Availability of Public and Private Resources and Investments in the Transport Sector

Summary

Driver description
Interactions with the Economy Domain
Interactions within the Social Domain
Interactions with the Environment Domain
Interactions with the Technology Domain
Impacts on Mobility and Transport

Driver description

  • “There are ultimately two primary sources of financing – the user and the taxpayer. The choice of which source(s) to employ is, for the most part, independent of the model used to provide infrastructure. However, it has profound implications for the functioning of that model, including on the availability of financing and the use of the infrastructure. Making this choice is a key sovereign task that must be undertaken prior to the design of the model to be employed for providing the infrastructure.” (Ref: CO_0205)
  • “Whatever the models chosen for providing and financing infrastructure, government will retain key responsibilities, particularly with regard to establishing the policy frameworks under which financing occurs, and regulating this activity. However, the nature of government’s role will be fundamentally transformed by the use of alternative financing, and government must develop appropriate structures to manage this.” (Ref: CO_0205)
  • “The extent and quality of transport infrastructure is of profound importance for the functioning of society and the economy.” (Ref: CO_0205)
  • “Investment in transportation infrastructure construction and transportation services has long been a favored policy option to aid economic recovery and accelerate employment growth.” (Ref: CO_0207)
  • “Infrastructure creates opportunities for mobility for people and goods. But infrastructure also has the ability to serve as a driver for transport development.” (Ref: CO_5048)
  • “The cost of EU infrastructure that would be required to match the demand for transport is estimated at over € 1.5 trillion for 2010-2030. However, in the coming years and decades there will be an increasing difficulty in finding the means for investing in transport infrastructure:
    • an ageing society implies that larger amount of resources will be absorbed by social security expenditure;
    • the 2008-9 economic crisis has severely hit public budgets and private lending. It will leave a legacy of long consolidation processes;
    • the introduction of vehicles powered by alternative fuels and the greater use of public transport will reduce revenues from excise duties on gasoline and diesel.” (Ref: CO_0089)
  • “These developments will intensify the declining trend in transport infrastructure financing from government budget, which, before the financial crisis, was to some extent compensated by an increase in private sector financing.” (Ref: CO_0089)
  • “It is clear that investments in infrastructure – such as motorways, railways, terminals, ports, bridges and airports – and the physical conditions for mobility have a large impact on businesses in the transport sector, as well as on the behaviour of individuals.” (Ref: CO_6006)
    “(...) improving transport connectivity can further concentrate economic activity. Roads and rails run both ways—better transport connectivity not only provides market access to firms in lagging areas, but also allows firms in leading areas to reach markets.” (Ref: CO_5028)
    “The incremental economic benefit of roadway expansion is declining in developed countries. Figure below shows how highway investment economic returns exceeded those of private capital investments during the 1950s and 60s, but returns declined below private investments by the 1980s, and these trends are likely to continue, since the most cost-effective roadway investments have already been made.” (Ref: CO_5047)
Figure 1‑47 Annual highway rate of return

 

Source: The Future Isn’t What It Used To Be. Changing Trends And Their Implications For Transport Planning. (Ref: CO_5047)

  • “In Europe, the motorway construction era has ended with most resources now being placed in upgrading and extending the Trans European Rail Network (TERN). It is expected that this new age of the train will allow travel between the main cities of Europe at speeds averaging > 200 km per h (maximum speed of 300 km per h).” (Ref: CO_4017)
  • “One aspect of the recent crisis has been a lack/shortage of availability of funds for businesses, since the banks have cut down heavily on lending. This clearly has direct impacts on the transport system, such as on the building of infrastructure which is not financed by national governments and on the viability of companies providing transport services.” (Ref: CO_5048)
  • “(...) public-sector funding provides a major part of the overall financing volume for transport infrastructure investments, at an average of 52.9 per cent in developing countries (...)” (Ref: CO_0210)
  • “(...) government budgets are tighter than they’ve ever been: Infrastructure maintenance and improvement funding gaps as high as 70 percent are not uncommon, according to the American Association of State Highway and Transportation Officials.” (Ref: CO_0209)
Figure 1‑48 Average annual capital needs and gap estimates, all levels of government, 2008–2035

