowledge of the macro parameters that different levels of other costs (air pollution, describe the demand for transport services and noise, road wear, safety, or congestion) on other fuel use, particularly in developing countries. drivers and on the environment. But obtaining Above all, one cannot separate the ASIF each group's likely responses requires the kind components and estimate how each might of survey work previously described. The approach of Greening and others (1997), which change. One can obtain overall fuel price observed changes in car use in the United elasticities from the relatively accurate data on States observed during a period of sudden high aggregate fuel sales, but such data tell us little prices (1990/1) through quarterly household about transport problems. McRae (1994) surveys, established how different family types computed gasoline demand elasticities for a experienced different short-term responses to number of developing countries, but higher fuel prices. Similar information must be overlooked the use of diesel in cars or the use gathered for operators of other modes, too. of gasoline in trucks and buses. Like Wheaton Otherwise, it is hard to anticipate the real (1982, see Schipper and others 1993), McRae short- and long-term reactions to imposition of did not measure the demand for transport new fuel or vehicle taxation schemes or other services and the consumption/km of different policies that significantly changes the costs of vehicles. The reality is that these approaches owning and using vehicles. Conversely it is represented the best that could be done at the difficult to quantify the total environmental time with the limited data. benefits of pricing strategies if some of the responses that may yield significantly fewer The problem is further aggravated because the km-traveled cannot be quantified. This is range of uncertainties one obtains for income particularly important for estimating how GHG and price elasticities of fuel use may be too abatement will affect traffic and how traffic for transport planning purposes. At one control strategies will affect fuel use and hence .reGHG emissions. The interaction of the two end of the uncertamnty range (high income end f te ucerainy rage hig inomestrategies may be as important as each strategy elasticities and low fuel price elasticities), there takeneeparatey (O 19 Eskeran and ie willbe argewelare osss asocited ithtaken separately (COWI 1996; Eskeland and Xie will be large welfare losses associated with 1998). Indeed, this may be the key to a imposing large taxes on fuels, and growth in the successful GHG reduction strategy for number of vehicles with income will soon erase transportation and a key step in the Global the effects. At the other end of this uncertainty Overlay analysis itself, tying non-GHG range, modest taxes could have an enormous measures to incidental GHG reductions. effect on fuel use, distance traveled, or even vehicle ownership. But no macro approach can The same problem of uncertainties plagues say whether substitution or fuel-saving estimation of macro responses from the freight possibilities exist unless they existed in the past system. In the IEA countries it appears that the and their effects were measured. Since part of GDP elasticities of domestic freight shipments the thrust of the present effort is to explore an vary from 0.8-1.2, and that the ratio of domestic area where few possibilities for GHG ton-km to GDP varies by a factor of three abatement were thought to exist in the past, by depending on geography, raw materials definition the macro approach to study the production and other factors. (Schipper, Scholl future is inappropriate. and Price 1997). These results are not Climate Change Series 37 Transportation and CO2Emissions: Flexing the Link -A Path for the World Bank inconsistent with those of Thompson, Frasier commence to measure even as policies that and Benson (World Bank 1994). But those affect how goods are moved are implemented. authors noted how poorly the parameters that describe freight are known in developing The demand for transport services is probably countries or even ElTs. more income elastic for in DCs and EITs than in upper income countries. Demand for fuel is Aggregate estimates for fuel price elasticities for elastic where substitutes exist (other modes, trucking are also fraught with difficulties more efficient technologies, or smaller vehicles). because of the problem of identifying trucking Over the longer run higher fuel prices mean fuel use (Schipper, Scholl, and Price 1997). The less fuel-intensive vehicles, and observed resulting elasticities appear to be small, as do behavior suggests that that response is more the elasticities of trucking fuel intensity with important that a decline in vehicle use or respect to fuel price. But estimating fuel mobility. That is, the long-run response to intensity elasticities with respect to prices for higher fuel prices results mostly in more fuel trucks is particularly tricky. Shifts in the mix of efficient (or smaller) cars and to a lesser extent trucks over time-in response to the needs of in reduced driving (johansson and Schipper changing production mechanism-have 1997). But how can we use these general boosted the importance of small trucks in many statements for building GHG abatement IEA countries. Consequently, even if capacity strategies? The answer is to expand the analysis utilization of a given size truck and relative to bottom-up techniques. levels among different truck types remain the same, average modal intensity will increase, all Using a bottom-up approach to measure else equal. Again, detailed surveys are required costs and benefits to see how trucking fuel use really varies under Using these general results to formulate a different conditions, and as a function of: fuel strategy requires us to complement the meager price changes. survey data and macro elasticities with best There is an interesting inverse correlation estimates of the impacts of technologies in Terweeisn inrestng fpiversed cing emissions, and the impacts of differences in between trucking fuel prices and trucking various prices on both vehicle use or mobility energy use/GDP (Schipper, Scholl and Price and fuel intensities as well. That is, one tries to 1997; Schipper [IEA] 1997). The geographically compare changes in emissions from changes in largest IEA countries have low trucking fuel each of the components noted above in the prices and, because of geography, natural ASIF formulation shown. Knowing something resource endowments, and natural economies about cross price elasticities and how they of scale for modal alternatives, relatively low affect modal shifts for travel is useful. Estimates shares of trucking in overall freight, but they of the marginal costs of changing technologies still have high trucking volumes/GDP because permit a rough sense of responses in the ideal the overall volume of freight is large. The long world. The Budapest bus loan proposed distances raise the relative importance of large, expenditures to provide more energy efficient, well-loaded trucks and thus lead to low values cleaner buses. Knowing how much the buses of fuel use/ton-km, too. Is this a reverse policy, are expected to run and how much less where large countries, such as Australia, pollution they will emit permits a quantification Canada, or the United States, simply kept road of air pollution reductions and energy saved. fuel taxes low? Even in IEA Countries, little is known about the rationale behind policy Even more useful is the approach of Eskeland formulation. For DCs and the EITs, the and Xie in attempting to estimate marginal situation is much worse. Hence we must abatement costs and the quantities that will 38 Environment Department Papers Tools for Flexing the Link - Better Practices change as well, in a program of pollution Finally, it is crucial to estimate the hidden costs. abatement or fuel saving. This leads to a curve Is enforcement of a required retrofit of pollution of pollution or CO2 abatement. It is important control expensive? Would higher fuel taxes to include any feedback from either higher or promote significant black-market sales of lower variable costs to estimate both how untaxed fuel or cutting of taxed fuel with changed technology and changed driving affect similar, untaxed fuel, such as when untaxed, overall emissions. It is also necessary to make at low cost kerosene is added to gasoline. Would least a rough calculation welfare gains and improved fuel economy lead to more imported losses. But the advantage of the bottom-up vehicles or vehicle components and less approach as a complement to the top down domestic production? These hidden costs might macro calculation is that the analyst or program lead to resistance to abatement strategies on manager can identify the key elements of the part of important constituencies. change that lead to the greatest benefits, Feedbacks/bouncebacks elements that might have to be monitored carefully. There seems little doubt that in lower income countries, more efficient or lower cost transport Here a warning is necessary. Much of the stimulates the demand for transport. This leads argument among governments and between to an increase in welfare, but lower net restraint governments and NGOs in the COP-3 involved in CO2 Will variabilization of costs, by lowering how and how much to value of the reduction of taxes on acquiring or owning vehicles, stimulate GHG emissions. A consensus on neither the greater vehicle ownership but less use? extent of actual or projected damage existed, Johansson and Schipper (1997) found that nor the willingness-to-pay of individuals, lower new-car taxes had a positive effect on businesses, or governments. There is somewhat ownership, while higher fuel prices had a small more consensus about the reality of the costs of negative effect on ownership but a modest other transport externalities, such as local air effect on use. Since the analysis applied only to quality, pollution, and noise, but even this upper income countries, conclusions about consensus is limited; representatives of these must be guarded when applied to low- transport industry, as well as some academics, income countries where a small reduction in regularly argue that such externality costs are small relative to the benefits provided by . transport, while some health scientists contend o greter cnenioatorities it that the costs for health alone are large. What is possibilioy a aesinfin ve metl for othGHG estaintandthefuel economy or decline in vehicle use greatly important f. cuts into future road-fuel tax revenues, even valuation of other transportation externalities is with the"bounceback"or"rebound"effect, to consider a range of costs and see where the hence it may be relatively easy to head off this boundaries lie, that is, at what lower valuation problem by raising taxes. (The converse is the do GHG restraint benefits become truly idea of the Danish Government, namely to insignificant, and similarly for other problems declare a new-car fuel economy path implying a (noise, safety, and so forth). If officials in a host certain average annual increase. Real fuel prices country are simply not willing to pay for rise at the same rate, so anyone buying a car reduced congestion, noise, dust, air pollution, with lower than the target fuel economy pays traffic fatalities, then it will be difficult for any more.) Bank manager to pursue any further the environmental aspects so important to a GHG It should be noted that financing of extensive strategy. metro and bus systems, while increasing Climate Change Series 39 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank