Nils Axel Braathen, OECD Environment Directorate Globalisation, Transport and the Environment: A Review of Recent Findings Presentation at a WTO workshop on the Linkages between Trade, Transport and the Environment Geneva, 9 November 2010 By Nils Axel Braathen, OECD Environment Directorate

Background OECD has recently issued a new book on Globalisation, Transport and the Environment – largely based on a number of the papers presented at a Global Forum on Transport and Environment in a Globalising World, held in Guadalajara, Mexico, in November 2008. See www.oecd.org/env/transport/globalisation

Overall impact of globalisation on the environment (I) The impacts of globalisation on the environment via changes in transport activity constitute only a part of the total picture. Globalisation affects the scale and composition of production activities, contributes to diffusion of clean technologies, and causes income increases that can make people place more value on a clean environment. In general, increased economic openness seems to have had, at worst, a benign effect on emissions of localised pollutants. One study* found that a 10% increase in trade intensity leads to a 4% to 9% reduction in SO2 concentrations. *Antweiler, Werner, Brian R. Copeland and M. Scott Taylor (2000), “Is Free Trade Good for the Environment?”, American Economic Review, 91(4).

Overall impact of globalisation on the environment (II) However, the net effect of trade liberalisation on CO2 and other GHG emissions is more likely to be negative. One study* concluded that a 1% increase in trade leads to a 0.58% increase in CO2 emissions on average. One explanation is the global nature of GHG emissions. The income and technique effects do not seem to have the same force when the pollutant in question burdens the global population, rather than just people in one country. For example, international transport-related CO2 emissions often involve third parties, and are difficult for one country to address. *Magani, S. (2004), “Trade Liberalization and the Environment: Carbon Dioxide for 1960-1999”, Economics Bulletin, 17(1).

Impacts of globalisation on transport (I) Maritime shipping Globalisation has led to a strong increase in activity. Trade and shipping are closely linked, although some disagreement remains about the degree to which energy use in shipping is coupled with the movement of waterborne commerce. The estimates depend i.a. on the number of at-sea or in-port days that are assumed in the analysis. Ocean-going ships now consume about 2% to 3% of world fossil fuels.

Main shipping routes Endresen et al. (2004), “Challenges in Global Ballast Water Management”, Marine Pollution Bulletin, Vol. 48.

Impacts of globalisation on transport (II) International air transport … is a major contributor to globalisation, and is continually reshaping to meet the demands of the economic and social integration that globalisation engenders. Some 40% of world trade, by value, moves by air. Air markets have been liberalised as a result of globalisation, the networks operated have changed (“hub-and-spoke”), many new (low-cost) companies have entered the market, and many have gone out of business.

Impacts of globalisation on transport (III) Road and rail freight transport Plays a limited role in long-distance transport now, but with measures to remove bottlenecks, combined with operational improvements, there is scope for growth in many regions. Border crossings represent an important barrier to trade. A major increase in road and rail transport from eastern parts of Asia to Europe would require major infrastructure investments, in particular for road transport.

Environmental impacts of transport (I) Maritime shipping Global CO2 emissions almost tripled between 1925 and 2002, and the SO2 emissions more than tripled. The size and the degree of utilisation of the fleet, and the shift to diesel engines, have been the major factors determining yearly energy consumption. From about 1973 – when bunker prices increased rapidly – growth in the fleet was not necessarily accompanied by increased energy consumption. Share of emissions from ships in anthropogenic emissions: CO2: 2% to 3% NOx: 10% to 15% SO2: 4% to 9%.

Environmental impacts of transport (II) High increases of short-lived pollutants (e.g. NO2) are found close to regions with heavy traffic. NO2 concentrations can be more than doubled along major shipping routes. Increases in surface ozone due to ship emissions are pronounced during summer months. Ship emissions might have lead to a net global cooling – but this would almost only affect ocean areas.

Contributions from ships to wet disposition Yearly averages Nitrate Sulphur Dalsøren et al., (2008), “Update on emissions and environmental impacts from the international fleet of ships. The contribution from major ship types and ports”, Atmos. Chem. Phys. Discuss. 8.

Environmental impacts of transport (III) International air transport Expected technological innovations will not prevent an increase in CO2 emissions from aviation, in light of the expected increase in demand. But the rate of technological progress will depend on the extent to which the sector faces a price on the CO2 it emits.

Environmental impacts of transport (IV) Because of “hub-and-spoke” networks, some airports receive a relatively large share of all take-offs and landings. As a result, noise pollution in the surrounding areas is relatively high. But hub-and-spoke networks might also have environmental benefits, due to environmental economies of scale: larger aircraft with lower emissions per seat can be used because passenger flows are concentrated on fewer links. The literature suggests, however, that the negative environmental effects tend to exceed the positive effects.

