Presentation by Professor Austin Smyth Transport Research Institute, Napier University E dinburgh [email protected] Scotland’s National Transport Strategy

Presentation by

Professor Austin SmythTransport Research Institute,

Napier University [email protected]

Scotland’s National Transport Strategy Dunblane 30th May 2006

Can growth be achieved without an associated rise in traffic emissions?


‘In developing our transport strategy, we will need to put in place a set of coherent policies. ……developing a transport system that is compatible with economic growth, sustainable development, equality, social inclusion and health improvement principles, will be the major challenges of the NTS.’ (Scotland's National transport strategy: A Consultation)


Can growth be achieved without an associated rise in traffic emissions? …..or in the jargon

Decoupling traffic growth from economic growth-Is this plausible ?

Transport and Economic TrendsThe last 40 years have seen growth in both the national economy, as measured by GDP, and demand for transport.

In the case of freight, road transport has become the predominant mode of moving goods in the UK over the last 40 years.

Also rapid rise in air transport both freight and passengers.

Many transport economists and politicians still argue that transport growth is inextricably linked with economic growth. However, research results clearly indicate that there is no linear relationship between the two.

Transport and the Economy:

Decoupling traffic growth from economic growth-is this plausible ?

The economic expansion of an economy (economic growth) is typically associated with a corresponding increase in traffic levels.

A greater number of economically active people boost commuting and work-related travel and higher disposable incomes increase the amount of money that can be spent on transport.

Between 1970-1995 the average number of kilometres travelled per person per year has increased from 6293 to 12,337, a 96% increase.

Economic growth over the same period has totalled 72% (24% less than traffic).

As the transport intensity of an economy increases it becomes less efficient. The transport intensity of the UK is increasing. This is highlighted by the difference of 24% between traffic growth and economic growth 1970-1995.


Decoupling traffic growth from economic growth-is this plausible?

Past Projected 1970-1995 1998-2010 GDP 83% 43% Passenger Transport 112% 24%Freight Transport 71% 38%

Trends in transport and economic growth in EU countries expressed as a percentage (Stead et al, 2002)

The Nature of the Debate about Transport and the Economy

Business argues that an efficient transport network is vital to a strong economy

Some commentators argue there is scant evidence for a causal link between transport improvements and economic growth.

In developing Transport Strategies the following Questions and Trade Offs need to be addressed:

•Growth or Displacement?•Growth and the needs of the Global Environment•Globalisation, Transport Demand, Spatial Patterns of Development and the Environment•Growth and the distribution of Prosperity - Spatial and Demographic aspects

Macro-Level Relationship between Transport and the Economy

Do Transport Improvements Lead to Increased, or More Efficient, Economic Activity?

Conclusions about the effects of transport on the economy are strongly dependent on local circumstances.

Theory suggests that there are a number of important mechanisms by which transport improvements could, improve economic performance.


These mechanisms include:•Reorganisation or rationalisation of production, distribution and land use; •Effects on labour market catchment areas and hence on labour costs; •Increases in output resulting from lower costs of production; •Stimulation of inward investment; •Unlocking' inaccessible sites for development; and •Triggering growth which in turn stimulates further growth.


Geographical Aspects

Key aspect of the debate are the claims made about the impact of a transport project on a local area or region.

Some claims deal with issues of perception, of potential inward investors about the accessibility of particular parts of the country.

North Lanarkshire Council claimed success of Lanarkshire Enterprise Zone during 90’s in attracting investors compared with Clydebank Enterprise Zone can be explained by the different quality of road links serving the two areas.


Geographical Aspects

Initiatives to promote regeneration also recognise that the degree to which a transport scheme is complementary to other policy tools is essential to maximising the contribution of that scheme.

Transport improvements can also harm a local or regional economy, by exposing indigenous firms to competition from stronger rivals outside the area - the so-called 'two-way road' argument.

UK Department for Transport has conceded that in rural areas improved transport links could run counter to regeneration and other policy objectives.

Micro-Level Relationship between

Transport and the Economy

A transport improvement which reduces transport costs enables firms to sell their products more cheaply.