mobility at relatively low GHG emissions/km, of notoriously inaccurate aggregates to estimate could also be a rebound stimulation by future energy demands. Without a clear picture permitting people to live much farther from of energy-use patterns, it was hard to convince work than previously. This is not to say that authorities to lift subsidies and"get prices such systems do not increase welfare. Rather it right."Finally, the industrial surveys often is important to model both distance and modal revealed the inefficiencies of basic processes choice and carbon intensity (that is, all terms in and showed the benefits of improving towards the ASIF formulation) where a new system is "best practices." likely to stimulate interactions amongst the terms. The same tools must be developed rapidly in developing countries and EITs. These include: The rebound or bounceback effect is associated with an increase in economic welfare. If a * Household vehicle/fuel use, travel surveys, and household's ranges of action are increased by time-use surveys such as the panels better transportation without subsidies or net supported by the Dutch Government increases in externalities, then everyone is through the Bureau of Statistics. These better off. When part of a rebound is stimulated cover both vehicles and people. either by under-pricing of externalities (or fuel), * Fleet activity and fuel use surveys, to one must anticipate the rebounds that will determine the condition of bus, truck, small occur and guard against aggravating other boat fleets (for example ferries, barges, even transport problems. Overall this effect is small fishing vessels which are not considered in high-income countries of the IEA but could here), their fuel use/km, their typical be significant in low-income countries and utilization factors and passenger or ton-km must be studied carefully and anticipated. delivered. For example, Kenya Bus Services was able to provide a very accurate record Improving the knowledge base - of all of its buses to an energy survey there Concrete steps in client countries in 1981 (Schipper and Meyers 1983). Goods must be surveyed with commodity The foregoing discussion assumes that an flow surveys attached to truck utilization analyst has at his/her disposal the same kinds surveys, such as the"TIUS"of the U.S. of data as are available to developed country Department of Commerce. These show how analysts and policy-makers. For most of the and how far different goods move, as well EITs and DCS, data is often either nonexistent as how different kinds of vehicles haul or inaccurate. Under this situation, how can we different kinds of goods. begin to measure what is best? * Geographic regions themselves need to be surveyed to better pinpoint vehicle flows, Here the World Bank can look to its own record origin-destination patterns, local sources of for"best practices," Starting in the early 1980s, emissions arising because of poor traffic the ESMAP program began a long and conditions or micro climate (still air, and so continuing series of surveys of energy use in forth). For urban regions this is essential to industry and households. These were finding both where traffic is tied up, who is considered essential to energy-related tying up traffic when, and estimating how industrial development for energy conservation, different policy instruments might affect assistance projects related to rural and urban these traffic flows. Better understanding of energy systems, and ultimately to judge the how goods are distributed in detail allows worthiness of large-scale fuel and power for better location of distribution facilities system expansion. Not understanding energy so that competition for road space is demard would have left planners to the mercy reduced. 40 Environment Department Papers Tools for Flexing the Link - Better Practices * Better assessment of the real emissions from from a single board showing the status of each vehicles, either from remote sensing vehicle. (preferable) or other techniques applied in real situations, or from spot roadside tests, Whatever the technology or survey instrument, or from yearly inspections. Bank experience with energy suggests that * Test facilities for measuring fuel consumption of funds used to support data gathering and and emissions from vehicles both in ideal sensing experiments could go along way to conditions and on the road. On-road both helping prove the systems and to measurements are particularly important convincing authorities and drivers alike that the because they reveal the impact of driver systems are fair and reliable. Assistance for in- behavior, traffic, and in lower-income depth travel surveys and the other instruments countries, road surface quality and fuel mentioned in the list above would pay back in quality as well. terms of far better information on both problems and results. This information is not cheap, but it is becoming cheaper rapidly. Without it, we Endnotes cannot measure the economic and physical dimensions of a transport system we seek to 10. It must be noted that very few countries have change. Nor can we measure the impacts of achieved a significant, permanent, long-term policies or technologies. Both measurements change in fuel pricing that was not erased by are essential to estimating costs and benefits of inflation. Canada is one example, where fuel policies ex ante and to evaluating policies ex prices were raised from well below U.S. levels post. in 1980 to above U.S. levels in 1981 and now remain somewhere between U.S. levels and There are many techniques that can be European ones. Data indicate that the fuel implemented with Bank assistance. Among intensity of the Canadian fleet was higher those readily available include simple meters than that in the United States in the early that measure kilometers traveled, which were 1970s but lower today, suggestive of the required on all diesel vehicles in Sweden, impact of changed prices (NRCAN 1997). But Finland, and Norway until 1993. Annual safety Canada also followed the US CAFE inspections can be expanded to note annual regulations in law and through the sharing of mileage and at least measure emissions under many auto manufacturing plants. The lack of standard conditions. Remote detection of speed possibility of observing how a given country's limit violations is already used in Germany and car stock (and driving) changed is one reason the United Kingdom, while manned-radar why many are skeptical about the real power measurements are used in many other of changes in fuel prices, however. countries. Soon, road-pricing schemes that 11. Interestingly, the former West Germany charge cars by where and when they travel will accepted a very large fuel tax increase ($0.70 be relatively inexpensive. Like electronic tickets US/gallon in current 1991 prices) to finance to metro systems in some US cities, these the rebuilding of the former East Germany, schemes can preserve the anonymity of the and Canada implemented an increase of driver or car owner, who simply purchases an about $0.50 US/gallon in 1981 prices as part electronic card worth so much against the fees of a significant compromise on provincial/ charged to drive in congested or polluted areas. federal energy policies in the early 1980s. The fees are deducted electronically. The same Externalities related to fuel use were not the system could be adapted to a GSM to allow motivating factors in either case. traffic monitors to follow problems in real time, 12. Of course, such a tax cannot take the place of much as large rail systems can be observed sound monetary policy, and the mechanisms Climate Change Series 41 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank of such policy must be in place to insure that CAFE was not thought to be binding, in the the tax is not repealed during other parts of sense that Americans bought less fuel the economic cycle. intensive cars than the standards called for, 13. The United States developed CAFE standards, but after 1982, from which time the real cost wHich were essentially followed in Canada, as of fuel began to fall, CAFE was increasingly well. These assessed a civil penalty to any binding on one or more manufacturers. Their manufacturer whose sales-weighted test fuel response was to set prices of cars such that economy in a model year exceeded the enough smaller, less fuel intensive cars were standard, which itself began at 16 MPG in sold to obtain a sales-weighted average that 1978 and rose to 28 MPG in the early 1980s, met the standard. Light trucks and vans were where it has remained. The penalty was subject to a different, more lenient standard. proportional to total number of cars sold That their share of new light duty vehicle tirnes the margin by which the limit was purchases has now approached 50% suggests exceeded. Margins in one year could be consumers in the U.S. do want larger cars credited to overshooting in another. During today, particularly with fuel costs low. the period of higher fuel prices in the U.S., 42 Environment Department apers Designing a Transportation/CO2 5) Strategy for the Bank There are several issues that ought to be central really examines the financial conditions, which to any Bank strategy, and we develop them in at present do not include accounting for this section. Following that, we discuss ways of reductions in externalities per se. The Global relating to national circumstances. We note that Overlays provide a convenient way for the Bank cannot just insert a transport estimating the benefits of the project that system-whether through a loan, help with accrue to all, not just the borrowerlborrowing technology, advice, and so forth-in a country country The Borrower will benefit both from count up the repayments, and walk away. A the implementation of the loan (say, a carefully conceived transport/CO2 policy government borrowing for a transit system) but framework is needed. This is particularly true also from the reduction in transportation for transit, land use planning, and other externalities, yet does not necessarily reap these systems or strategies that interact closely with benefits in direct financial terms. The analyst lifestyles, and where unanticipated and often can measure what each of the first two actors unintended reactions by drivers, travelers, or "sees"but also must make a number of tricky shippers can be expected unless policies check calculations to estimate both environmental spurts in transportation activity impacts per se and their valuation as well. At the outset we noted that few developing Finally, the Bank Task manager has not only to countries are concerned about GHG emissions, balance the first two perspectives using the particularly local or regional authorities. Still, in analysis provided, but he/she also must balance some cases, policies designed specifically to the political, bureaucratic, and institutional or address GHG reduction may offer gains for the even personal forces that certain characterize local/regional environment. Fuel taxes will any transaction involving millions of dollars, reduce local traffic somewhat. Biofuels, such as prestige, highly visible projects, and so forth. In alcohol/gasoline blends could offer significant this process, it is very important for the Task benefits to local air pollution problems, as Manager to identify those aspects of would natural gas. Encouragement of local environmental improvement (including GHG production of clean two- or three-wheeled restraint) associated with the project and make vehicles, bicycles, clean buses, or small freight sure these are not only evident to all parties, vehicles, to meet transport needs and further but"sold and accepted"by all as a plus