Source: Investing in transportation: doing more with less (Ref: CO_0209)

  • “Infrastructure investment across all modes must not be neglected; innovative funding arrangements will need to be further developed.“ (Ref: CO_0284)
  • “The automobile industry is now mature and overcapitalized. World vehicle production capacity significantly exceeds demand. As a result, vehicle manufacturing profits are low and likely to decline in the future. Although the automobile industry was once a leader in providing good wages, benefits and local taxes, this is no longer true. Many other industries now pay comparable or better wages, and manufacturers demand various financial incentives from governments (tax rebates, infrastructure expenditures and training programs) in exchange for locating industrial facilities in a jurisdiction, capturing much of the economic benefits. As a result, there is declining justification for public policies that favour the automobile industry.“ (Ref: CO_5047)
  • “In the medium and long term, investment in the transport sector could be shifted substantially from MIT[1] investment to public transport and NMT[2] investment. Then the growing PT expenditure could be afforded by countries and local authorities.” (Ref: CO_5006)
  • “The new popularity of public transport, in particular projects involving segregated infrastructure, will not drive down public spending, quite the contrary.” (Ref: CO_0034)
  • “We need significant investment in battery and fuel technology to take alternative energy-powered vehicles to scale over the next few decades.” (Ref: CO_5018)

[1] Motorised Individual Transport

[2] Non-Motorised Transport (pedestrian and bicycle traffic)

Interactions within the Economy Domain

GDP trends

  • “Public investment in transport typically accounts for 2.0 to 2.5 per cent of GDP and may rise as high as 4 per cent or more in countries modernizing or building new transport infrastructure.” (Ref: CO_0204)
  • “Total public spending on transport and water infrastructure has fallen steadily since the 1960s and now stands at 2.4% of GDP. Europe, by contrast, invests 5% of GDP in its infrastructure, while China is racing into the future at 9%. America’s spending as a share of GDP has not come close to European levels for over 50 years.”(Ref: CO_0213)
Figure 1‑49 American public spending on transport and water infrastructure as % of GDP

 

Source: The Economist (Ref: CO_0213)

  • “Following a period of relative (economic) decline, more large cities have decided to boost investment in UPT[1] in light of projected needs to 2025/30, both in the industrialised world and in emerging countries such as Brazil, China and India.” (Ref: CO_5042)

[1] Urban Public Transport

Figure 1‑50 Percentage of transport in national budgets for selected countries in 2005


Source: A paradigm shift towards sustainable low-carbon transport (Ref: CO_0211)

  • “Road infrastructure is perceived to be a “driver of economic growth.” (Ref: CO_0211)
  • “Investment in inland transport infrastructure (road, rail, inland waterways) as a percentage of Gross Domestic Product (GDP) has declined steadily in Western Europe since the 1970s. Our first reports from the 1980s noted this decline from an average 1.5% in 1975 to 1.2% in 1980 and further to 1.0% in 1982, after which it levelled off. Our most recent data show that investment in inland transport infrastructure as a percentage of GDP declined again in the 1990s in Western European countries (WECs), to around 0.8% in 2000, where it has remained. However, there are marked differences between countries, especially for recent years, varying from 0.5% in Denmark to 1.1% in Spain in 2009.” (Ref: CO_0109)
  • “For the 20 Member States included in the EEA32 analysis, the annual investment in transport infrastructure in absolute terms has risen steadily from around €67 bn in 1995 to more than €120 bn in 2008. This equates to a rise from around 0.9% of GDP to approximately 1.2% of GDP in the same period (a third increase). Road infrastructure has accounted for by far the largest expenditure in every year, though its share is smaller than a decade ago (from 62% to 58% in the decade to 2008). The share of investment in rail has increased slightly (28-30%) in the last 10 years, as have the shares of investment in sea (3-4%) and air (6-7%) infrastructure. However, looking over the last 5 years this trend reverses: the share of road infrastructure has increased between 2003 and 2008 (52%-58%), whilst the share of investment in all other modes has dropped. Inland waterways continue to attract the lowest share of infrastructure investment; its share has shrunk by nearly a third over 10 years to just over 1% in 2008.” (Ref: CO_0111)
Figure 1‑51 Investment in transport infrastructure by mode as % of GDP

