Can Transport Continue to Drive Development in the Face of Carbon and Resource Constraints?

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Transport drives development: It leads agricultural producers out of subsistence by linking them to markets, enables regions and nations to become more competitive, and makes cities more productive.  But transport is also a big polluter, contributing 20 percent of global energy-related CO2 emissions.  These emissions have grown by 1.7 percent annually since 2000, with 60 percent of the increase in non-OECD countries where economic growth has been accompanied by a surge in demand for individual motor vehicles.

Are attempts to change this trend bad for development? Recent historical experience tells us otherwise. Countries with the lowest emissions per passenger-km are the ‘development miracles’ of recent decades: Japan, Korea, Singapore, and Hong Kong are all champions in transport fuel-efficiency.

So what would a low-emission future look like? Some see rapid improvements in engine technology as the path to de-carbonization. (Source: IEA) The IPCC, however, finds that technical breakthroughs such as mass affordability of fuel cell cars are unlikely to arrive soon. If so, emission reductions will have to be achieved by a modal change, emphasizing mass transit, railways, and inland water transport rather than individual motorization and aviation.

Cover image of Turning the Right Corner As we document in a new study, Turning the Right Corner, less action has been taken on reducing GHG emissions in the transport sector than in other sectors. For instance, only 31 of 7,414 projects registered with the Clean Development Mechanism (about 0.4 percent) are in transport. This reflects the lack of alternative technologies and the high costs of a technology switch compared to other sectors.

There are other barriers to action: A reduction in transport emissions cannot be achieved by discretionary policies to replace fossil fuel use, as in electricity production. Supplying low-emission transport services does not guarantee that citizens will want to use them. And demand-side interventions which only focus on containing GHG emissions have limited effect. For example, implementing the Stern review’s (high) carbon price estimate of $300 per ton of carbon would increase the US gasoline price by $0.70 per gallon – not enough to change mobility patterns.

Bringing the external, social costs of transport – air pollution, road safety, and congestion – into the equation can help reposition the sector in overall climate policy. The link between local GHG emissions and health costs is increasingly recognized. The IPCC notes that more than 20 percent of global warming is due to emissions of black carbon. Black carbon emissions from the burning of diesel in transport lead to particulates that cause respiratory diseases and increase the risk of lung cancer. The Global Burden of Disease study estimates that nearly 6.4 million years of healthy life are lost due to long-term exposure to particulates from transport emissions. Road traffic crashes cause nearly 1.3 million deaths each year. And congestion costs billions of dollars in lost time and productivity. (Source: Vanderbilt, T. (2008). Traffic. New York)

A comprehensive reform agenda for transport, taking these aspects into account, would generate higher benefits and emission reductions than action focused on emission reductions alone. In general, GHG emissions are not the most pressing problem in reducing the social costs of transport. For example, the estimated cost of expected damages from climate change for the Washington, DC area is only 6 dollar cents per gallon of gasoline. The costs from congestion ($1.05 per gallon), road safety (63 cents), and local air pollution (42 cents) are all much higher. (Source: Parry, I., Walls, M., & Harrington, W. (2007). Automobile externalities and policies. Journal of Economic Literature, 95, 373-399)

Would reforms lead to higher transport costs, putting the role of transport for development at risk? Cleaner engines and fuels would increase transport costs for households, as we would have to replace our vehicles more often to meet tighter technical standards. The IEA estimates that such a policy perspective would cost households $4.5 trillion between now and 2030. The cost of new mobility and settlement patterns to reduce the GHG emissions from transport would vary country-to-country. Where past infrastructure investment has facilitated individual car use, the modal shift would imply investment in a new transport system, leading to "stranded assets" in the old system. Countries in this situation will face difficult and costly choices.

Developing countries can pre-empt such a development by avoiding the developed countries’ path of infrastructure investment. They can respond to future fossil fuel and carbon prices by investing in low-emission transport and guiding user behavior. This will reduce congestion and health costs in the short-run and lower transport costs in the long-run.

Fiscal incentives are key to achieving the transition to a low-carbon transport sector, not least given the reduced fiscal space in many countries. A first step is to reduce gasoline and diesel subsidies. Implementing the carbon price recommended by the Stern review would lead to fiscal revenues in the US of about $100 bn. The revenues from pricing the negative impacts of transport would help lower taxes that stand in the way of development and poverty reduction. Low-emission transport could thus provide a double dividend of increasing people’s well-being and supporting income growth.



Andreas Kopp

Chapter Author, World Development Report 2010

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