in the environmental goals would encourage national overall loan process. Otherwise, the real thrust and local governments to develop of applying the Global Overlays is lost. comprehensive CO2, air pollution, and transport policies. Overriding issues facing any transport Actors in a Bank loan process of necessity have CO2 strategy different perspectives. The Borrower (the Bank) The data present herein suggest that in wants the loan repaid at minimum risk and countries with low motorized personal and Climate Change Series 43 Transportation and CO2 Emissions: Flexing the Link -A Iath for the World Bank goods mobility, growth in these activities alone available, but they are under development, both will swamp most attempts to reduce GHG to bring down costs and to increase the net emissions from transport unless either low- reduction in CO2 as well. More likely, however, CO2 fuels or low-CO2 modes truly dominate there will be a significant lowering of the rate of transportation. So far this has not happened increase in CO2 relative to the rate of increase anywhere. Few countries have an incentive to in GDP (for a given set of fuel prices). In DCs adopt bold strategies like Singapore or Hong this path has to be constructed carefully, so that Kong vis-a-vis congestion. Still, it is important there is not a big rebound effect arising from to have in mind whether the goal is to cause significantly lower fuel costs, an effect that minor changes in transportation activities (and could make other transport problems worse. If possibly CO2 emissions) or indeed cause major this approach is successful, we will discover the restraint or even decline. It is crucial to path of restraint. Under this strategy, transport remember that CO2 is not a key issue for either growth continues but development is transportation, environment or energy policy in successively less CO2-intensive, although CO2 most DCs or EITs. Nevertheless, the Bank's emissions may continue to grow for a very long actions could affect CO2 emissions from time. Note, however, that such a strategy does transport directly and indirectly. We can little to address other problems within the conceive of three different paths or strategies transport sector; congestion, pollution, road that are by no means exclusive, and mention a wear, noise, and other problems associated with fourth for consideration as well. transport may still continue to grow. Eventually, this activity growth may also begin to push up The first strategy is one of abatement, whereby CO2 emissions, in spite of the radical present-day patterns of transport and emissions reductions in specific CO2 emissions caused by are continually attacked and (hopefully) made the new technology. less C02-intensive little by little. This goal is accomplished by chipping away, sometimes A third approach is to try to define a long-term piecemeal, at all parts of the ASIF equation goal of far lower emissions per GDP than one through requiring marginal changes in the sees today in the OECD. Curitiba in Brazil, and actors, stimulated by price and administrative perhaps Singapore, are examples, but so far, policies. Each new strategy lowers emissions a have not been replicated elsewhere.Yet it is bit from where they would have been, but the worth setting sights on this avoidance path system still keeps growing and so do emissions. whereby policies are established to build a low- These actions are each justified by modest CO2 transport system rather than just reduce changes in fuel and transport prices, revenue existing emissions from a high level. It is needs, cost-effective incremental changes to arguable whether Singapore really succeeded in vehicles or systems, and technological reducing overall car dependence, or whether developments whose pace exceeds the changes Curitiba will remain only half as car-intensive occurring in vehicles that are CO2 intensive. as other Brazilian cities. But in principle, The overall impact, however, is growth in GHG strategies that restrain car and truck ownership emissions. and use in the name of sound transportation reform would contribute greatly to vitality of If technologies permitted a radical reduction in low-CO2 modes. This is effectively the CO2 emissions, either by changing fuels or development that occurred in Denmark and the through greatly improved fuel efficiency, a Netherlands, at least for cars. If this buys resulting strategy would actually allow for CO2 significant restraint, then one can expect that elimination. Such technologies permitting such the next generation of vehicles, which could be a large reduction are not yet commercially far more fuel intensive than vehicles today, and 44 Environment Department Papers Designing a Transportation/CO2 Strategy for the Bank the next generation of alternative fuels (which some extent OECD governments have a stake could power yet again the entire vehicle fleet in in seeing that this option is pursued, even if it thirty years time) would each reduce emissions bodes ill for traditional supplies of vehicles, more. In other words, if A and S grow only half fuels, and much of the transportation as fast in a country (relative to GDP growth), as infrastructure.Thus the Bank should monitor they did in most of W. Europe in the 1960s or developments in this regard. 1970s, and if I is cut in half from present values and F is eventually cut by more than one half, In all of these goals it is assumed that CO2 per then one can foresee a system that grows to se is irrelevant in most countries. But policies avoid high CO2 emissions, by as much as a closely related to CO2 may be justified to factor of 90 percent lower, per unit of GDP, than reduce oil imports and thereby"fix"CO2 by we experience today in Europe. restraining transportation fuel use or encouraging substitution of natural gas (where All of these approaches tend to follow the same available), with lower GHG emissions in most paradigm of western style transportation cases. Similarly, policies designed to stimulate development, even if some (like Curitiba or production of local biomass fuels because they Singapore) appear radical to other make economic sense on their own could lead communities: reduce transport demand to significant lowering of emissions where these somewhat and try to use less carbon intensive are truly produces of biological processes and modes, more energy efficiency vehicles, and not simply"refined biomass" such as U.S. corn- perhaps less carbon intensive fuels. based alcohol. Finally, fiscal measures affecting vehicle ownership would likely put downward A fourth approach, the hardest, is to ask pressure on vehicle fuel intensities (or whether OECD patterns, which seem to serve encourage 2 or 3 wheelers instead of cars). This as a goal for transport planning might change. would also reduce fuel use. Note however that Could this change be dramatic and rapid all of these policies have other justifications. enough so as to illuminate new ways of Other options must be integrated with providing access on fewer kilometers? These transport policy reform, land use, or other changes could arise from a combination of sectoral reforms for which CO2 hardly appears technology and land use/lifestyles changes. as an important factor. Thus any Bank activity There is serious research into these possibilities must somehow be related to either CO2 examining both travel and freight and raising (because it affects either fuel or vehicles) or fundamental issues (FMS 1997; the ECN work; non-CO2 measures. In an integrated policy, the German Enquete Commission"Mobility and non-CO2 concerns may be boosted by C02- Climate"1995, and so forth), and on more justified strategies and vice versa, leading to general changes in lifestyles (Schipper 1996; synergies not present if specific policies or Schipper and others 1989). Car sharing, for technologies are considered each by example, may eliminate some driving by themselves. spreading car ownership over many people; selective tolls on all but the cleanest or smallest Bank strategy will inevitably interact with the vehicles might eliminate many vehicles from private sector, the vehicle manufacturers and commuting or city traffic in general. sellers. Volvo, for example, played a key role in producing buses for Curitiba. They are now It is possible that continued experimentation in working with authorities in Bangalor, India select OECD countries or communities might both to establish production there and to grow yield stable, low-CO2 transportation systems a bus system for that city (press release from (even when all the leakages are counted). To Volvo, March 1997).Vehicle manufacturers are Climate Change Series 45 Transportation and CO. Emissions: Flexing the Link -A Path for the World Bank always looking for other opportunities to Issues facing development of a strategy provide buses in growing markets. More in each region, country, or project important, the international vehicle manufacturers see developing countries as Time frame and timing huge potential markets for both cars and trucks. At the outset it was noted that the time frame Therefore they must be brought into any Bank for various measures can be from days to strategy, since their goals inevitably will collide decades; the most important GHG reduction with any policies designed to slow the growth measures act through the replacement of the in motorized mobility. At the same time some stock of vehicles, which takes two to three manufacturers have recognized that without decades. For developing countries, most of the overall measures to rein in uncontrolled growth change in the stock is through growth, so in vehicle use, transportation in the very strategies affecting principally new vehicles will countries where they see future markets will have a rapid downward effect on the average become unsustainable. Therefore, partnerships emissions per unit of activity, even if the overall with the private sector are needed now. path of emissions is still upward. This point leads to a final, more sensitive issue. Is the client country interested in GHG at all? Is The politics of transport can be sensitive. short-term abatement of emissions, medium- Consumer/household interests, public and term restraint, or long term avoidance the goal? private transport unions, road boulders, road Does the client country want to develop a long- stoppers, even lobbies for bicyclists can be term strategy for sustainable transport? Or is powerful interest groups that sway decision the client interest much more narrowly defined makers. The Bank must decide how to deal with to getting a project completed? If the latter is these interests, which, for better or worse, do the case, the Bank probably cannot do much to have the power to force trading best practices affect GHG emissions. This does not mean a for second best, and often for first worst. project should not be evaluated as to its GHG impact, only that the real long-term impact will In the final analysis, a Bank strategy has to almost invariably be upward if the project combine options (technologies, and so foith) contributes to increased traffic. By contrast, a with tools (policies, measurement, and so forth) strategy of purposeful replacement of vehicles that work in a given country in a way that will and significant changes to the new vehicles provoke sure change. This is quantitatively and entering the stock could have a very profound qualitatively different than a lending policy that long-term impact on emissions. simply seeks to provide loans to transport A key element that affects costs is the timing projects for which environmental and transport cycles for capital replacement of equipment that policy implications are thought to