Source: European Environment Agency 2010 (Ref: CO_0112)

Figure 1‑52 Investment in inland transport infrastructure as % of GDP

Source: International Transport Forum (Ref: CO_0110)

  • “(...) it is unsatisfactory to deal with the ratio of the public debt to GDP by considering the growth rate of the economy as independent of the composition of public spending. A larger share of public spending devoted to “productive expenditures” can positively affect the growth rate and, hence, the ratio of public debt to GDP.” (Ref: CO_0236)
  • “(...) the concern for a continuously growing ratio of the public debt to GDP does not derive from the unlikely possibility of a default of the state, but rather from the fact that a growing debt ratio indicates that the government is not using resources in an “efficient” manner. The government is spending resources in such a way that the GDP does not grow sufficiently to keep the debt ratio stable.” (Ref: CO_0236)
  • “The economic and financial crisis has laid bare the weaknesses of the dominant growth model in no uncertain terms. Manifestly, this growth, which was largely abandoned to market forces, was not sustainable. (...) A simple return to pre-crisis business as usual scarcely seems convincing. If more balanced and social growth is to be achieved we have to bid farewell to the idea of »efficient« financial markets.” (Ref: CO_0235)
  • “(...) the rate of economic growth itself is not independent from public spending: in the short run, the existence of stable public expenditures restrain the size of recessions (through “automatic stabilizers”); in the long run, public investment and expenditures (education, health, research, infrastructures (...)) stimulate growth.” (Ref: CO_0242)
  • “Economic wealth provides for improvements in infrastructure, which increases the mobility of people and economic growth. Therefore, it is clear that economic growth has a very direct effect on the demand for transport and logistics services.” (Ref: CO_6006)
  • “A substantial cut in investments between 2007 and 2008 led to lower financing for all transport modes. Although the distribution of investment between the different transport infrastructures did not change significantly between 2007 and 2009, some modes did experience changes over the period 2000 to 2009. The share of road infrastructure investments fell from 60 % in 2000 to 52 % in 2003, but has since returned to 62 %. Investments in rail infrastructure have been in decline since 2003.” (Ref: CO_0197)
Figure 1‑53 Investment in transport infrastructure by mode, EU

Source: Sustainable development in the European Union (Ref: CO_0197)

Employment

  • “It is often difficult to determine whether highway construction and maintenance jobs should be considered newly created jobs, relocated jobs, long-term jobs or short-term jobs.” (Ref: CO_0113)
  • “(In Unites States) an estimated 30,000 jobs are supported per billion dollars of spending. (...) The national rate can vary from of 24,000 to 41,000 jobs per billion dollars of spending, depending on the spending mix. The lower figure holds for spending on capital investments (vehicles and facilities), while the higher figure holds for spending on transit system operations.” (Ref: CO_0207)

Regional differences in economics

  • “Recent externality based growth models suggest that differences in public spending policies are able to explain, at least in part, the observed differences in growth rates across countries. This view has revived interest among economists in re-evaluating the relationship between the levels and the compositions of public spending and growth performances of countries.” (Ref: CO_0214)
  • “In a cross-country study, Easterly and Rebelo (1993) find that public investment in T&C sector is consistently positively correlated with growth with a very high coefficient (between 0.59 and 0.66).” (Ref: CO_0214)
  • “Passenger transport is equally important for the region’s economies. During the rapid catch-up phase of economic growth, the investments of countries of the region have focused on providing international connectivity at the land-sea interface, exacerbating subnational disparities. More recently, their focus has typically included providing access for rural areas and small towns.” (Ref: CO_0204)
  • “The impressive growth of shipping in Asia is in large part due to the formation of regional production networks (RPN), whereby countries specialize in the production of particular components which are shipped from one country to another until final product assembly, a process that is often referred to as “regionalization”.” (Ref: CO_0204)

