Road pricing #1 – Political poppycockatoos

Well, well, well. What a week.

For those who are interested in Brexit, I am currently writing a short paper on the topic that I hope to make available via the Blog.

Right now, however, I want to cover political issues closer to home. Specifically, the release of the ATAP report. What is ATAP? Well, it’s simply a collaboration between Auckland Council, Auckland Transport, and Central Government that is designed to align plans for transport in Auckland. Not a bad idea.

ATAP recently released a report that has breathed fresh life into the road pricing debate. As many of you will know, TransportBlog has over the years expressed qualified support for the idea of road pricing. While we think it’s important to carefully consider 1) distributional impacts; 2) revenue neutrality; and 3) complementary transport investments (of all modes), these issues should not be allowed to scuttle discussion and research into road pricing. The potential benefits of road pricing are simply too large to ignore, IMO.

Not everyone, however, seems happy with ATAP’s recommendation that road pricing be investigated in the Auckland context. In this post I’m going to review statements made by three political parties in response to the ATAP report. In future posts, we hope to cover some of theory behind road pricing in more detail, and consider their implications for road pricing in Auckland.

1. The Government – Simon Bridges

In the past few years I’ve been somewhat critical of the Minister, as evidenced by posts on Bridges’ bridges and subsidies for electric lemons. We’ve also criticized the ineffective mega-motorway projects this Government has promoted, such as the East-West Link and Auckland Waitemata Harbour Crossing.

On the other hand, I’ve really been impressed with Bridges’ comments on road pricing, which have been refreshingly candid, informed, and balanced. Here’s a selection of what Bridges has had to say about the ATAP report in general, and road pricing in particular (source):

In the short term, more roading and public transport may … be necessary,” Mr Bridges told the Herald. “But that alone isn’t enough. We can’t keep building new lanes on highways.

We will need a combination of demand-side interventions if we are going to deal with congestion over the next couple of decades.

When pressed on his Government’s tepid support for road pricing in the past, Bridges made the following comment:

Asked why the change of heart, Mr Bridges said: “It is the evidence. What’s been shown quite clearly here is that a combination of technology, including pricing, can dramatically lessen congestion on the network.”

In the same interview, Bridges noted that (1) road pricing was intended to manage demand, not raise revenue (even if the revenue could be used to accelerate some specific projects) and (2) road pricing would only be introduced over a period of 10 years, if further research found it to be effective. In these comments, Bridges demonstrated:

  1. An awareness that supply-side transport interventions will not, on their own, be a cost-effective way to manage the growth in travel demands Auckland is experiencing;
  2. A willingness to engage with complex issues, and to change his position if doing so is justified by evidence. This is something that is often hard for politicians to do, and I think is something to celebrate when such changes are based on new evidence coming to light;
  3. An acceptance that if road pricing is implemented, then it should be to manage demand – not raise revenue. This is an approach the Blog has supported for many years.; and
  4. An understanding that several years of research and discussion are necessary before road pricing can be implemented.

In short, I thought Bridges’ comments were candid, informed, and balanced. Bravo. The two issues he doesn’t appear to discuss in detail was (1) distributional impacts, although further research would seek to clarify the nature of these impacts and (2) the need for complementary transport investments to manage anticipated demands from road pricing. While there’s still room for improvement, it’s heartening to seem Bridges take a somewhat bold position on an important issue.

2. The Labour Party – Phil Twyford

Now for a different perspective. In response to the ATAP report, Labour Party MP Phil Twyford commented as follows (source):

The Government wants to tax Aucklanders thousands of dollars a year just to use the motorway network … the average Aucklander … would pay new congestion charges of between $185 and $2461 per year.

National has allowed the gridlock on Auckland roads to get steadily worse over the past eight years, leaving Aucklanders to sweat it out daily in traffic jams … Now they want to whack commuters with a massive tax for the privilege of using a road network that they’ve already paid for with their petrol taxes and road user charges.

I feel Twyford is being overly dramatic, and would like to clarify a few relevant issues from my perspective:

  • The last Labour Government also looked into road pricing; you can still find the reports here. While it ultimately didn’t go anywhere, ATAP is simply a continuation of a debate that started under Labour. In the intervening decade, technology has of course improved considerably.
  • In a revenue neutral situation, the revenue from road pricing would be used to reduce taxes elsewhere. Or increase welfare payments to low income households. Until we know the precise details of the scheme, we won’t know who wins/loses, or to what degree, so any statements to this effect are simply premature.
  • As the ATAP report shows, government spending on transport in Auckland has increased to approximately 2.5% of GDP. This is high by historical standards, and more than most OECD countries. In a nutshell? Both Labour and National have spent buttloads on transport in recent decades; the supply side has received plenty of attention.
  • Transport projects take time to design and construct. Most of the highway projects being completed now were planned under the last Labour Government, even if they have been accelerated under National. Thus, you cannot blame all of today’s problems on National; the transport system reflects decisions made over decades.
  • The road network is never “paid for”, at least not in the way that Twyford implies. Operating costs, the opportunity cost of land, capital improvements, and externalities, such as congestion, noise, and air pollution, are all examples of costs associated with roads that are incurred continuously over time.

