Identification of the Key Linkages Between Transport Intensity and Economic Growth

Deliverable D1

IDENTIFICATION OF THE KEY LINKAGES BETWEEN TRANSPORT INTENSITY AND ECONOMIC GROWTH

Status: Public

SPRITE

GRD1-1999-11067

(Separating the intensity of transport from economic growth)

Project Co-ordinator:

Institute for Transport Studies, University of Leeds

Partners:

Marcial Echenique and Partners Ltd

PROGNOS Transport

PROGNOS Economics/Energy

Dipartimento Idraulica, Trasporti, Strade, University of Rome La Sapienza

Date: 25th JULY 2000

PROJECT FUNDED BY THE EUROPEAN

COMMISSION UNDER THE

GROWTH PROGRAMME OF THE

5th FRAMEWORK PROGRAMME

ContentsC.1

Contents

Page
List of figures
List of tables
Executive summary
1 / Introduction / 1.1
2 / The linkages between transport and economic activity / 2.1
2.1 Introduction / 2.1
2.2 An overview of the linkages between transport and economic activity / 2.1
2.3 Economic and other influences on the demand for transport
2.3.1 Passenger transport
2.3.2 Freight transport / 2.1
2.2
2.3
2.4 The influence of transport on economic activity / 2.5
2.5 Conclusions / 2.7
3 / Review of transport trends across Europe / 3.1
3.1 Introduction / 3.1
3.2 Transport intensity / 3.1
3.3 Past trends in passenger transport
3.3.1 Past trends
3.3.2 Understanding the causes of past growth in passenger transport / 3.8
3.8
3.11
3.4 Past trends in freight transport
3.4.1 Past trends
3.4.2 Understanding the causes of past growth in freight transport / 3.17
3.17
3.20
3.5 Future trends in passenger transport growth
3.5.1 Transport related influences on road passenger travel demand
3.5.2 Substitutes for travel / 3.25
3.25
3.29
3.6 Future trends in freight transport growth / 3.29
4 / Experience of de-coupling output from economic growth in other sectors / 4.1
4.1 Review of experience from other sectors
4.1.1 Energy consumption and economic development
4.1.2 Developments by sector / 4.1
4.2
4.6
4.2 Implications for the transport sector / 4.10
5 / Conclusions / 5.1
5.1 Transport and economic activity / 5.1
5.2 Transport trends / 5.1
5.3 The de-coupling debate / 5.3
References
List of figures
3.1 / Index of GDP and passenger travel by mode in the EU15, 1970-95 / 3.3
3.2 / Index of GDP and freight transport by mode in the EU15, 1970-95 / 3.3
3.3 / Passenger travel by mode in the EU15, 1970-95 / 3.4
3.4 / Freight transport by mode in the EU15, 1970-95 / 3.4
3.5 / GDP and vehicle kilometres by vehicle type in the UK, 1952-97 / 3.5
3.6 / GDP and vehicle kilometres by vehicle type in pre-unification Germany, 1952-90 / 3.6
3.7 / GDP, goods lifted (tonnes) and goods moved (tonne-kilometres) by road in the UK, 1952-97 / 3.7
3.8 / GDP and goods moved (tonne-kilometres) in pre-unification Germany, 1950-90 / 3.7
3.9 / Annual number of journeys, kilometres travelled and travel time per person and GDP in the UK / 3.9
3.10 / Cars per 1000 inhabitants in selected EU15 countries and the USA, 1970-95 / 3.12
3.11 / Total journeys per person, per year for households with and without access to a car and by person type for the UK, 1995/97 / 3.13
3.12 / Modal share of journeys per person, per year for households with and without access to a car and by person type for the UK, 1995/97 / 3.13
3.13 / Real changes in the cost of transport in the UK, 1970-94 / 3.14
3.14 / Motor vehicle traffic growth on UK roads, 1987-97 / 3.16
3.15 / Annual road goods vehicle kilometres travelled, tonnes-lifted, average length of haul, tonne-kilometres and GDP in Great Britain, 1974-96 / 3.17
3.16a / Annual road tonnes-lifted, average length of haul and tonne-kilometres for Belgium, 1970-93 / 3.18
3.16b / Annual road tonnes-lifted, average length of haul and tonne-kilometres for the Netherlands, 1970-93 / 3.18
3.16c / Annual road tonnes-lifted, average length of haul and tonne-kilometres for France, 1970-93 / 3.19
3.16d / Annual road tonnes-lifted, average length of haul and tonne-kilometres for Germany, 1970-93 / 3.19
3.17a / Annual rail tonnes-lifted, average length of haul and tonne-kilometres for Belgium, 1970-93 / 3.20
3.17b / Annual rail tonnes-lifted, average length of haul and tonne-kilometres for the Netherlands, 1970-93 / 3.21
3.17c / Annual rail tonnes-lifted, average length of haul and tonne-kilometres for France, 1970-93 / 3.21
3.17d / Annual rail tonnes-lifted, average length of haul and tonne-kilometres for Italy, 1970-93 / 3.22
3.18 / Linking economic activity and road freight traffic / 3.24
4.1 / Primary energy consumption and GDP in the EU15, 1970-94 / 4.3
4.2 / Energy consumption, electricity consumption, CO2 emissions and GDP in the EU15, 1985-97 / 4.5
4.3 / Energy intensities by sector in the EU15, 1985-97 / 4.7
4.4 / Energy intensity of steel production in Western Germany, 1980-94 / 4.7
4.5 / Energy consumption of dishwashers in Western Germany, 1980-98 / 4.8
4.6 / Energy consumption and energy intensity of road transport in Germany, 1980-94 / 4.9
List of tables
3.1 / Comparison of changes in trip rates, over time, for selected European countries / 3.9
3.2 / Comparison of changes in average time spent per trip, over time, for selected European countries / 3.10
3.3 / Comparison of changes in average distances per trip, over time, for selected European Countries / 3.10
3.4 / Income and travel per person in EU countries in 1995 / 3.11
4.1 / Implications for transport sector de-coupling, drawn from the energy sector / 4.12

