1 The Development of Thoughts, Policies and Action Plans on Transportation Energy- Saving – International, East Asia and Taiwan’s Experiences Lee-in CHEN Chung-hua Institution for Economic Research for the 10th SEE Forum in Brunei Darussalam November 21~23, 2012

2 Outlines I. Basic Terminologies, Transportation Policy Framework and Energy-Saving Experiences – International Perspective II. Comparison of Energy-saving Pricing Policy and Demand Elasticity between Taiwan and Korea III. Sustainable Transportation Polices and Plans in Taiwan IV. Concluding Remarks: Lessons for other Developing Countries

3 I. Basic Terminologies, Transportation Policy Framework and Energy-Saving Experiences – International Perspective  The sectors propelling worldwide transport energy growth are primarily light-duty vehicles (38%), freight trucks (27%) and air travel (23%). (The Mobility 2030 Study)  Three basic concepts of transportation energy-saving: transportation intensity, energy intensity and emission reduction (personal vehicles vs. public transportation).  The aggregate energy intensity is shaped by different modes and modal energy intensities (vehicle fuel intensity vs. the use of vehicle capacity)  The quality of the transport infrastructure affects both mode choice and energy intensity.  High energy-use transportation is inevitable during the earliest stages of economic development

4 I-1. Energy-saving policies and measures by transportation authority  Five types of policies and measures help to achieve both energy saving (or GHG reduction) and sustainable surface transport: (1) Land use and transport planning,  (2) Taxation and pricing,  (3) Regulatory and operational measures,  (4) fuel economy standards – road transport, (5) Transport demand management  (Ribeiro et al, 2007).

5 Table 1: Taxes and pricing in the transport sector in developing and developed countries InstrumentDeveloping countries/EIT Developed countries Tax incentives to promote use of natural gasPakistan, Argentina, Colombia, Russia Italy, Germany, Australia, Ireland, Canada, UK, Belgium Incentives to promote natural gas vehiclesMalaysia, EgyptBelgium, UK, USA, Australia, Ireland Annual road tax differentiated by vintageSingapore and India (fixed span and scrapping) Germany Emission tradingChile Congestion pricing including Area Licensing Scheme; vehicle registration fees; annual circulation tax Chile, SingaporeNorway, Belgium Vehicle taxes based on emissions-tax deductions on cleaner cars e.g. battery operated or alternative fuel vehicles South KoreaAustria, Britain, Belgium, Germany, Japan, The Netherlands, Sweden Carbon tax by size of engineZimbabwe Cross subsidization of cleaner fuels (ethanol blending by gasoline tax – through imposition of lower surcharge or excise duty exemption) India Source: From Ribeiro et al. 2007, “Transport and its infrastructure” Table 5.14.

6 Table 2 Potential energy and GHG savings from pricing, taxes and charges for road transport I-2. Evidence of effective transportation energy-saving policies by Tax/Pricing Tax/pricing measure Potential energy/GHG savings or transport improvements Reference Optimal road pricing based on congestion charging (London, UK) emissions as a result of 18% reduction in traffic Transport for London (2005) Congestion pricing of the Namsan Tunnels (Seoul, S. Korea) 34% reduction of peak passer traffic volume. Traffic flow from 20 to 30 km/hr. World Bank (2002) Fuel pricing and taxation15-20% for vehicle operatorsMartin et al. (1995) Area Licensing Scheme (Singapore)1.043 GJ/day energy savings. Vehicular traffic reduced by 50%. Private traffic reduced by 75%. Travel speed increased 20 to 33 km/hr. Fwa (2002) Urban gasoline tax (Singapore)1.Mton by 2010; 2.6 Mton by 2020 Transportation in Canada; anre1999/tc9905be.htm Congestion charge trial in Stockholm ( ) et.se/ template/page.aspz?id=2453