Parkinson pointed out transport costs were a small proportion of total production costs (5-10%).

Importance attached by business to the need for transport improvements has been questioned.

‘NITL Competitive Challenges: Chain Reactions’ on Business Competitiveness and the Role of the Supply

Chain on the Island of Ireland

Largely Macro Supply Chain Challenges

ROI NI45.5%

9.4%

10.8%

14.6%

7.0%

12.7%

Increased competition 52.8%

Globalisation 13.4%

Changes in industry / market 13.2%

Regulations / new legislation 6.9%

Currency 4.7%

Other 9.0%

Source: NITL Competitive Challenges: Chain Reactions (2005)

‘NITL Competitive Challenges: Chain Reactions’ (2005)

Largely Internal Supply Chain Challenges

ROI NICost reduction 53.6%

Wages/salary costs 35.4%

Product innovation 16.1%

Staff retention 13.1%

Lead time reduction 8.5%

Marketshare/state of business/customer base 8.0%

Introducing IT Systems 7.3%

Finding the right staff 5.3%

Other 17.8%

38.0%

19.9%

8.1%

17.5%

5.4%

7.1%

4.7%

9.8%

27.3%


‘NITL Competitive Challenges: Chain Reactions’ (2005) Critical Factors for Competitiveness

Customer service 64.6%

Product quality 54.3%

Product development/innovation 40.2%

Price competitiveness 33.8%

Strategic relationships/alliances 18.4%

Productivity 11.9%

Distribution channel effectiveness 11.9%

Intellectual capital/knowledge management 11.3%

Employee retention/recruitment 10.3%

Market growth 9.3%

Supplier performance 5.2%

Other 11.2%

66.0%

56.6%

33.0%

35.4%

16.2%

15.5%

8.8%

7.7%

12.1%

8.1%

7.7%

12.1%

ROI NI


Satisfaction with Transport Systems

VerydissatisfiedFairlydissatisfiedNeitherFairlysatisfiedVerysatisfied

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Passenger air services

International transport services freight/express sea

International transport services freight/express air

Transport infrastructure within the country

Freight transport services within the country

Public transport services within the country

Total

ROI

NI

VerydissatisfiedFairlydissatisfiedNeitherFairlysatisfiedVerysatisfied

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Passenger air services

International transport services freight/express sea

International transport services freight/express air

Transport infrastructure within the country

Freight transport services within the country

Public transport services within the country

Total

Transport and Business LocationTheoretical Expectations

Changes in transport ‘costs’ have a range of potential economic effects:•the location decisions of firms;•their influence on regional patterns of commerce;•incentives to invest and to innovate;•the commuting and migration decisions of households

Porter's model of competitiveness highlights the interdependence of conditions necessary to attract and sustain competitive businesses.

Transport and Business LocationTheoretical Expectations

Competitiveness theory argues transport provision in an area increases the effective market size of an area and increases competition.

Transport can affect business location through: •financial costs for goods transport; •relative time costs and savings; •certainty/reliability of travel time; •the need to physically meet customers and suppliers; and •staff and customer travel costs.

The Drivers Of Business LocationKey Evidence

Empirical research highlights access to markets and availability of skilled labour, sufficient business accommodation and transport links as key drivers of business location.

The evidence suggests that transport is a necessary, but not sufficient condition in determining business location.

When combined with other measures, and integrated into part of a business development programme, transport can help to influence location.

The Drivers Of Business LocationKey Evidence

The evidence for road transport alone to attract business is mixed - some research suggests it can have negative effects in certain circumstances.

Businesses change location in discrete steps. Hence (re)location responses to changes in transport costs will occur only after a substantial cost saving threshold has been reached.

Transport infrastructure is likely to be relatively more influential at local levels of (re)location than at broader levels, where other factors may be relatively more significant.

Business Organisation and TechnologyKey evidence

Changes in business operations affect the role of transport in influencing location.

Tighter delivery and stockholding through practices such as Just-in-Time (JIT) and increasing demand for added value in components increase the logistical demands of businesses.