Foreign trade, globalisation

  • “Transport development has been a major factor driving the internationalization of production. (...) Large investments have been made in seaports to achieve the significant productivity gains from containers and changes in shipping technology.” (Ref: CO_0204)
  • “Falling transport costs in the 100 years or so before World War II brought closer economic integration within and between countries. Then, as in the twentieth century, the fall was caused by large infrastructure investments and breakthroughs in transport technology.” (Ref: CO_5028)
  • “Freight costs have about halved since the mid-1970s, driven by investments in transport infrastructure, better capacity use, and technological progress.” (Ref: CO_5028)

Interactions with the Social Domain

Income structure and distribution

  • “Calderón and Servén (2004) examined the relationship between the breadth and quality of infrastructure and income inequality using a sample of 121 countries including 26 EU countries (UK was not included) and spanning the years 1960-2000. The study found that the Gini coefficient was negatively correlated with transport (-0.48 for roads, and – 0.57 for roads and rail). This suggests that public investments in transport and particularly rail are strongly associated with income equality. There are various reasons why infrastructure development may disproportionately benefit the poor. There is evidence that better transportation infrastructure helps poorer individuals to gain access to additional productive opportunities (Estache, 2003). It can also decrease production and transaction costs (Gannon and Liu, 1997) and raise the value of the assets (homes, agricultural land) of the poor (Jacoby, 2000). From the UK there is evidence suggesting that commuting to work distances are increasing. People are less likely to relocate, to find a job, rather they will increase their job search area to find a job and stay put. This suggests that households are increasing their spending on travel to work. Investments in transport, particularly public transport, is therefore likely to have an increasing equalising effect.” (Ref: CO_5054)
  • “However, the TEN-T related investment may also benefit, and potentially disproportionately benefit, higher income groups making use of the high speed rail infrastructure.” (Ref: CO_5054)
  • “Transport investments in roads (...) are likely to be somewhat less effective in reducing inequality because the benefits tend to accrue to those owning cars and because effects on property values are likely to benefit more middle and higher income groups than those on low incomes.(...) Bearing in mind the above and the evidence of Calderón and Servén (2004) it is reasonable to suggest that basic roads infrastructure is likely to be pro poor through improving the access of lower income groups living in, for example, rural areas. However, roads infrastructure in urban areas that is characteristically expensive is less likely to be pro poor.” (Ref: CO_5054)
  • “Airports is likely to bring more benefits to middle and higher income groups than low income groups because higher income groups travel more. (...) However, airports and related developments are major sources of employment and local economic activity and potential a source of construction, maintenance and service sector employment of benefit to lower income groups. They may also be associated with significant regional economic multiplier effects.” (Ref: CO_5054)

Urbanisation

  • “It is particularly important to gain greater understanding of the impact new transport infrastructure has on land. Investment in new motorways, for example, can accelerate urban sprawl by facilitating the growth of edge-of-town shopping centres and residential zones.” (Ref: CO_0260)
  • “(...) transport infrastructure also fuels urban sprawl when land use and urban planning policies are not optimised so as to avoid induced impacts, breaking down old distinctions between urban and rural land, and leading to a vast extension of urban uses in former rural areas.” (Ref: CO_5030)
  • “New transport investment, in particular motorway construction, can be a powerful stimulant for new development and sprawl, including shopping centres and residential areas.” (Ref: CO_0028)
  • “(...) newly constructed infrastructure, in return, spurs further urban sprawl – investments made in new motorways or road connections attract new development along the improved transport lines.” (Ref: CO_0034)
  • “Similarly, the construction of public transport links such as light railways and tramways tends to increase housing densities around access points.” (Ref: CO_0260)