be makes vehicles (or components) or, in some acceptable. In other words, the Bank can limited cases, retrofits possibilities of vehicles. assume a reactive posture - do nothing unless Are there local manufacturers who have just trouble signs arise - or a proactive stance, geared up for vehicle production, or are they which means acting to create reform, to open just now considering production? If the later, up options that both improve transport system intervention could change what is produced, performance at lower environmental cost and particularly vis-a-vis engines and exhaust abate, restrain, or avoid GHG emissions at the systems. Are local or international companies same time. This is truly the essence of a"win - bringing in relatively modem vehicle win" policy, but it can only be obtained from technologies? Or do old designs for knockdown the proactive approach. vehicles, or even used vehicles, dominate the 46 Environment Department Papers Designing a Transportation/CO2 Strategy for the Bank market? If the latter, timing may actually be Policy framework and the interaction matrix right for persuading car companies to retool for What is the scope of action called for? Overall cleaner, more efficient cars. But if they have just transport reform, GHG measures, or just a tooled up for relatively new designs, they will minor transport project? Is there room to push not be willing to retool yet again, a transport project into a GHG abatement Equally important for timing is the state of framework in a way that will not be costly to existing cars and trucks. Are consumers and the (uninterested) client? truckers at a point where their demands for What work is already underway? What policies vehicles are changing with time and with support that work? Will a project the Bank is incomes. In this case it may be difficult to .sr tha t w il othe Ban i chane te diecton f mooriatio intheconsidering interact with other developments in change the direction of motorization in theawythtilinrseodceseGGr short or long term. Or are there relatively few transportation problems. The Budapest urban drivers, so that significant changes in vehicle transport problems ThegBudaeturn taxaionandtecnoloiescoud sarttransport project shows marginal returns. Of taxation and technologies could start particular worry is the 24 percent decline in motorization in an entirely new direction? For both usage and capacity between 1987 and fuel use, the only significant"retrofits"of 1993. The real problem is probably burgeoning vehicles were aerodynamic spoilers seen on car ownership and relatively low cost car fuel by large trucks and some technologies added to European standards. This is not to say that the aircraft. Otherwise almost all fuel economy Bus Company and the environment will not improvement comes from new cars and trucks. benefit from new, clean, more energy efficient This means that vehicle and fuel taxation buses. But for the project to have a major measures have to be phased in carefully except impact on transportation in Budapest, policies where there may be overriding air pollution must also address automobile use, as this concerns justifying rapid change. dominates the personal transport scene there. Similarly, have large cities with urban transport What is the private sector role? In Hungary, as problems frozen development patterns (most of in other Eastern European countries, private Latin America and Asia) or are there potentials importing of used cars skyrocketed after for significant new development following political reform began. These cars tended to be models of Curitiba or Singapore? A long-term old and more fuel intensive (but technological strategy of replacement and refinement of more efficient) than the much smaller vehicles patterns of settlement and production, which is produced locally. Now, however, world car what most OECD countries face, will yield companies are producing and selling there too results only slowly. By contrast, a greenfield and the newer cars, while larger than the development (perhaps as both households and previously produced local product, are much business flee from over-congested megacities) cleaner from an air pollution point of view. In could establish the viability of alternative this sense the private sector might be seen in a modes of access tied to significantly less CO. negative role, although the new cars emit much per unit of income than seems to be occurring cleaner exhaust than the older ones. But the in the megacities of Latin America and Asia. private sector could assume a more Needed here are real data on new towns: are environmentally friendly role. Few realize that their transport patterns significantly less for Curitiba, Volvo worked intensively on both transport intensive because of co-location of the political side (that is, the policies necessary places to live, to work, to shop, and to play or for success) and also invested in the buses are the transport levels of inhabitants and themselves, particularly those with three workers just as high as elsewhere? sections. In other words, when the private sector Climate Change Series 47 Transportation and CO2 Emissions: Flexing the Lnk -A Path for the World Bank has a stake in the success of low-CO2, low pollution policies (such as in Singapore). Where road transportation, it becomes a very pro-active partner conditions between cities or even in cities are itself poor, cars are clearly less attractive than other modes of transport. Where vehicle industries One way to entice private actors is to use are strong (Korea, Taiwan, Brazil, Mexico) or innovative procurement, whereby local potentially strong and under development authorities ask for tenders for a particular (Indonesia, China), political sentiment to vehicle with certain low-pollution properties. develop these industries for both domestic Another way is simply to provide a prize for products and exports may be stronger than any development and marketing of"clean concerns for a balanced program of sustainable technologies,"for example two- or three - transport. Finally, economic growth itself cuts wheelers, much as US utilities offered two ways. On the one hand Curitiba shows that significant rewards to manufacturers of a low- a low automobile society can be carved out of a energy refrigerator, which was eventually rapidly growing and prospering region. developed by Whirlpool. This does not mean that private producers will not respond to Vehicles, fuels, or entire systems? In considering changes in economic boundary conditions, only technological investment strategies, it is that efforts to focus their attention from the important to distinguish between true"nega- beginning are likely to be rewarded both in the carbon"investments (for example, fuel rapidity of response as well as lower costs and substitution towards a lower carbon intensive ultimately popularity of the product. fuel) vs. energy efficiency investments (such as swapping TDI diesel engines for cars, or adding Geographical framework. Are the proposed a wind spoiler to a truck to reduce real fuel actions of national or only local significance? costs, and so forth) vs. broader investments National policies (fuel pricing, vehicle taxation, where energy efficiency is a by-product (such as alternative fuels) can be crucial to supporting developing a transit system) vs. really radical local initiatives. If local, do the proposed actions redesign (totally new car concepts, like the attack major transport problems in a megacity Daimler Benz Smart car). As noted earlier, or potentially permit smaller conurbations to many of these options have marginal costs that avoid such problems? While work in Mexico can be estimated. The trouble is that they are City or Santiago is important to improve the not necessarily options for Bank lending. quality of the air there, modest investments in Nevertheless, the Bank can affect how rapidly other areas before the pollution situation is they appear on the market if the Bank can affect virtually irreversible may have greater payoffs fuel or CO2 pricing strategies. by leading to avoidance than investments (beyond basic abatement to clean the air) in the For large-scale investments in vehicle systems worst affected areas. National authorities may (metro, bus systems, aircraft) there are always have to develop a kind of"triage"to decide how choices that have modest impacts on fuel to best use limited resources (both economic intensities) there may be much larger choices and political) to affect change. affecting the performance, size and overall impact of the system. As with district heating, it Present situation. Other basic characteristics of may turn out that some branches or extensions the present situation of client countries or of a system simply do not pay because of regions must be examined. Where motorization projected low utilization per unit of fixed or is very high it is unlikely that transit or variable cost invested.14 In any case, the individual alternatives like two or three possible CO2 reduction from large-scale wheelers can beat back cars without serious transportation system choices is very hard to 48 Environment Department Papers Designing a Transportation/CO2 Strategy for the Bank predict because the new system itself changes require both public and private support in many patterns in so many ways. This is again why countries, such as wide-scale manufacture of integrated policies are so important. clean two- or three-wheelers? The Bank would not want to encourage a public-sector company Table 6 examines a number of techqiques/ do to such private sector work, but how to put technologies and supporting policies for the private sector into this business? Finally, possible relationships with Bank activity other what about working with the largest OECD- actors, barriers, and so forth. The various based automobile companies to encourage options listed are by no means exclusive, them to produce new kinds of vehicles although there is some overlap. primarily for LDC markets but with applications in OECD countries? These Consider how present Bank activities affect the represent new modes of interaction between components in Table 6. Urging changes in fuel the World Bank (as a lender), borrowers, and pricing or introduction of road pricing has some authorities. In the final assessment, such effect on fuel economy, total travel, modal interaction may be the key step for the World choice, and possibly alternative fuels Bank if its policies are to have any significant development as price signals indicate real costs impact on GHG emissions from transportation of both using fuels and releasing carbon. But in developing countries. the Bank has no present mode of affecting vehicle fuel intensities directly, and only affects First steps in a cooperative country air pollution in countries with major Bank- assessment related programs. The impact on freight fuel use The first Bank Energy Sector assessments and GHG emissions is weaker because the focused principally on supply-side issues with importance of fuel pricing to freight activity is only minimal attention paid to the structure less strong, although tough regulations on and efficiency of energy use. Similarly, early trucking use could affect the numbers of assessments of carbon emissions focused on trucking runs and therefore fuel use. Only in emissions by source, with little data on the transit development does the Bank play a sectors or uses from which carbon emissions strong role at present, through financing. But resulted. Most transport assessments focus on however important price signals are to quantities that are important for road or transit transport reform, they may not be sufficient to planning (capacity, traffic flows, number of bring forth both the technological responses passengers, aggregate emissions), but again, that would ease GHG problems (that is, among little on how transport services are actually vehicle manufacturers) and to clear up the linked to fuel and emissions. complex maze of existing regulations and conflicting political and economic interests that Box 3 outlines steps that the Bank could take in may keep many GHG-intensive practices from cooperation with client countries to make a changing. Hence the need for a pro-active more accurate assessment of this link (see also involvement by the World Bank. Zegras and others 1995 IIEC). They reflect experiences with exploring the household Another issue is that implied by the column sector. Sometimes a simple model suffices. Take "regional scope." Bank activity focuses on for example the"Lisa"model ofVIT, Espoo, national or regional projects, such as a railway Finland, prepared for the Finnish Road connecting major regions or a transit system Authority. This model covers vehicles and veh.