Transportation costs and the impact on the environment

The cost of taking public transport keeps rising while the costs of driving and flying keep falling. A new approach is needed if we’re going to encourage people to make low carbon choices.

Government departments are gearing up for the challenge of tackling climate change. The Department for Transport is preparing for carbon budgets, with the Committee on Climate Change saying that surface transport must make a significant contribution to cutting emissions. There has never been a better time to rethink Government pricing policy.

So far, the Government has made little attempt to ensure that price reflects carbon. In fact, Government pricing policy (or the lack of it) has made it less affordable for people to travel by public transport and more affordable for them to travel by car or plane. From 1997 to 2007, the cost of motoring has decreased in real terms by 8%, while bus fares have risen by 13% and train fares have risen by 5%.

In ‘Delivering a Sustainable Transport System’, Geoff Hoon advocates tackling climate change in the most economically efficient manner by ‘preserving freedom of choice, facing people with the true carbon cost of those choices….helping people reduce their need to travel or switch to lower-carbon modes’.

At the moment, these words don’t mean a lot to people making decisions about how to get where they want to go. The true carbon cost has nothing to do with the actual price, so even people who want to be green find it hard to do so.

Going from London to Scotland for example, the plane can often be cheaper than the train, even though it produces around seven times more carbon. Taking the family in the car can often be cheaper than taking the bus, even though buses produce as little as one-third of the carbon.

Why is the green option the expensive one?

The bus industry has been hit by increasing costs: wages, insurance, fuel and the cost of congestion. CFIT’s report ‘cost issues in public transport operation’ suggests that this trend will continue in the future: this will make it even harder to maintain good service frequencies and affordable fares. The report concluded ‘the likelihood is that there will be further divergence in real terms of public transport fares and private motoring costs. This will drive travel choices in the opposite direction to that desired by Government.’ Free travel for over 60s and disabled people is a good step forward, but unless the Government invests in affordable fares for the rest of the population, there may not be anyone else on the buses in 10 years time.

Government policy on rail fares is to let passengers pay more. Regulated rail fares can rise by RPI+1, so they are above inflation increases every year. In ‘Delivering a Sustainable Railway’, the Government outlined its plan to reduce public spending on the railways by around £1.5 billion by 2014. Hundreds of people have told us that affordable rail is vital to them, many criticising the Government’s approach. And that means affordable rail for all journeys: there is a huge difference between the cost of buying train tickets in advance and on the day. Our fortune teller, ‘Mystic Peg’, visited stations last year offering to predict future journeys, to make the point that people can’t and shouldn’t have to plan weeks ahead to get the best deals.

How does current policy affect people’s lives?

People who don’t have a car, whether for environmental reasons or because they can’t afford one, are not supported in their decision by Government policy. Instead, they are hit by above-inflation increases in public transport fares.

For people who have invested in a car, the marginal cost of each journey is relatively small, so petrol can often cost less than the public transport fare. The cost of buying a car is falling and car ownership is rising, so that more and more people aren’t reliant on public transport. High fares will discourage them from using it when their car is a cheaper alternative.

Public transport has enormous potential to help the Government cut carbon emissions from transport through modal shift, but this won’t happen when fares are high and rising. The economic incentives are pushing people in the wrong direction.

Aiming to find solutions to this problem, Campaign for Better Transport recently commissioned research by Steer Davies Gleave on Transport Costs and Carbon Emissions.

SDG’s task was to:

• ‘Assess the extent to which demand for public transport has been suppressed as a result of the level of public transport fares relative to motoring costs’
• ‘Estimate what might be achieved in terms of modal shift and reductions in carbon emissions through changes in the price of using different types of transport’
• ‘Highlight the policy mechanisms that might be used to influence prices and help secure the carbon reduction targets for the transport sector as a whole’

The results make a strong case for proactive Government policy in an area which has not been the subject of much debate.

SDG concluded that currently, cost trends are working against Government attempts to cut carbon emissions. Public transport is a low-carbon way to travel, but the cost is discouraging people from using it. Fares keep rising in real terms and in the UK are approximately 20% above the European average. This has suppressed demand for bus and rail travel.