Executive summaryE.1

Executive summary

This is the first deliverable of the SPRITE (Separating the intensity of transport from economic growth) project. The project is looking at the observed correlation between economic growth and growth in the movement of people and goods. In particular it is seeking ways to separate transport from economic growth, that is, to reduce the transport intensity of the economy. In this respect, the project is very much concerned with the trade off between economic growth and environmental sustainability.

Transport and economic activity are interrelated; economic activity can influence the demand for transport but, at the same time, changes in the transport system can also influence economic activity. The demand for transport, particularly road transport, has increased strongly across EU countries in recent decades. Of particular note:

-growth in passenger car travel has been far more rapid than that in other surface modes and has also outpaced the rate of growth of economic activity;

-the major proportion of past passenger travel growth across all modes has arisen from increases in the length of trips rather than in the overall number of trips;

-the quantity of freight moved by road has grown far more rapidly than that moved by other modes and has also outpaced the rate of growth of economic activity and

-increases in the average length of haul have been the predominant source of growth in freight tonne-kilometres in recent decades.

The main factors that have encouraged the observed growth in road passenger and freight transport include:

-changes in the relative costs of transport by different modes;

-increased income levels;

-increased car availability;

-improvements in the supply of transport (speed, comfort, reliability);

-land use effects including changes in migration and commuting patterns;

-economic changes affecting the commodity structure of the economy;

-European integration and globalisation and

-changes in the operational behaviour of companies.

To date there is little evidence to suggest that the growth of transport demand has been or ever can be separated or ‘de-coupled’ from the rate of economic growth. Moreover, in some countries certain types of transport have historically grown at a much faster rate than that of the economy in general. De-coupling can, however, be said to have occurred in some other sectors of the economy. For example, taking the energy sector as a whole, it can be seen that the energy intensity of the EU economy has been systematically decreasing since at least the mid-1970s. Within the energy sector, though, the experience of individual sub-sectors has been more varied.