7 I-3. Fundamental Measures via Manufacturing R&D on Vehicles and Fuels (Private sectors or Pubic-Private Partnership)  3.1. Reducing vehicle loads  Lightweight materials – A 10% weight reduction from a total vehicle weight can improve fuel economy by 4-8%.  Aerodynamic improvements  Mobil Air Conditioning (MAC) systems  3.2. Improving drive train efficiency  Advanced Direct Injection Gasoline/ Diesel Engines and transmissions  Hybrid drive trains  3.3. Alternative fuels  Biofuels 3.2 Hydrogen / Fuel Cells 3.3 Electric vehicles  3.4. Well-to-wheels analysis of technical mitigation options  3.5. Road transport: mode shifts  3.6. Improving driving practices (eco-driving) ※ The first condition influencing national priority on carbon reduction is “location”. National territory situating in high or low latitude faces different weather condition so that different policies and technologies need be developed to battle the climate change crisis.

8 I-4. Transportation Sustainability of Rail System – International Comparison 1. US Train Development Experiences ( )  Transportation energy use has been nearly a constant 25% of gross energy use from 1947 to 1975 (Staley, 1979).  new technology of railroads did make difference: Automobiles used 4.2 quads or 43% of the total in 1955 vs.9.1 quads or 49% in Air travel increased the most, accounting 1.4% of the total in 1955 and 7.0% in All trucks consumed 17% share in 1955 and 22% share in  class I railroads carried roughly 21% more freight with 38% less energy in 1975 than in 1955.

9 I-4. Transportation Sustainability of Rail System – International Comparison 2. The Rise of High Speed Rail System (1964 up to now)  Japan’s Shinkansen (1964)  Germany’s ICE (1981)  French TGV (1984)  Korea’s KTX HSR (2004)  Taiwan’s HSR (Feb. 2007)  China’s Beijing-Tianjing HSR (2008) Levinson et al., (1997) : (1)In the early stages of transportation network design, land uses are denser and cities are closer together can be an better environment for HSR projects. (2) The regulated transportation sectors in Japan and Europe prevented the level of competition from air travel that prevails in the United States.

10 I-4. Transportation Sustainability of Rail System – International Comparison 3. Trend of Railway Patronage in East Asia  Taiwan: relatively low mainly due to the opening of the first Mass Rapid Transit line in Taipei in The full network for Taipei City was completed in 2005 followed in 2010 by extensions to Taipei County (named New Taipei City after 2011).  Seoul: the combined modal share of bus and metro falling from 75% in 1980 to a low of 60% in A combination of metro system expansion and car-restrictive policies implemented in the mid-1990s, caused public transport’s share of trips to rise from 60% in 1996 to 65% in Other successful innovative policy measures include congestion toll of two key tunnels during peak hours; parking fee rises and parking facility reduction,; all helping to reduce the incentives to drive cars (Pucher et al, 2005).

11 Table 3 Railway Patronage Share of Public Transportation in East Asia Hong KongTokyo(2006)TaipeiSeoul Metro RCenter %43%30%70%35.1%43.1%60%65% Source: The author compiled from various conference ppt files. Seoul’s definition is slightly different from other three cities.

12 II. Comparison of Energy-saving Pricing Policy & Demand Elasticity between Taiwan and Korea  Banaszak et al. (1999) examined the demand for gasoline and diesel in the ground transportation sectors of South Korea and Taiwan. Economic and Policy Background ( ):Petroleum taxes in Korea at the end of the time-series were made up of three components: i) a 5% import duty on crude and products; ii) a Special Excise Tax (SET) levied on gasoline, diesel and LPG; and iii) a 10% value added tax 150 to 180% while that for diesel rose from 20 to 25%. Taiwan does not maintain a large gasoline-diesel price differential through taxation. Comparison: Korea uses twice as much diesel as gasoline, a trend more common in developing economies, while Taiwan consumes an ever greater share of gasoline in industrialization process Important Findings: (1) Income has a relatively greater (at least 3-4 fold) effect on aggregate transport fuel demand than on whether that fuel is gasoline or diesel. (2) Price elasticity is lower in the higher income country Taiwan and higher in lower-income Korea (3) Aggregate demand elasticity for Korea and Taiwan Infer: smaller long-run income elasticity for Bangladesh, India, Indonesia, Philippines, Thailand and Sri Lanka. (important policy implication for ASEAN cross-boarder transportation plan)