Motoring and aviation are high carbon, but falling prices mean people are using these modes more. The overall cost of motoring is falling in real terms (despite fluctuating petrol prices); the price of one-way flights from UK airports has, on average, halved in the last 10 years.

SDG suggested that the Government has an opportunity to develop a holistic pricing policy that gives people financial incentives to choose low-carbon transport. Relative transport prices have led to the UK having the highest modal share for car of all the EU 15 countries (together with the Netherlands). Encouraging people to choose public transport rather than driving and flying would reduce traffic levels, congestion and carbon emissions. The research shows that if public transport fares had been reduced by 20% (to the European average) in 2000, bus and rail travel combined might now be 120 billion passenger-km, an increase of 10 billion or approximately 9%. Reducing fares today by 20% could increase bus travel by 13% and rail travel by 17% by 2015.

SDG modelled the impacts of a package of pricing measures, involving cutting bus and rail fares and increasing motoring and aviation taxation. This package could increase public transport use and reduce the car’s modal share of travel from 87% to around 78% by 2025. Taxing aviation fuel would make rail more competitive. Overall, carbon emissions from transport could be reduced by 16 million tonnes a year by 2025, a reduction of 13% compared to the levels implied by Government traffic forecasts.

SDG concluded that:

‘These outcomes support the view that, in practice, relative transport prices in the UK have tended to encourage car ownership and use and suppress the demand for public transport. They also suggest that Government does not apply a holistic pricing policy across transport modes. Policy needs to achieve a more holistic, rebalancing of prices, recognising the different contribution of each transport mode to carbon emissions.’

SDG suggested this rebalancing should have at least four main elements:

• ‘In the case of car travel, fuel duty should be used to ensure steadily increasing motoring fuel prices over the long term, creating an expectation among motorists that car use will become gradually more expensive at the margin and encouraging the use of other modes and more sustainable land use patterns. In the short term, duty could be used to stabilise the overall fuel price, postponing real increases for the duration of the recession but offsetting the substantial fall in prices that can be expected to accompany an economic downturn. In addition, congestion charging, parking and other policies applied within city regions, possibly supported by taxation of free parking provided by employers, should be used to both manage city centre traffic and provide revenue sources to fund improvements in public transport.’
• ‘Bus and light rail subsidies at both the national and local level should be targeted to achieve the maximum possible abstraction from car use and ensure improved service quality. Such measures can be usefully supplemented with the deployment of smartcard and other technology that makes public transport much simpler and more convenient for passengers to use. Policies of this kind can be expected to benefit lower income groups while encouraging those on higher incomes to consider bus and light rail services for local journeys.’
• ‘Current policy to increase the share of passenger revenue in overall rail funding should be revisited. Specifically, policy in respect of rail fares should be redefined to ensure that the real level of regulated fares remains at the current level. This would involve replacing the RPI+1 formula currently applied with RPI+0. In addition, DfT should work with train operators to enable them to offer a wider range of discounts to encourage greater rail travel on the part of those groups most willing and able to switch from car.’
• ‘In the case of aviation, the impact of the EU Emissions Trading Scheme on the demand for air travel is uncertain, not least because it will only apply to aviation from 2012. However, the introduction of the Aviation Duty in the UK affords a more immediate opportunity to use the price mechanism to reduce carbon emissions from domestic and international flights.’

Unless policies change, traffic, congestion and of course carbon emissions are forecast to increase. Current plans to improve vehicle efficiency won’t get us to our carbon targets; modal shift is needed. The evidence is that pricing changes could help us achieve that modal shift. Pricing is not the only thing needed, but it’s a key part of the picture.

Getting the prices right for different transport modes could help the Government to meet its carbon reduction targets. The relative prices of public transport, motoring and flying have an impact on demand, modal shares and carbon emissions. Carbon emissions could be cut substantially if the Government recognised the different contribution of each transport mode to carbon emissions, and provided financial incentives for people to choose low-carbon modes like public transport.