Though significant differences exist between the transport and energy sectors, there may be some lessons that can be drawn from experience gained in the energy sector. De-coupling there occurred chiefly as a result of:

-sometimes sharp increases in the cost of primary energy inputs;

-economic restructuring, leading to a relative decline in the economic importance of high energy using industries and

-regulation, driven by environmental pressures.

The response to these pressures and trends, by both households and firms, was to seek more energy efficient ways of meeting their own needs in terms of consumption or production. Firms also responded to regulatory and environmental pressures by switching to ‘cleaner’ energy producing or using technologies. Should the political will exist, there is no reason why similar pressures could not be applied in the transport sector.

The problem is that transport is different. To begin with, it is not straightforward to define exactly which transport ‘outputs’ should be de-coupled from economic growth. After all, the ability to travel easily and cheaply is essentially an economic benefit to individuals and firms. Should policy therefore be concerned to minimise travel only by private car and for leisure purposes, for example? Alternatively, perhaps it should just focus on travel at certain times of day and/or locations? These are questions that go to the heart of the ‘de-coupling’ debate.

In seeking to de-couple transport from economic growth it is important to bear in mind the ultimate objectives of policy. In other words, what policy makers are really seeking to minimise are the unwanted environmental and other side effects - the negative externalities - created by transport. This is a debate that will be taken forward in the second deliverable of the SPRITE project.

Introduction1.1

1. Introduction

This is the first deliverable of the SPRITE (Separating the intensity of transport from economic growth) project. The project is looking at the observed correlation between economic growth and growth in the movement of people and goods. In particular it is seeking ways to separate transport from economic growth, that is, to reduce the transport intensity of the economy. In this respect, the project is very much concerned with the trade off between economic growth and environmental sustainability.

SPRITE has three core objectives:

(i)To examine the linkages between transport and economic growth and identify objectives and indicators that can be used as a guide to reducing transport intensity.

(ii)To identify all possible measures (both within and outside the transport sector) that could be used to reduce transport intensity.

(iii)To assess which of the measures, identified in (ii) are potentially practical and cost efficient and which offer the best trade off between environmental protection, transport spending and economic growth.

This deliverable is concerned with one aspect of the first project objective, an examination of the linkages between transport and economic growth. The second project deliverable will focus on the identification of objectives and indicators that can be used as a guide to reducing transport intensity.

Chapter 2 of this deliverable provides an overview of the linkages between transport and economic activity. The two are interrelated; economic activity can influence the demand for transport but, at the same time, changes in the transport system can also influence economic activity. The chapter begins by looking at economic and other influences on the demand for transport. This section provides an introduction to the subsequent, more detailed, review of transport trends across Europe, contained in Chapter 3. The final part of Chapter 2 looks at the ways in which transport can influence economic activity.

Chapter 3 reviews transport trends across Europe and looks, in more detail, at economic and other influences on the demand for transport. It begins with a discussion of transport intensity and briefly reviews some of the evidence regarding changes in transport intensity that have taken place at EU and national level. The chapter goes on to examine past and present trends in passenger and freight transport and attempts to explain the driving forces behind those trends. It concludes by considering some possible future transport trends.

Chapter 4 looks at the experience of other sectors of the economy, in particular the energy sector, in separating or ‘de-coupling’ growth in their output from economic growth. It begins by establishing the meaning of ‘de-coupling’ in the energy sector and examines whether de-coupling has taken place in all parts of the sector. It then goes on to consider the causes of energy sector de-coupling and concludes by drawing some implications for the development of a de-coupling strategy in the transport sector.

Chapter 5 concludes the deliverable and looks forward to some of the issues that will be taken forward in the second project deliverable.