Change of lifestyle and values

  • “Where regions suffer from economic or social problems, transport infrastructure projects could either result in further exclusion of such communities or could contribute to addressing the problem of social exclusion by improving accessibility and mobility.” (Ref: CO_0113)
  • “Sharing risk and liability with public-private partnerships will play a role, as will road pricing. The public perception that such pricing schemes are just an additional tax needs to be tackle.” (Ref: CO_0284)

Interactions with the Environment Domain

Climate change impacts

  • “The 10-year increase in the share of investment directed towards rail and sea infrastructure could be seen as a positive shift towards more environmentally friendly modes of transport. However, in the case of sea infrastructure it could equally be argued that the investment has enabled an overall increase in freight movement, rather than shifting freight away from less environmentally friendly modes. Additionally, the more recent trend for road transport to take an increasing proportion of infrastructure investment could be seen as regressive from an environmental perspective.” (Ref: CO_0111)

GHG mitigation

  • “Between 2000 and 2009 the share of investments in the infrastructure of transport modes with lower environmental impacts (rail, maritime and inland waterways) decreased slightly. Road infrastructure investments remain dominant in the EU.” (Ref: CO_0197)
  • “Investment in public transportation and vehicle efficiency improvements generates exceptional economic returns. Several scenarios show that a green, low carbon, transport sector can reduce greenhouse gas emissions by 70 per cent without major additional investment.” (Ref: CO_0210)

Noise levels and emissions standards

  • “Transportation investment can reduce noise pollution – New automobiles are far quieter than their predecessors thanks to advances in engine technology. Erecting “green” roadway sound barriers can muffle the sound of passing vehicles.” (Ref: CO_0206)
  • “Noise barriers reduce noise levels by five to 10 decibels, cutting the loudness of traffic noise by as much as 50 percent.” (Ref: CO_0206)

Pollution levels and emissions standards

  • “Public funding at all levels (international – including Official Development Assistance (ODA) and climate related funds – national and local) is mobilised to support green transport.” (Ref: CO_0210)
  • “Private finance is leveraged, through the appropriate design of markets and the creation of consistent, longterm incentives to invest in green transport and through the application of public-private sector models to invest in and operate green transport systems (such as Bus Rapid Transit (BRT) systems).” (Ref: CO_0210)
  • “Transportation investment can improve air quality and energy efficiency – Investments in clean vehicle technology, clean fuel technology, and congestion relief projects can reduce emissions and contribute to energy efficiency. Investments in ridesharing programs, transit, pedestrian, and bicycle facilities can reduce vehicle miles traveled.” (Ref: CO_0206)

Interactions with the Technology Domain

Technology development and innovation diffusion

  • “The private sector is the major driver of innovation and the diffusion of technologies around the world. But governments can help to promote international collaboration to overcome barriers to technology development. Technology co-operation enables the sharing of risks, rewards and progress of technology development and enables co-ordination of priorities.” (Ref: CO_2024)
  • “The private sector plays the major role in R&D and technology diffusion, but closer collaboration between government and industry will further stimulate the development of a broad portfolio of low carbon technologies and reduce costs.” (Ref: CO_2024)
  • “Technology development tends to be driven most by corporate R&D and the public, especially those with few resources, struggle to access much of it.” (Ref: CO_5018)
  • “(...) there are also important uncertainties regarding the availability of R&D funding because of public and corporate budget constraints, public policy development and the availability of a sufficiently skilled labour force, which could be affected by barriers to international migration.” (Ref: CO_0274)
  • “More investment in low-carbon energy technology RD&D is needed at all stages of technology development. This should include direct government funding, grants and private-sector investment.” (Ref: CO_0154)
  • “The whole transport systems of countries or large urban areas can be made more efficient by capital spending and by innovations removing their chronic weaknesses. This goal, however, cannot be achieved by innovation alone, if it is not accompanied by the necessary investment in order to replace traditional elements of the system. Innovation becomes a must if traditional heavy spending on the existing transport systems produces no results.” (Ref: CO_6065)
  • “Increased public investments in infrastructure will be concentrated on the large-scale ‘debottlenecking’ (local expansion of road area) and upgrading (more, and stronger, bridges, tunnels, viaducts) of the congested economic regions and interconnecting corridors. The initial focus will be on those regions and corridors where the existing quality of infrastructure will allow for the most cost-effective development. After the next decade, investment will shift towards the development and introduction of advanced technology, such as intelligent systems for traffic management (e.g. cooperative systems).” (Ref: CO_0077)