- within a region. What about smaller projects km by vehicle type, fuel, road type and location with only local public sector interest, like (such as, rural, urban), CO2, CO, NOx, and SOx bikeways? Or international ventures that would emissions, and so forth. The model can then be Climate Change Series 49 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank Table 6. Some potential strategies: Role of the World Bank and other actors Bank role in Components/ Future Bank Other actors who Regional overcoming Impact in option affected roles? would support scope Potential barriers barriers 10-20 years Technique Vehicle fuel Procurement, Large Vehicle Buyers National Interest from major Supporting Lower Intensities economy (C*E.) Stnds/ Manfacts/Importer Int'l auto companies but group 25% or more. Vol. Agreements Local University fears of higher purchase; Depends on fuel Financing Test product costs, supporting and vehicle facilities and consumer acceptance; test facilities; taxation schemes Development of local trade barriers Local Vehicle preventing options importation of vehicles or components; low fuel prices Afterative Analysis, Fuel companies, car National, Local factions or Assisting Biofuels: reduce Fuels (F): Financing companies, veh.fleet int'l, companies favoring "losing C02 significantly development, production owners, operators one fuel or another interests" find pricing other products to make or market Non-motorized Financing Local planning and Local Crowding out from Finance Unknown, but or low-energy bikeways; housing or roads, etc., by procurement potential large if transport financing commercial interests. motorized vehicles and demon. starting fresh. production Investors. stration, facilities for 2 and testing of 3 wheelers viability against crowding out Freight Financing of Truckers, rail road Potentially Freight companies, ? Build strong facilities (U) intermodal authorities, major regional unions, shippers, int'l intermodal system facilities to blend shippers compatibility of truck, rail, and systems water modes. Transit Financing, analysis Local authorities, Local Conflicts over land- Assist with Depends on development of supporting vehicle manufacturers use land and right- strength of (S) policies of-way supporting purchase policies Policies Fuelprig Analysis, Advice Tax, road, energy National, Political resistance Developing Potentially large (generd, authorities local plans for rel. expected dffeentated, i.e, redistributing demand C02 ares) revenue Km Pricing Analysis; Tax, Road authorities Regional Political resistance, ? Potentially large (AS) (incl. development of (congest) difficulties introducing reduc. In growth congestion measurement, nat' for the technologies in km, vehicle pricirg, etc.) collection motor- ownership systems ways Cooperation Arrange R/D, Virtually everyone, Potentially Trade barriers, Assemble Unknown, but among client financing of but important to global, not protection of own conferences, potentially HUGE countries production guard against groups limited to vehicle manufacturers draft if low C02 projects etc in one country nearby or potential proposed technologies are where single resisting what Is really countries manufacturers trade developed and country efforts in the bests interests agreements fostered to are too small or of all maturity and unrewarding popularity Land use Affect sitting of Housing, commercial Local Existing land owners ? Unknown, but planring homes, industry, interests; local or other interests potential large if etc. Assistance in authorities starting fresh planning 50 Environment Department Papers Designing aTransportation/CO, Strategy for the Bank Box 3 Steps in a transport GHG mitigation assessment-What we need to know Quantitative Inventories * Inventory of active vehicle stock, by vehicle type, fuel type, capacity or size (for trucks and buses), by domicile or garage site (large city, small city, rural), and by whether private, government, or commercial * New vehicle sales, vehicle importing, assembly, or full manufacturing - Approximate balance of fuel use by vehicle type and region (urban, rural) * Estimate of veh. -km / year by vehicle type, and estimates of fuel intensity by vehicle type consistent with the fuel balance above * Estimate of passenger and ton-km by mode, including non-motorized, non-commercial, and mixed modes (such as light trucks, boats, and so forth, carrying both passengers and freight). This must at some point be supplanted by careful survey of travel and freight . Building of ASIF model for Base Case, with calibration of present situation based on previous steps . Estimates of test fuel economy of new vehicles * Any information on actual fuel economy or emissions testing, or monitoring of emissions from roadside locations. . Fuel prices and taxation, vehicle taxation, import tariffs on cars, parts, used cars, and so forth, as well as existing road user charges, tolls, and so on. Relatively Complex Qualitative Assessments * Current land-use regulations and planning tools * Projections of growth in major settlements, regions of industrial, agricultural or other economic activity, particu- larly those presenting greenfield opportunities for new transport planning experiments * Assessment of transport-related revenue needs nationally and locally, and comparison with estimated generation of externalities to see what matches can be made * Estimates of the impacts of fuel or road taxes on vehicle choice, vehicle use, or fuel use . Building ASIF model for reform cases based on assessments of how the four components could develop in the region or country of interest * Backwards calculation of ASIF components to see which combinations (with emphasis on I and F, the two tech- nological components) permit a significant restraint or even reduction in GHG emissions from transportation. used to simulate future strategies for abatement Endnote of any of these pollutants, and, if assumptions are included about price and income elasticities, 14. The parallel with district heating is important. In terms of recovering fixed costs, DH needs a future fuel use and vehicle-use levels as well. certain number of customers per km of pipeline and per sq. km of city to make the heavy fixed costs pay. This has been easily met in the centers of cities of Sweden, Finland, Climate Change Series 51 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank Denmark and much of E. Europe given the off the system which leads to fewer customers calculations used by authorities, but harder to over which to spread fixed charges which justify elsewhere. A relatively high density of leads to more price increases. One fears the customers is also important to reduce the same experience in E. Europe today for public distribution losses (proportional to distance transport. As fares are raised and service cut heat is sent) relative to sales. And district back to reduce economic losses, many fear heating, like collective transit, faces bleak that more and more users will be driven to prospects when cost-recovery goals lead to their cars, cutting transit system viability even rising variable charges which force customers more. 52 Environment Department Papers 6 Conclusions Carbon emissions from transportation are (somewhat less mobility, purchases of growing in all parts of the world, driven by somewhat more fuel efficient vehicles, modal increased mobility, an increasing share of which switches, and so on) and a longer term reaction is provided by cars, trucks and aircraft. While (less carbon-intensive vehicles and use the emissions per unit of output of these modes patterns, possibly different patterns of are still falling in many countries, the overall settlement.) The uncertainties lie more in terms trends are towards higher emissions. Growth of what is achievable in the near or medium rates in developing countries are much higher term with only modest carbon taxes and a than in developed countries, both because of business as usual research effort. more rapid economic growth and because overall mobility is so much lower in the Among the key analytical steps that project developing world. Thus the challenge to restrain planners should consider, the bottom-up ASIF emission in the Third World is formidable. methodology offers many useful benefits. In addition to tracking present transport and World Bank policy can alter these trends, emission patterns into future scenarios, the certainly by contributing to a slowing of the rate approach permits planners to identify of growth, and in some cases by contributing to technologies, policies, actors, and Bank a radical decline in the growth in emissions. In opportunities that truly affect the development some countries this departure may begin at of each of these components. relative low levels of emissions per capita or per dollar of GNP, as has been demonstrated in Global Overlays can assist Bank planners in some developed countries and in some regions identifying the overall benefits of these of the developing world as well. The key strategies in terms of carbon not released. The approach is to"grow"transportation in a way ASIF methodology fits the Overlays approach, that is less CO2 intensive in developing but the actual tabulation of data and economies than is the case in OECD countries. relationships is complex. Still, it is possible to This growth can take place by promotion of foresee changes in these components, non-motorized modes, clean two- and three- particularly I and F, that would lead to lower wheel modes, and very efficient cars, trucks and future emissions than otherwise. ASIF is a other vehicles. Supporting such growth from useful way of calculation the reduction in low levels of emissions today are fuel and road emissions. However, GHG emissions are not use charges (including carbon taxes) that reflect the only transportation problems at stake. A social costs of additional mobility. larger set of avoided costs from other measures related to transportation reform that also In aiming specifically at GHG emissions, it is restrain GHG emissions comprise a larger goal important that the cost of emitting carbon be for Bank planners. The exact proportion of each raised. There will be a short term reaction benefit depends critically on local situations, Gimate Change Series 53 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank because so many externalities and other and freight patterns seen in the OECD today problems of transportation are related to are laid down. From technology procurement location and temporal factors. While the CO2 and financing of new approaches to vehicles problem is a global one, the problems that (and their local manufacture) or truly low motivate local actors are certainly the growing carbon fuels to stronger leadership in the use of health costs of air pollution, safety (including sound policy tools, as well as provision of dangers to those using non-motorized technical tools (testing facilities, surveys, and so transport), congestion, and noise. forth) there is an enormous gap to be filled if developing countries are to restrain the Nevertheless, the likely small size of the CO2 development of carbon-intensive transportation benefit relative to other benefits of in a way that increases total welfare and well- infrastructure projects suggests that the Bank being. If the World Bank desires to have a major must take a proactive role in developing low- impact on GHG emissions from transportation, CO2 transport systems. While intensive efforts it should take a pro-active role in the among leading industrialized countries may development and deployment of truly low result in much lower emissions from vehicles, carbon vehicles and fuels as well as policies that experience with other equipment suggests that support their success in the marketplace. Such unless technologies and policies are tailored a strategy, if combined with strong transport now to fit individual client needs (or regional reforms that restrain the unchecked growth in needs), the likely wave of low-carbon transport mobility, could lead to significant reductions in may not arrive in developing countries until the growth of GHG emissions from much of the traditional infrastructure and travel transportation in the developing world. 