On the other hand, it is true that this Government has spent billions on relatively ineffective road projects, such as Puhoi-Wellsford, SH18-SH1 connection, the East-West Link, and Kirkbridge Rd grade separation. These projects do little for congestion compared to their costs, and is something that Twyford is justified in criticising.

Twyford also had this to say:

Without a massive improvement to the public transport system as a viable alternative to driving on the motorways at peak hours, it would be utterly unfair to charge people thousands of dollars extra a year …

The first thing I want note is that it’s not immediately clear road pricing requires complementary public transport investment. The experience in London and Stockholm, for example, was that road pricing caused a ~20% reduction in vehicle travel but only a small shift to PT. In London’s case buses were the big beneficiary of less congested roads, as you can imagine. Personally, I’d expect road pricing would justify some selective investments in PT, but this shift should not be overplayed. The second thing to note is that the statement is duplicitous. Why? Well, the ATAP report considers how road pricing impacts on the demand for PT, and identifies where PT infrastructure and services may need to be improved. Put simply, the ATAP report does not present road pricing as a standalone solution, but instead considers it as part of a wider transport plan. As it should be.

Some of the issues with Twyford’s argument are highlighted in this Radio New Zealand interview, in which he moderates some of his positions under pressure by the interviewer. Twyford makes an excellent point with respect to the North-western Busway: It does seem to be a clear situation where road pricing might create the need for a project to be accelerated.

One other issue worth considering: In a recent press release, Twyford advocated for removing Auckland’s urban growth boundary and shifting costs on developers (NB: evidence suggests costs will ultimately be paid for by occupants, but that’s besides the point). ATAP shows that even with additional infrastructure investment, Auckland would still experience ongoing congestion. The latter might even worsen without an urban growth boundary. So while getting rid of regulations is well and good, it won’t mean congestion disappears. To put it another way, changing the way we fund transport infrastructure from rates to development taxes doesn’t mean that demand management is not beneficial.

Ultimately, I think Twyford needs to take a longer-term perspective on the issue of road pricing. Rather than trying to assail the Government to shut the conversation down, Twyford should be supporting the need for a 5-10 year investigation that gives serious attention to distributional impacts and complementary transport investments. I really don’t see any reason to get emotional before the details of possible schemes are worked through.

3. The Green Party – Julie-Anne Genter

In this interview Genter advances the Green Party’s position on ATAP’s road pricing proposal and also argues for more investment in public transport before road pricing can be implemented. As noted above, I suspect this issue tends to be over-played, simply because the benefits of road pricing don’t necessarily require huge mode shift, as Stockholm and London demonstrate. There’s also several other reasons to push back on the notion that road pricing is not a priority until public transport is improved.

The first reason is that investment in public transport won’t reduce congestion for those who continue to travel by car. In a city that is growing as fast as Auckland, even massive investment in public transport won’t maintain vehicle demands at present levels. By extension, even with significant public transport investment, there will be many, many vehicle trips that will continue to suffer from congestion. Commercial vehicles being a prime example: Why leave these vehicles sitting in congestion, when they are prepared to pay for faster and more reliable travel? One of the key benefits of road pricing is that it enables commercial vehicles to do their thang. And that generally benefits all of us.

The second issue is that, as noted above, ATAP does consider complementary transport investments to support road pricing. There is probably sufficient time between now and when road pricing is implemented to complete the CRL, extend electrified rail services to Pukekohe, progress extension of the Northern and AMETI busways, and construct key elements of the North-west busway. It may even be possible to implement LRT on Dominion Rd within 10 years. Auckland will within 10 years have a much better bus network with higher frequencies and capacity. Now, I appreciate completing all these projects would require a change in Government priorities, and that it’s important to highlight this need, but such things are kind of what the ATAP process is all about. Of course, if and when PT investments are rolled out, we may find that we can delay implementing road pricing, which is all well and good – but the opportunity to avoid road pricing through PT investment shouldn’t stop us (a priori) from discussing how we might implement road pricing.

Basically, I’m suggesting that the Greens should express conditional support for the idea of road pricing, subject to more detail on the nature and timing of its implementation. I don’t think saying “it’s not a priority we should do other things first” is a sufficiently strong reason to object to the recommendations of the ATAP report, at least at this stage.

Wrapping up

All in all I am happy to see the road pricing debate reinvigorated. I’m particularly impressed with comments from Simon Bridges, which are candid, informed, and balanced. Twyford and Genter are justified in highlighting that (1) implementing road pricing will likely require some complementary transport investments and (2) this will likely require the Government place a greater emphasis on public transport than the have in the past.

On the other hand, the positions adopted by both Labour and the Greens come across as overly negative. While I can appreciate this is the general nature of political opposition in New Zealand, I feel that they might want to step back from the political coal face on this particular issue. Road pricing is not a discussion that needs to be rushed, nor should it be shut down. It seems to me that the more reasonable position is to express conditional support, with some specific caveats on where the ATAP research should head.

As something that will take several years to develop, we have the chance to discuss the nitty gritty of road pricing means in the Auckland context without committing to anything. Why fall into hard and fast negative positions before then?