The linkages between transport and economic activity2.1

2.The linkages between transport and economic activity

2.1Introduction

This chapter considers the linkages between transport and economic activity. Section 2.2 provides a brief overview of this subject area. Sections 2.3 and 2.4, respectively, then go on to look at economic and other influences on the demand for transport and, conversely, the influence of transport on economic activity. This latter topic has most recently been examined in work carried out in the UK by the Standing Advisory Committee on Trunk Road Assessment (SACTRA). SACTRA were requested, by the Department of the Environment, Transport and the Regions (DETR) to investigate the linkages between transport and economic activity. Their subsequent report (SACTRA, 1999) covers this topic in some detail and many of the areas covered are of direct relevance to the SPRITE project. Section 2.4 provides only the most fleeting of summaries of the SACTRA work. Readers interested in the detail of the subject matter are directed to the SACTRA report itself. Finally, section 2.5 contains a few brief conclusions to the chapter.

2.2An overview of the linkages between transport and economic activity

SACTRA note that, ‘the close correlation between economic growth and increased movement – and, since 1945, the correlation in particular between road traffic growth and economic growth – is seen as evidence of a close link between transport and the economy. But this does not help clarify the direction of cause and effect – whether increased movement is a sign of economic growth stimulated by other factors; whether traffic growth, facilitated by transport improvements, itself stimulates economic activity; or whether there is some iteration of the two.’

They go on to say that, ‘on the one hand, there are linkages which can help explain how transport has an impact on economic activity. On the other hand, economic activity itself can shape the demand for transport. There may often be iterations between these two aspects – for example, a transport intervention may lead to changes in the economy which in turn may have further impacts on the demand for transport.’

The following section summarises the evidence concerning the latter type of linkage, that is, the role of economic activity in shaping the demand for transport. This topic is considered in more detail in Chapter 3. Section 2.4 then goes on to discuss the first type of linkage - how transport can impact on economic activity.

2.3Economic and other influences on the demand for transport

The demand for transport, particularly transport by road, has increased strongly across EU countries in recent decades. Sections 2.3.1 and 2.3.2, consider the key trends and main driving forces that have been important in the passenger and freight transport markets.

2.3.1Passenger transport

Key trends

For passenger transport, across all modes:

-the average number of trips made by a particular type of person exhibits reasonably similarity across the EU;

-when broken down by trip purpose, different categories of people have different needs to travel but, in general, the young and the retired make the fewest trips while those in employment make the most;

-the number of trips made does not vary greatly either over time or between countries;

-the major proportion of past passenger travel growth has arisen from increases in the length of trips rather than the overall number of trips and

-growth in overall passenger travel demand is quite closely correlated with economic growth.

Looking at particular modes:

-growth in car travel has been far more rapid than that in other surface modes;

-though air travel has grown rapidly, much of its market is over distances where car cannot easily compete, hence it has had little impact on the demand for car travel;

-because car travel now accounts for such a large share of all passenger travel, even strong future growth in rail travel would not significantly reduce the dominance of car travel and

-the main growth in car travel has not been in congested city centres but in the less congested outer suburbs and the surrounding areas outside cities – areas in which public transport is currently unable to compete cost effectively with the car.

Driving forces

To understand the factors that create and influence the demand for transport, the key concept is that transport is a derived demand. It generally occurs as an indirect result of trying to achieve some other goal. Travel is not normally of central importance in its own right.

There are certainly some cases where people go out for a spin in a car at weekends to see the countryside. But even just within the category of leisure trips, trips where the travel is the central purpose of the trip are in a minority, compared to trips where people are trying to get quickly and cheaply to a beach, a sports or cultural centre, or a park. For example, in 1992/94 in the UK the trip purpose ‘day trip/walk’ accounted for only 4.0% of total person-kilometres travelled by residents of urban areas (data from the UK National Travel Survey, quoted in Potter, 1997). For most passenger trips and for all freight trips, the travel is just a necessary side effect of trying to carry out some social or economic activity. It is the activity that is of primary importance and the travel that is of secondary importance in determining people’s behaviour.