54 Environment Department Papers Annex 1 Transportation Activity, Energy Use, and Emissions in IEA Countries-A Brief Review Transportation energy use in IEA statistics is policies and conditions may vary significantly divided into four aggregates shaped by data from place to place. Unfortunately, it is very availability from fuel supplies: road, rail, water, difficult to separate the fuel used in travel and domestic air modes, as well as a residual within or near cities from that used between mode that may represent off-road vehicles, cities. This is unfortunate, since the scope of special vehicles (like cranes), military, or other transportation problems in built-up regions is uses of transportation fuels. For the four main much different than on the open road. As a rule modes, the analysis focuses on travel and of thumb, however, most rail energy (fuel or freight separately. electricity) is for intercity travel, while most bus energy is for urban or suburban travel, intercity Cars, buses, and trucks account for 70-85 buses having only one third of the bus travel percent of fuel used and emissions in most market or less in most IEA countries. countries. In a few IEA countries, vehicle energy Automobiles are principally used for short trips intensities changed radically (United States and in and around cities simply because most Canada, for example; see IEA 1997 or Schipper automobiles are garaged in and around cities and others 1997) or the energy intensity of and most use is in these short trips. In all we trucking (energy consumed per ton-km hauled) estimate that in IEA countries, at most 20-30 fell significantly (W. Germany, Norway, the percent of automobile fuel is for intercity traffic. United States in recent years). Where such By contrast, the majority of truck fuel is for changes occurred, emissions showed some intercity trucking or uses on the periphery of restraint relative to vehicle activity or mobility. cities although as much as one third could be In all countries, the fuel intensity of domestic used for distribution itself. airline travel fell 45-55 percent from 1973 to 1993, but air travel is still only a small part of Vehicle ownership and use trends the emissions picture for most countries. Consequently, emissions tracked the output of Automobile ownership in IEA countries (figure basic transportation services, passenger and A.1) has risen with income or GDP per capita, ton-km, which in turn tracked GDP. The although it is showing some saturation in the coupling between each respective service and most motorized countries. Distance traveled per GDP, or the relative importance of one or the vehicle (vehicle-km, or v-km) is rising only other service, varies significantly among slowly (and tends to fall as vehicle ownership countries, but within a country there were few increases), but distance traveled per capita on all deviations. This explains why the curves in modes (figure A.2) is rising more rapidly because figure 1 in the text appear so rigid for so many of increasing car ownership. Because the number countries. of people per car has fallen, travel in cars (in passenger-km) has not risen as fast as total Regional distribution within a country of traffic vehicle-km. This means that energy use and CO2 and fuel use is important because transport emissions rise faster than travel, all else equal. Climate Change Series 55 Transpcrtation and CO, Emissions: Flexing the Link -A Path for the World Bank Figure A. I. Automobile ownership and GDP Cars per 1000 people 550 -- 450 350 - 250 - - 150 - 50- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 GDP per capita, thousand 1985 US$ (PPP) us +Japan -*-W. Germany *France -*Denmark +Australia -*-Sweden -Canada Includes diesel and LPG vehicles, household light trucks and vans Source: National transport statistics, vehicle registers, and national accounts. Figure A.2. Car use and per capita GDP 000 KM Driven/Capita 12- --- - -- - - - - - - -- - -- - - -Denmark - - ------ --- - - - ----- - Canada +Sweden - -W. German --Japan - USA 4- - - - -France -UK I I I I II 6 8 10 12 14 16 18 20 GDP/Capita (10e3 1985 US$/cap at purchasing power parity) Figure .A.3 shows per capita travel by mode in Figure A.5 shows how the level of freight the United States, Japan, Australia, Canada and activity (within a country including the aggregates of four European countries and four domestic portion of foreign trade but excluding Nordic ones (France, W. Germany, Italy, and the transit goods) itself is coupled to industrial United Kingdom; Denmark, Finland, Norway, GDP. Figure A.6 shows the CO2 emissions and Sweden). Knowing the energy use for each patterns for freight (Schipper, Scholl, and Price mode we can tabulate emissions of CO2 in a 1996). straightforward way. Figure A.4 shows these patterns (in tons of carbon per capita) for travel Factors related to vehicle performance are (Schipper 1995; Scholl, Schipper, and Kiang absorbing some of the savings that advances in 1996). fuel consumption technology offer. Figure A.7 56 Environment Department Papers Annex 1 Transportation Activity, Energy Use, and Emissions in IEA Countries -A Brief Review Figure A.3. Per capita domestic travel in OECD countries shows that indeed fuel use per km Travel per capita (thousand of passenger-km per capita) per unit of new car power, averaged 25 over each year's new cars, is falling steadily and uniformly in every 20 country, and in fact differs little from DAir country to country. But figure A.8 1Rain shows that power is growing steadily, 10 MBus propelled mainly by higher incomes. IMICar Thus new technology has made cars 5 (and most other vehicles) more efficient, but only some of the results 0 73 93 73 93 73 92 73 92 are now reducing fuel intensity. US Japan EUR-4 NOR-4 Nor-4: Denmark, Finjand, Norway, Sweden;EUR-4: W. Germany,France, Italy, U.K. Travel patterns are an important Source: National Transport Staistics. element of the picture. Schipper, Figueroa, and Gorham (1995) Figure A.4. Carbon emissions from passenger travel compared travel surveys from the Tons of C2 pr cUnited States and a number of 4 European countries, work travel (mostly commutin& but some trips within work) accounting for 20-30 3 MgPassenger air percent of travel, services for about 25 percent (except in the United States, []Passenger water where the share was higher) and 2 liMPassenger rail leisure for the rest. The car dominates gPassenger buses the latter two categories, but outside 9jAutos & light trucks of the United States, the car accounts for only 40-60 percent of work trips, since these are more easily taken on o1 Icollective modes. Including walking 1973 1992 1973 1992 1973 1992 and cycling has little impact on total ur- . Japan Eur-8 travel, but an important impact on Figure A.5. Domestic freight and industrial in industrialized total trips, since these can account for countries, 1970-1993 as much as one third of trips. But it is Ton-km per capita (log scale) travel in cars (or by air) that accounts for the growth in mobility, except for the few exceptions (Denmark and 10000 -U.S. Sweden) noted earlier. Non-work -t Japan -- Denmark trips seem to be leading growth in the Eur-4 United States, probably the result of -- Nor-4 much greater saturation of trips to work by car since the 1970s (over 85 percent of trips, of which only 1 in 10 0 ow ias a passenger). In Europe, by 2 4 8 10 Thousand 198S US$ per capita contrast, there is still a slow increase Industrial GDP manufacturing, construction, mining, & agriculture in both the share of work trips taken Source: Lawrence Berkeley National Laboratory. in cars. People are not only moving Climate Change Series 57 Transportation and CO.Emissions: Flexing the Link- A Path for the World Bank more, but the structure of Figure A.6. Breakdown of transport emissions per unit of mobility, in terms of mode and GDF 1973 and 1993/94 purpose, is changing slowly. 10o. DOther Freight Moreover, the average trip in a o aTruck Freight car remains around 13-15 km for so.0 DOther Travel the United States and all the 70.0-Ar Travel 60.0 European countries studied. 0 0 50.0 0 Automobile Travel While cars are increasingly built s for higher speeds and longer . trips, they are still used 20.0 predominantly for local I1.0 transportation. IJ 0.00 What about the impact of urban w L form, population density, or 0 U) other parameters related to the physical layout of cities? The Figure A.7. Test fuel consumption per horsepower ratio accompanying box, from 0.2 Uters per horsepower Schipper (1997), suggests that there is a significant relationship 0.17 --- - ----- -- -- - -------- between urban form and total travel.'But is not clear whether 0.14 -------- -- - - --- -------- there are policy variables that can be applied to squeeze 0.11 -- ------------- - - --- people., jobs, services, and free- time into a given physical 0.08 ------ - ------------ configuration. Nor does anyone know what configuration 0.os reduces travel significantly. The 1970 1975 1980 1985 1990 1995 density relationship explored in Model Year the Box suggest enormous -US -W. Germany -France -Italy -UK Sweden changes in density (orders of magnitudes) are associated with Figure A.8. Evolution of car power factors of two to four in travel. 