Traffic management systems

  • “Investment in viable alternatives to congested road corridors can support intelligent solutions involving co-modal logistic chains, which optimise the use of transport infrastructure within and across different modes. This includes transalpine tunnels, rail corridors and intermodal nodes for rail, sea and air transport.” (Ref: CO_0255)

Information systems

  • “Lack of funding to improve the current physical infrastructure puts a premium on intelligent solutions that can raise the potential of existing transportation systems.” (Ref: CO_0284)

Pollution abatement and monitoring

  • “Tremendous strides in engine technology mean that the average car today produces 60 to 80 percent less pollution than the average car did in the 1960s.” (Ref: CO_0206)

Renewable energy production

  • “Different renewable energy sources are at various stages of technological and commercial development. Under favourable conditions, wind, hydro, biomass and solar-thermal sources of energy are economically viable. Others like photovoltaic energy (which uses silicon panels to generate electricity from sunlight) require increased demand to improve economies of scale.” (Ref: CO_0270)
  • “In 2008 and 2009, the governments of many countries committed additional funds for renewable energy through economic recovery and stimulus packages. These short-term measures need also to be coupled with more longterm oriented policy action to tackle non-economic barriers to the wider deployment of renewables.” (Ref:CO_0153)
  • “State support has undoubtedly kick-started the photovoltaic market across the EU. But with state budgets under severe strain there is no guarantee the same level of support will be available in the future.” (Ref: CO_0267)
  • “By 2020 we expect that there will be no incentives and that PV installations will be profitable without them.” (Ref: CO_0267)

Energy efficiency

  • “Since running eco-driving courses is relatively inexpensive, and the lifetime fuel savings per person can be very high, the cost-effectiveness of eco-driving is generally considered to be excellent.” (Ref: CO_0154)

Impacts on Mobility and Transport

Investment opportunities and transport modes

  • “Infrastructure creates opportunities for mobility for people and goods. But infrastructure also has the ability to serve as a driver for transport development.” (Ref: CO_5048)
  • “Particularly in congested cases it is doubtful whether an expansion of infrastructure capacity will improve the mobility in the long term. Analyses have shown that expansion of infrastructure capacity in uncongested cases has a limited effect on mobility, whereas expansion of road infrastructure capacity in congested cases leads to a fast development of mobility, and a possible change of land use encouraging urban sprawl along the expanded infrastructure. Whilst, a part of the new demand is latent demand suppressed due to high costs of congestion, another part may be real new demand.” (Ref: CO_5048)
  • “An often promoted policy is to invest in public transport. According to the analysis presented here this will only have a substantial effect if the door-to-door speed of public transport at least equals that of the car. And this seems only feasible in large cities where car driving slows down to an average of 10 or 20 km/h and on longer distances between city centers, where public transport can reach a speed of 100 km/h. On other medium distances the car is unbeatable. Policy makers should avoid illusions about the effectiveness of promoting public transport as an instrument to reduce car mobility.” (Ref: CO_2046)

Financial management schemes

  • “The construction and maintenance of transport infrastructure will put enormous financial pressure on public entities. A possible reaction to this may be increased privatisation of transport infrastructure and services. In addition, we may see more financing models based on the “user-pays” principle.” (Ref: CO_0079)