Outsourcing of many transport functions to third party firms and increased demand for part-assembled components has elevated the importance of logistics businesses in determining the location of other firms, reducing the direct effect of transport infrastructure on manufacturing and service firms.

Business CharacteristicsKey evidence

In the UK, air transport has greater influence on location of foreign investors and business services, whereas road transport has a larger influence on domestic investment, light manufacturing and commercial businesses such as retailers.

Air transport investment can be used attract foreign inward investment. It appears to be important in promoting the perceived accessibility of an area

Labour Supply, Travel To Work and Social Inclusion

Key evidence

Transport investment shown to increase workplace accessibility and therefore the labour market size and reduce job search costs.

Labour supply is often one of the most important factors in business location, transport can be used as a tool to boost labour supply.

Implications for social policy are also centred on accessibility - certain groups (e.g. those with dependants, part time or low paid workers etc.) are less able and willing to travel far to work.

Spatial ScaleKey Evidence

Transport investment is likely to influence business location at local or intra-regional level, rather than generating regional or national growth.

Evidence transport policies are more influential at influencing intra regional and city level location decisions than those on a wider scale.

Congestion is major problem to be tackled in urban areas - leads to unreliability of trips, adds to business costs and can drive business out of city centre locations.

Transport policies moving business into cities are most effective if combined with other urban policies.

Growth versus DisplacementKey evidence

Policies aimed at inducing business to move from high to low growth areas can have positive effects for both areas.

There is a lack of consensus on whether building transport infrastructure into low growth areas would be significantly helpful.

Evidence that large-scale transport infrastructure policies successful in supporting growth in under-developed regions, but relatively ineffective in stimulating new growth.

Investment in a monopoly situation will bring competition and attract business, but an already competitive area may not improve and suffer from externalities such as pollution and congestion.


Now the question we posed at the beginning let us return to

Can Economic Growth be 'Decoupled' from Traffic Growth?

Traffic has been growing faster than the economy as a whole.

Result is that 'transport intensity' of the economy has been increasing, i.e., each unit of output is associated with a greater amount of movement of people or goods.

Private car-kilometres, Private car CO2 emissions, and household spending, 1990 to 2003

Road transport, CO2, NOx, PM10 emissions from road transport and Gross Domestic Product, 1990 to 2003

Road freight, Heavy Goods Vehicle (HGV) CO2 emissions, freight kilometres, freight tonnes and Gross Domestic Product, 1990 to 2003

Summary of points made in SACTRA 1999 report on 'Transport and the Economy':

Initial transport related impacts of transport improvements are converted to economic impacts via, for example,

rationalisation of production/distribution/land use, effects on labour costs, increased output, inward investment, unlocking inaccessible sites for development, triggering growth which stimulates further growth

Policies intended to change volume of traffic that will arise from any particular level of economic activity are feasible, in principle.

Summary of points made in SACTRA 1999 report on 'Transport and the Economy':

Reducing traffic levels can contribute to economic performance when transport prices are below marginal social costs (e.g. due to congestion/environmental impacts)

If transport prices are too low due to uncharged congestion then a transport improvement could lead to additional costs for the economy.

Conversely, if transport prices are too high due to monopoly power then a transport improvement, which successfully opens the area to external competition, could lead to additional benefits for the economy

Optimal pricing often does not exist, so assessment of price conditions is vital to allow appraisal to identify conditions in which transport improvements may assist the promotion of economic growth


Questions and Trade Offs

In developing Transport Strategies and addressing the question Can Economic Growth be 'Decoupled' from Traffic Growth? the following Trade Offs need to be addressed:

•Growth or Displacement?•Growth and the needs of the Global Environment•Globalisation, Transport Demand, Spatial Patterns of Development and the Environment•Growth and the distribution of Prosperity - Spatial and Demographic aspects

Presentation by

Professor Austin SmythTransport Research Institute,

Napier University [email protected]

*


Can growth be achieved without an associated rise in traffic emissions?

Documents

Presentation by Professor Austin Smyth Transport Research Institute, Napier University E dinburgh [email protected] Scotland’s National Transport Strategy