3Power, W Since such large changes in 120 d e n s ity a r e a s s o c ia te d w i t h m a n y o - - other costs (and benefits) of every day life (land and housing costs, car insurance and parking costs, personal security and so -------------- -- --- ----- other problems associated with 70 ----------------- - --------- - - large cities, for example), it 60 ------------- - ------ seems unfair to focus only on 50 ----------------- - -- --- ---- the apparent reduction in 40 kilometers of travel as a goal of 1970 1975 1980 1985 1990 1995 Model Year land-use policies per se. Indeed, the Bank's recent Transport -uS -*-W. Germany France +1taly *UK *Sweden 58 Environment Department Papers Annex 1 Transportation Activity, Energy Use, and Emissions in IEA Countries -A Brief Review study, taking off from the famous graph of countries? It is often forgotten that for most Newman and Kenworthy (1989), shows that countries, real fuel prices were higher for two their figures for per capita fuel use rise with per brief periods, 1974-77 and 1979-1985, periods capita home area in different cities. too short to expect radical changes in both vehicle technology and use and modal choice to Economic forces and vehicle fuel use occur, let alone major rearrangement of the Did higher fuel prices not affect fuel use or housing and mercantile infrastructure affecting emissions? Johansson and Schipper estimated the origin and destinations of travel and freight price and income elasticities of car ownership, respectively. Still, emissions per unit of GDP car use, and fuel consumption based on the did fall somewhat in these periods, and same data presented in the previous sections. emissions per unit of activity fell as well. Some This was the first international study to take of that decline continued after oil prices crashed due account of ownership, distance and use as because of the technological gains that were quasi-independently determined from national started in the high-price years, gains still data sources, including consumption of working their way into the fleet through vehicle gasoline, diesel, and LPG by automobiles and turnover. Figure A.9, however, shows that there for the United States, household light trucks is a significant relationship between car fuel used for travel as well.Al They also examined intensity (or per capita car fuel use) and real national population density. They summarized fuel price (with diesel included at its share of their results with"best guess"estimates based car fuel in each country). The correlation on parameters from several models, parameters between trucking fuel intensity and truck fuel shown in table 1. The results are typical with price is very poor, but the correlation between those found in the literature (Goodwin 1992). the ratio of trucking energy to GDP and Income elasticities for car ownership near one trucking fuel price, shown in figure A.10, but falling as car ownership approaches 100 suggests that trucking energy depends percent among licensed drivers; car use somewhat on price, both through modal elasticities w.r.t. fuel prices relatively low (0.2- intensity and through total volume of truck 0.4); fuel intensity of the car stock more elastic freight shipped. Thus in a cross-national (0.4-0.7). That the influence of national comparison, prices appear to affect both fuel population density appears so low is likely a intensity and fuel use in most cases. If fuel use function of the local-nature of most car use, for cars in figure All were normalized by GDP where only Japan is truly constrained by very high densities. Figure A.9. Car fuel prices and fuel use in 1993 The"tax parameter"modeled the F Fuel Use, mj/veh-km GJ per capit 50 relative taxation of new cars based only 4 on a approximation, and found ++ relatively small effects, mostly through N o the impact of the size of the car on fuel O + consumption. In fact, it was estimated that one dollar of taxation on fuel 2*. would lower fuel used in the car over its 1 - - Fuel Use/Capita ----. 10 life at least four times more than one + Fuel Use/km dollar added to the price of a new car. 0- - 10 0.2 0.3 0.4 0.5 0.6 0.7 0.8 Why was there not a greater price effect Weighted Average Fuel Price on automobile fuel use in IEA Source: International Energy Agency and Lawrence Berkeley National. Climate Change Series 59 Transportation and CO2Emissions: Flexing the Idnk -A Path for the World Bank Figure A. 10. Truck freight energy intensities in seven international companies industrialized countries sharing largely the same MJ trucks per GDP 1985 PPP US$ technologies. Within a country 6 fleet-average automobile size 5 or weight, power, and features differentiate the points for fuel 4 intensity. Vehicle ownership- and use-taxation, including 3 the impact of company car taxation, certainly explain some of the scatter, since L -these policies affect not only 1970) 1975 1980 1985 1990 1995 the ultimate cost of fuel to the --Denmark -Sweden -W. Germany+Japan -US -UK -&Netherlands user but the cost of using the Includes light trucks vehicle as well, which is much Source: Lawrence Berkeley National Laboratory. more significant (Schipper and Erickson 1995). Thus one key Figure A. I. On-road automobile fuel intensity in OECD countries option affecting GHG Weighted Average of Gasoline and Diesel Fuel Intensity emissions from travel, the Liters per 100 km Gallons per 100 miles characteristics of vehicles, is already shaped by fiscal 164- 6.9 policies in every IEA country and likely in every developing -- --country as well. -4.9 For travel, higher per capita 1- travel (activity) increased .- - II JL -I emissions in every country 1 - and group depicted with 6 2.9 Laspeyres indices (figure A.12). Modal shifts towards U.S 4- Japan W.Germany -w France more energy-intensive modes Italy * U.K ~ Netherlands -v Canada (cars, air) increases emissions Includes diesel, LPG for all countries; household light trucks for U.S. and U.K. by as much as 30 percent (in Gasoline, diesel, and LPG Included at energy. Japan), but in most countries instead of population, the U.S. point would fall iby up to 5 percent. Falling stmewad o er pou to the U.Se. piwuenergy intensities of vehicles themselves somewhat closer into the line reduced emissions in more than half of the The fact that car fleet fuel intensities appear to countries, but falling load factors in cars (and be almost linearly related to fuel prices, and bus and rail in many countries) offset this that U.S. vehicle fuel intensity in 1993 appears restraint, leading to a net increase in energy use consistent with the points from the other (and CO2 emissions) per passenger-km in cars. countries is striking. This suggests that The only major exception was the United States automobile fuel intensity is a function of fuel (and Canada, not shown). Shifts in fuel mix and price. But automobile efficiency in a technical utility mix had almost no impact, for two sense now varies little among countries (cf. reasons. First, the emissions per unit of energy figure A.11).Vehicles are produced by released from diesel and gasoline are very close, 60 Environment Department Papers Annex 1 Transportation Activity, Energy Use, and Emissions in TEA Countries -A Brief Review Figure A. 12. Changes in CO2 emissions from with travel, the modal energy intensities of travel, 1973-93/95 freight (energy/ton-km) reduced emissions in more than half the countries. The impacts of 200 changes in fuel mix (including fuels used to generate electricity) were again small, except where railroads underwent significant 1oo- electrification and electricity was generated by low-CO2 sources. Unlike travel, (electric) rail a plays a more prominent role in carrying freight. 0- US 1995 Japan 1995 EUR-81993 Figure A. 13. Changes in carbon emissions for Changes in freight, 1973-1992 C Actual E Act Modl Mix I Effect n Enmisions iMM for Each Factor 175- - particularly if the higher emissions in refining II 125- of gasoline are included (Delucchi 1997, private 100- communication) Second, the role of electricity 7 for travel (rail, trams) is so small that even the so almost complete transition away from fossil 2s fuels in some countries (Sweden, France, and a A". Finland) had only a very small impact on us .an EU- emissions from this sector. Thus by 1993, Change In behavioral factors had clearly increased COM 2Source: Schipper Schol, and Prie 1997. emissions, even after over a decade of relatively Still, eisions ard frigh adm td high road fuel prices from 1973 to 1985. Still, emissions from freight are dominated by Closer examination of trends in automobile those from trucks, soit is this mode, like cars, characteristics shows further evidence of this whose evolution is the most important for that finding. While the average tested fuel use per of the sector's emissions. kilometer driven and per kilogram of new cars Looking more closely at the coupling between fell dramatically in all countries, the weight energy and trucking reveals many surprises. (and performance) of new cars increased in all Figure A.13 shows a wide spread in the ratio of countries, absorbing much of the effects of fuel use to ton-km hauled, calculated to include improved technology. Worsening driving local freight (and light trucks or vans) as well as conditions - both more high-speed vacation intercity haulage. Since the trucks are produced driving and more driving in congested areas - by large, international firms, difference between raised fuel use/km above what tests would the figures shown cannot be very much predict (Schipper and Tax 1994). attributed to actual differences in the energy efficiency of trucks. Instead the differences arise Figure A.13 decomposes changes in CO2 largely because of differences in fleet mix emissions for freight in the same way as for (between large, medium, and light trucks), travel. In all of the countries studied, absolute differences in traffic, and above all differences emissions increased, and in half of the countries in the capacity utilization of each kind of truck studied, this increase was greater than that of (Schipper, Scholl, and Price 1997). Empty GDP. In a majority of countries, modal shifts backhauls can account for as much as 45 (towards trucking) increased emissions, often percent of large-truck km in some European by more than was the case for travel. In contrast countries. Actual figures for fuel use/vehicle km Climate Change Series 61 Transportation and CO, Emissions: Flexing the Link - A Path for the World Bank of trucks by size class show declines in all registered to obtain total km driven. Noting countries, but not always in countries where the how uncertain total number of cars registered modal intensities fell. Again, it is changes in the can be even in very mature countries, the loading and utilization of trucks that affect the huge gap between test and actual fuel overall evolution of each country's freight economy, and above all the importance of modal intensity the most. These changes have gasoline to trucks and even buses in lower explanations in the need for just-in time income countries, they warned that such deliveries, the rising value (as opposed to derivations could not give reliable estimates tonnage) of freight, and above all the of elasticities or even fuel consumption. They importance of other costs besides those of fuel also showed that even in a majority of lEA importancecountries, growth in" gasoline" widely in determining the optimal use of trucks. cutis rwhi"gsln"wdl misrepresents growth in automobile fuels, while growth in diesel also misrepresents Endno te .growth in trucking fuel. For the Johansson and Schipper study,"quasi-independently" Al. This is not a trivial issue. As Schipper, determined figures for fuel economy, fuel use, Figueroa, Dolan and Espey (1993) showed, and distance driven were obtained from there are many dangerous circularities in the national sources where it was clear that two way data are obtained. They found, for of the three were measured or estimated example, that Wheaton's (1982) classic study independently and the third derived. For the that included car use in many LDCs used number of ears (and where significantl vans gasoline use divided by the test fuel economy and light trucks used as household of a few models and the number of cars transportation vehicles) they used mid-year averages of vehicles actually in use. 62 Environment Department Fapers Annex 2 Technologies -Vehicles and Fuels: The Potential Is There, but What Does It Cost? Best Technologies: Vehicles. These are hard to vehicles themselves have so