Environmental impacts of transport (V) Road and rail freight transport … account for a minor, but increasing, share of global transport emissions of e.g. NOx and noise. The contribution of these emissions to local air pollution is actually decreasing in most parts of the world, mainly due to various vehicle emission standards. Only in those parts of the world that have an extremely high growth in transport volumes have overall transport-related emissions of local air pollutants not yet decreased. On the other hand, CO2 emissions from international road freight transport are increasing all over the world, and there is not yet a sign that this trend will be curbed soon.

Policy instruments (I) There is no silver bullet that can solve all the environmental problems created by transport activity. In some cases, e.g. regarding emissions of local air pollutants, standards will be the best instruments. A mix of instruments will in many cases be needed. It is, however, important to assess carefully what each instrument adds to the mix, and how instruments interact. The optimal mix is likely to vary from country to country.

Policy instruments (II) International transport regimes have focused on protecting transport activity, but countries now recognise the need for them to deal with environmental problems. ICAO and IMO are tasked to address climate change and other environmental challenges arising from international transport – and it is important to find a way to include bunker fuels in the future international frameworks. The interface between global and local regulation is key: Global regimes should not be perceived as limitations on national action. On the other hand, national actions should explicitly respect the principles of non-discrimination and national treatment.

Policy instruments (III) The climate change issue will clearly lie at the heart of efforts to deal with the environmental impacts of transport that result from globalisation. Although the specific estimates vary, transport-based CO2 emissions are projected to grow significantly. Light duty vehicles on roads will continue to be the largest contributors to this problem, but aviation-related emissions are expected to grow more rapidly. Some shift toward less carbon-intensive technologies is foreseen, but no significant shift to truly low-carbon technologies is anticipated.

Policy instruments (IV) At the national or local level, the road transport sector is already quite heavily regulated in one form or another. More cost-effective opportunities may exist in e.g. aviation and shipping, but measures in these sectors will primarily have an impact near airports, harbours and major sea lanes.

Environmental impacts of seaports As a follow-up of the book on Globalisation, Transport and the Environment, OECD has also been assessing the environmental impacts of seaports. Case studies of Los Angeles and Long Beach; Vancouver; Rotterdam; and Busan … show a broad spectre of negative environmental impacts, and present a number of policy options for limiting these impacts.

Examples of negative impacts While efficient ports and transport systems to the hinterland play an important role in promoting economic development, the port activities can cause several negative environmental impacts: Emissions of local air pollutants (SO2, NOx, particulate matter, …) Emissions of CO2 Noise Spread of invasive species Oil spills, waste, sewage ….

Policy instruments (I) Due to the wide range of these impacts, a broad mix of policy instruments will need to be applied, and the “optimal” mix of instruments is likely to vary much from port to port. In addition to many regulatory instruments, a number of economic instruments are being applied to address negative environmental impacts of port – and the related shipping – activities. However, these economic instruments are generally of a somewhat “prescriptive” nature and provide few possibilities for the interested parties to make innovations that address the underlying environmental problems at a lower cost.

Policy instruments (II) One reason is the lacking global framework for addressing environmental impacts of international shipping, making it difficult for individual countries to take action that would “internalise” the climate change impacts (e.g. by putting in place a carbon tax on bunkers). Another reason is the difficulties involved in monitoring and enforcing such actions (i.e. a tax on e.g. the real SO2, NOx, or noise emissions from each ship). The study did not dispose of sufficient resources to compare the costs and benefits of the related policies. However, given the policies addressing international shipping at present, it is possible that almost any policy implemented to address the externalities caused by that sector would pass a cost-benefit test.

Policy instruments (III) A broad spectre of policies are already addressing land-based sources of environmental externalities stemming from port activities. The challenge for policy makers is to determine whether it is better to introduce stricter policies regarding these sources or to address other priorities (environmental or otherwise). While it is impossible here to try to identify “best practices” for all the environmental impacts port activities generate, introduction of shore-side electricity would have the advantage of reducing several negative impacts simultaneously, such as SO2, NOx and particulates emissions, noise – and, possibly, CO2 emissions.

More information www.oecd.org/env/transport/globalisation www.oecd.org/env/transport/GFSD www.oecd.org/env/transport www.oecd.org/env/taxes www.oecd.org/env/taxes/innovation www.oecd.org/env/policies www.oecd.org/env/policies/database