13 III. Sustainable Transportation Polices and Plans in Taiwan III-1 Transportation Energy-saving policies (regulations) in historical review 1.1 Examine via Legislative History: (Energy-using) (1) “The Energy Management Act” (1980) and its “Enforcement Rules” (1981) (2) “Regulations on Fuel Economy Standard and Inspection and Administration of Motor Vehicles” (only 15 articles, 1987) (3) “Regulations on Fuel Economy Standard and Inspection and Administration of Fishery Carriers” (1988, no amendment ) (4) “Regulations on Corporations Purchasing Energy-saving or Utilizing New/Clean Energy Equipments or Technologies as Adaptive Investment Countervailing” (1995, however abolished on 2011 due to distorted tax reduction purpose by industry sector)

14 III. Sustainable Transportation Polices and Plans in Taiwan III-1 Transportation Energy-saving policies (regulations) in historical review 1.1 Examine via Legislative History: (Pollution prevention and control) (5) “Air Pollution Control Act” (1975 with 21 articles) - intensive extension and amendment to 27 articles in 1982, 55 articles in 1992, 78 articles in 1999, and 86 articles in 2002; shrunk the Law to 18 articles on 2005, 2006 (due to the successful second term of DPP administration on 2004?) and (6) “Basic Environment Act” (2002) – one decade behind Japan (7) “Regulations Governing the Implementation of Greenhouse Gas Verification” (2007)

15 III. Sustainable Transportation Polices and Plans in Taiwan 1.2 New Policy and Action Plans proposed by Executive Yuen  The first comprehensive National Energy Conference was held in However the transportation specific policy and action plans were not drafted until the second NEC in The third NEC in 2009 merged related programs into “Sustainable Energy Policy Action Plans”. The six goals[1] are:[1]  (1) Construct convenient public transportation network so as to mitigate the use and growth of personal vehicles,  (2) Providing ICT timely traffic information so as to enhance transportation management and function,  (3) Establish human-centered green transportation system (i.e. bicycles and pedestrians way) in the urban,  (4) Encourage adoption of substitute fuels and modes.  (5) Promote energy use efficiency of private vehicles – 25% growth of efficiency by 2015,  (6) Review and modify street light standards to reasonable range so as to cope with lighting efficiency.  [1] There are administrative disputes between MOTC and MOEA on items (5) and (6). MOTC prefers to put them at action plan level. However MOEA prefers to put them in policy goal level. [1]

16 III-2. Thoughts and planning process of Taiwan high speed rail system Taiwan High Speed Rail Feasibility Study (1989), the total population was 20 millions. The socio-economic forecast for future inter-city transportation demand growth was based on:  (1) the population was predicted to grow in a slower rate than in the past, approximately 23.8 million by  (2) The annual employment growth rate is to reach 2.3% between 1989 and 2011 and the Northern Region would account for about 45% of labor force. (3) Family disposable income would continue to increase at annual growth rate of 3.5% and reach NT.$980,000 by the year 2011[1].[1]  (4) The private car ownership for Taiwan would be some 5.2 million vehicles in 2011 (assuming an annual growth rate of 6%). [ 1][ 1] The actual family disposal income is NT$889,000 in However Taiwan’s PPP is relatively high as comparing to peer countries. So, Taiwan HSR runs in pretty passenger load rate and began to make profit on the first half of 2011 (after a long BOT contract re- negotiation on the adjustment of reasonable infrastructure depreciation years on 2010).