many technical, define without an objective function. Cars that environmental, and market requirements. run on solar cells have been crossing Australia and the United States in competitions for years. More difficult, marginal technology costs for Do these define"best practices?" Very efficient vehicles are hard to pin down in order to diesel engines using direct injection of fuel (so calculate cost-benefit ratios, even assuming called "TDI") are now very popular in Europe, near-ideal pricing of externalities. The reason is and reduce fuel use compared to ordinary that it is difficult to pin point the"marginal diesels of the same power by as much as 30 technology" and its impacts. For example, the percent, although there are problems with NOx U.S. National Academy of Sciences found that emissions. Chrysler is developing a gasoline- new U.S. cars could average about 34 MPG (7 11 run fuel cell system (based on an on-board 100 km) in the early 1990s in a"cost effective" reformer, more recently announced by Arthur way. A study by Ross and Decicco suggested D. Little), while Daimler Benz is probing other over 40 MPG (6 1/100km), while a study approaches to fuel cells, buying a fuel cell commissioned by the auto industry pointed company and announcing plans to build a fuel- towards 31 MPG (7.75 1/100 km). Who was cell Mercedes. Ford Motor Co. has since bought right? Each considered packages of individual into the same fuel-cell manufacturer, Ballard options. And the endless arguments over the Systems. Neither device has on-board welfare costs of achieving the U.S. new test combustion and so there are no thermal losses average of 28 MPG (8.2 1/100 km) through associated with these systems. Others advocate imposition of CAFE standards revolve very battery-based electric drive (the GM EV-1), much over measuring the "costs"of reducing combined combustion/electric hybrids (Toyota, fuel consumption, reductions in weight and Nissan, for example). Mitsubushi, Honda, and power (much of which was won back in the Nissan also place a great deal of hope on direct longer term), and sacrifices of consumer injection gasoline engines that would reduce surplus. "Costs"of new metro and rail systems, fuel use to nearly parity with diesels for the new highways are always uncertain, but the same (or better) performance. Which are best cloudiness of the incremental costs of saving depends both on the full costs to the users as energy in automobiles remain a source of well as the balance of externalities. If a Honda controversy. Thus the cost of reducing GHG Lean bum gasoline engine reduces CO2 emissions from changing vehicles is hard to emissions/km 25 percent over those of a similar estimate. The same is true for infrastructure Honda without the engine in question, but developments. And estimating both real costs NOx emissions are higher, is the lean burn of changing how vehicles are designed and "better?" And what if the NOx is eliminated produced, as well as what they will ultimately but the performance is not as good? In other cost in the marketplace priced so consumers words, it is very difficult to define"best"for will buy them, remains the largest economic most kinds of vehicle technologies because the cloud over the promise of technology. Climate Change Series 63 Transportation and CO2 Emissions: Flexing the Link -A Path for the World Bank To be sure there are even more advanced by compressor efficiency, houses only differing proposals, such as Amory Lovins'"Hypercars" by the extra pane of glass and molecular that promise to use very little fuel indeed coating on windows that filters or traps heat), (Lovins, Lovins, and Weizacker 1997). But just we might say that the only criterion is whether how little fuel these really would need, or the extra cost pays back in a sufficiently quick indeed which of his many interesting ideas will time to interest the consumer. But if a consumer find their way into real cars in ways that saves has a limited budget and liquidity significant amounts of fuel, remains to be seen. requirements, than an investment in more AUDI A6 Models (1997) 1.8 T turbo 2.4 Tiptronic 2.8 Quattro 1.9 TDI ENGINE 4 cyI. 20 valve V 6, 30 valve V 6, 30 valve 4 cyl. 8 valve FATING 150@5700 165 @ 6 000 193@ 6 000 I10@ 4 500 (HP to rpm) TORQUE 210 between 230 @ 3 200 280 @ 3 200 235 @ I 900 (Nm to rpm) I 750-4 600 ACCELERATION 9.4 10.2 7.9 12.3 0 to 100 kmh SPEED 217 217 234 194 (km/h) CONSUMPTION 5.9/7.8/10.1 6.2/7.9/12.4 7/8.7/13.1 4/5.3/6.2 at 90/120/town (1/ 100) PATIO 9 8.8 7.9 12.4 weight/power (kg/hp) Pating for French Taxes 7hp 14 hp 14 hp 5 hp Further adding to the difficulty is defining the windows might boost her welfare more than "base case."For example, cars are becoming the investment in more efficient glazing. Which more powerful, as noted earlier. On the one of the cars is"best practices?" Clearly we need a hand, the greater the fuel consumption, the model that maximizes surplus or welfare, not more a technology that saves a given share of simply a method for calculating the payback fuel consumption pays back. But if over the from energy saving. For developing countries next ten years cars would have increased fuel this approach is important because growing consumption 5-10 percent to accommodate incomes tends to mean ability to afford larger more power and features, than an investment and more fuel-intensive cars, all else equal. that saved 10 percent of the fuel only returns fuel consumption to where it was today And Best Technologies: Alternative Fuels. Even modest-sized cars in Europe are now being among alternative fuels the definition of "best" offered with air conditioning, which on a small is difficult because of the differences in service. car can increase fuel consumption 10 percent Cars using liquefied petroleum gas (LPG) or when operating. Thus the base case is difficult natural gas (NG) instead of gasoline give to define. More bluntly, we are losing ground equivalent performance but sacrifice consider slowly as consumers appear to derive greater space for storage tanks, and NG vehicles have surplus from more power and features than lower range than gasoline ones. Electric cost-effective approaches to lower fuel bills. vehicles are even less straightforward to compare with an internal combustion engine This point bears explanation. If there are truly (ICE). No one claims that a battery-driven equivalent choices (refrigerators differing only electric car is the same as that for an ICE, but 64 Environment Department Papers Annex 2 Technologies -Vehicles and Fuels: The Potential Is There, but What Does It Cost? the best electric cars perform as well as small or alternative fuel is truly low in carbon, that is, modest ICE except for range between charges. true biomass, or hydrogen produced from solar, The greenhouse characteristics of electric renewables, or nuclear sources. If we express vehicles, however, depend critically on a full the marginal cost of a new fuel in terms of fuel cycle analysis of both the gasoline and $/gallon of gasoline equivalent of fuel, then we electricity, the charging routine of the batteries, can see how much more the new fuel costs and so forth. If the electricity is produced from relative to present costs, about $0.60-0.80 at the present mixes (coal, some oil or gas) it is wholesale, pre-tax price. Of course, this requires possible that there is no greenhouse benefit at us to model differences in both well-defined all if the electric is compared with a small ICE. fixed costs (like the cost of a natural gas Hybrid electrics, by contrast, would easily reach cylinder in the car) as well as costs harder to the performance of ICEs, as would likely fuel define, like the value of the loss of space to the cell vehicles (FC), and each would offer greater cylinder. If we compare these incremental costs overall efficiency, that is, lower net GHG to the range of likely reductions in CO2 emissions. But hybrids and FC are still under emissions, we can arrive at shadow prices of development. Should the task of the car be carbon. But these also tend to be large. Since redefined to fit the alternative? And energy use few believe that politicians will accept the value in all these alternatives depends on driver of reducing carbon emissions exceeds $30/ton behavior. What should the analyst assume? To of carbon (approximately $100/ton of CO2), we be sure, true biofuels (that is, ones without a only have a modest incremental cost we can great amount of fossil fuels hidden in the afford to pay for alternative fuels. In terms of harvesting and processing) would give a real the cost per liter of gasoline equivalent, this is reduction in GHG emissions, but these are still usually small compared with retail price levels elusive at costs competitive with gasoline or in W. Europe, for example. Of course, advocates diesel. of alternative fuels point to the cost reductions they expect as particular options become Some analysts defined a shadow cost of popular. gasoline or carbon that makes the alternative "cheaper." Sperling and others (1993) took this There is another perspective on this compari- approach, using technologies of the early 1990s son. With gasoline prices at approximately that included battery electrics, various kinds of $1.25/liter, new cars in Italy on average are biomass, natural gas, and other fuels. He found significantly smaller and less powerful than in that were the shadow value of gasoline not the United States, and consume one third less used as much as $1.00/gallon over its market fuel/km. The average new car in Italy still price, alternatives would pay off. The price of outperforms"average" electric cars. Does that electricity itself was almost irrelevant to the mean that with an even higher market price for comparison, because most of the cost of using gasoline of, say $2/liter, electric cars would slide an electric car is for the higher fixed cost.A2 For into the market with much more ease? We do other fuels, fuel costs mattered, but so did other not know. But it is true that if drivers in vehicle costs. Southern California, where a certain fraction of new cars sold by 2003 must be electric, faced With present technologies, the incremental significantly higher fuel prices, their choices for costs of using alternative fuels tend to be new cars would match more closely what is significantly higher than for gasoline or diesel available in electrics, and they might embrace on an equal energy content basis. Expressed as the loss of trunk space and range to purchase differentials per unit of carbon not released, CNG vehicles. Or they might choose less fuel- these differentials become very large unless the intensive gasoline vehicles. In other words, the Climate Change Series 65 Transportation and CO2 Emissions: FleXing the Link -A Path for the World Bank first step towards any alternative fuels that first declaring the winner, it might be better to affect the performance of cars must be a pricing better define the loser! strategy to first eke some fuel savings out of ICEs running on gasoline or diesel fuels. This Endnote strategy also defines the shadow value of reducing gasoline or diesel use by means of A2. This invites the prospect of somewhat higher alternative fuels, and gives both fuel and. car driving levels, which we argue farther on is supplies something to shoot at. Unfortunately, only a small effect in developed countries but most present-day strategies rely on edicts or tax could be a significant effect in developing breaks that favor the alternatives: Rather than countries.. 66 Environment Department Papers References Ararki,Y., General Manager, Powertrain Operations Eskeland, G.S., and S. 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