17 Table 4 Inter-city Travel Demand by Mode for Years 1984 and 1989 (Person Trips ＞ = 40 km and Passenger-kilometers per Day) Year CarBus(1)RailAir(2)Total Trips (1000 ) Pass- Km (Mill.) Trips (1000) Pass- Km (Mill) Trips (1000) Pass- Km (Mill) Trips (1000) Pass- Km (Mill) Trips (1000) Pass- km (Mill) 1984Abs. Rel % % % % % % % % % % 1989Abs. Rel % % % % % % % % % % Increas Rel.54%44%68%85%2%10%32% 48%55% (1)High-Class (air-conditioned) buses only (2)Excluding traffic to off-shore islands ＊ Based on the “ 50” traffic zone system in Taiwan

18 III-3. Trial Calculation of HSR’s Carbon Emission Reduction Effects via increasing HSR loads  Chen (2011) simulated the HSR carbon reduction is thousand tons =603.3 thousand tons (carbon reduction due to mode shifts) – thousand tons (carbon increase due to HSR operation)  assumptions: (1) mode shifts from private cars to HSR is 50%; from buses is 13%; from traditional train is 27%; and from aviation is 10% which carbon emission per person km is 5.6 times of HSR. (2) Other parameters include:  the average passenger load rate of a private car (2.3 persons) and a bus (13.34 persons);  the mode energy (or fuel exhaustive) efficiency rate: 11.6 km per liter for private cars and 3.1 km per liter;  energy intensity: Traditional rail degree per person km, HSR degree per person km, and airplane liter per person km;  CO2 emission coefficient per unit: vehicle gasoline 2.26 kilogram/liter, diesel 2.61 kg/liter, aircraft gasoline 2.39 kg/liter and electricity kg CO2/degree.  ※ Currently the major CO2 emission structure in 2008 Taiwan is: 52% by industry sector; 18% by residence and commercial sectors; 14% by transportation sector and 7% by energy sector.

19 IV. Concluding Remarks: Lessons for other Developing Countries (1)  What should a national government do? – Seriously examine the priority issues of the national carbon reduction; devoting public sectors to plan and construct the necessary infrastructure for consumers and producers; and establishing a legal framework for domestic and foreign BOT investment.  Each country has different resource abundance and transport infrastructure which all influence the meaning of comparison.  High intensity public transport is good for energy-saving in general.  Transportation demand and modal structure change in freight is influenced by business practices.  Japan and Taiwan together (geographical location and strong innovation ability) can be the best R&D and manufacturing platform for ODA collaboration on clean /green transportation.

20 IV. Concluding Remarks: Lessons for other Developing Countries (2) - future prospect  (1) inter-city and intra-metropolitan land use and transportation network to maximize energy-saving and minimize GHG emissions.  (2) Income level (or stages of economic development), demand elasticity and the fiscal (budget) condition of the planning nation, region or city influence the investment capability of transportation infrastructure and moving welfare of their citizens.  (3) Transport energy-saving pricing policies and measures will produce better effects if multiple measures are adopted. (i.e. Singapore and Korea)  (4) R& D investment in new green technologies on vehicles and fuels (i.e. USA, Australia)  (5) New green transportation development schemes (such as more R&D on green freight trucks for moving goods and more clean energy trains for moving passengers) need cross-border negotiation and investment fund support from the World Bank and Asia Development Bank (i.e. ASEAN countries)

21 The UN Millennium Development Goals (MDGs)  (1) reducing extreme poverty, ( ＊ )extreme poverty  (2) Achieve universal primary education,  (3) promoting gender equality and empower women, ( ＊ )  (4) reducing child mortality rates,child mortality  (5) improve maternal health,  (6) fighting disease epidemics such as AIDS,epidemicsAIDS  (7) ensure environmental sustainability, ( ＊ )  (8) developing a global partnership for development. ( ＊ )  We seldom utilize planning ability, market economy and WTO tariff negotiation, Government Procurement Agreement and some other possible international treaties in fulfilling UN MDGs. It is time for DCs and LDCs to work together and integrate UN MDGs, related organizations, local investment and FDI capacity of DCs into solid action plans of green development. ~The End~