ATAP Interim Report

Yesterday, the second Auckland Transport Alignment Project (ATAP) report was released, with the third and final report due in August. ATAP is the council and government working together to come up with an agreed transport plan for Auckland, one that ultimately performs better than what is currently planned.

The first Foundation Report was about agreeing on the assumptions they would use (such as land use, growth rates etc), and looked at how the currently planned transport projects would perform in the future based on these assumptions. There was a lot of interesting information, but ultimately the report found that by 2046 the outcomes weren’t great, and highlighted that we need to improve our plans or face even greater congestion.

Now we have the Interim Report (2.1MB), which explains the outcomes and thinking so far from the work to look at how our transport plans could be better. The work so far includes looking at a range of transport interventions to see how what impact they have.

So far the media have focused on one very specific outcome of this interim report – road pricing – but there are a lot of other important points that needs to be covered. Perhaps more than anything, the important thing from ATAP so far is that it hints at thr old business saying of ‘joined up thinking’. That’s because it doesn’t just take a “build more stuff” approach, but looks at a mix of building stuff and also managing demand. So let’s go through what I thought were some of the key and interesting points found in the Interim Report.

Revenue Assumptions

While the purpose of ATAP is to come up with a better and aligned transport plan, it’s also important to consider how much that might cost. To that end, the ATAP team have taken a stab at how much money might be available to spend in the future. Investment in transport in Auckland has been much higher over the last decade, as the city has gone into catch-up mode, however they’ve projected that level of investment forward based on a couple of options. Continuing the current investment:

  • as a share of Auckland’s projected GDP – currently estimated at over 2.5%
  • on the same per capita basis.

Because productivity is expected to improve over time, the share of GDP measure results in a lot more transport spending and over a 30-year period results in total difference of around $23 billion. The two approaches are shown below, with the current expected spending also shown as far as is currently budgeted (10 years). The lump in current investment is the result of a heap of big projects on the books including CRL, East-West link, Puhoi to Warkworth etc.

ATAP - Interim Report - Revenue

Testing Alternative Packages

ATAP have tested alternative scenarios and condensed these down to two packages as shown below.

ATAP - Interim Report - Test Packages

These have then been modelled, to see how they perform relative to the Auckland Plan Transport Network from the Foundation Report. The outcome isn’t great, and they say that while there can be some improvements made in some areas, they are not to the level that would be needed to make a material difference. The colours on the graphs match the colours above.

ATAP - Interim Report - Package Modelling

The graphs above are at a regional level, but at a sub-regional level, things can be quite different. The Foundation Report highlighted big issues with accessibility from the South and West.

The big improvement in the Northwest for PT is the result of building the Northwest Busway, highlighting once again just how stupid it is that the NZTA aren’t building it right now as part of their motorway widening.

ATAP - Interim Report - Package Modelling - South + west

The report also gives a lot of backing to Auckland Transport’s plans for light rail – although without actually mentioning it. It talks about how a number of bus corridors to the city centre (North Shore, Northwest and Isthmus) will be subject to significant capacity issues unless something is done. The example given is of Symonds St showing that by 2045 it is well over capacity.

ATAP - Interim Report - Symonds St

The Additional Waitemata Harbour Crossing gets a specific mention too, which is unsurprising because as currently planned, it’s by far the single biggest transport project ever planned in New Zealand. What is surprising, though, is that ATAP seems to pour a bit of cold water on the road-building side, saying that it doesn’t improve congestion and seeming to suggest that perhaps a PT-only crossing might be more appropriate.

Improving access to and from the North Shore

  • The bridge and its approaches are a pinch-point on the transport network, particularly during the evening peak in both directions.
  • An additional crossing significantly improves accessibility to/from the North Shore, but does not appear to substantially improve congestion results.
  • Projected growth in public transport demand appears likely to trigger the need for a new crossing within the next 30 years. There is potential for a shared road/PT crossing, but the costs and benefits of different options require further analysis.

High cost of potential solutions

  • Because any new crossing will be tunnelled, there is a significant opportunity cost arising from this investment. Fully understanding key drivers, alternatives, cost and benefits will be crucial before any investment decisions are made.
  • It makes sense to protect the route for a new harbour crossing in a way that integrates potential future roading and public transport requirements.

The congestion issue is highlighted in these results, showing it is just as bad or actually worse.

ATAP - Interim Report - AWHC

New Opportunities

New opportunities represent some of the potential changes that could be made to the system but which are not currently in plans. It’s possible that they might not all become reality, but they were included in a bid to see what impact they could potentially have.

Part of ATAP’s terms of reference was to look at the impact of road pricing as a demand management tool. While the media have picked this up as “motorway tolling”, the outcome ATAP is talking about is quite a different beast. In essence motorway tolling was about raising as much money as possible and trying to do that efficiently. Road pricing for demand management is primarily about trying to get more efficient use of the road resource we have. ATAP is talking about pricing roads regardless of whether they are motorways or local roads, across the entire region i.e. a network-wide solution.

Their hypothetical solution looked at having varying charges between 3c and 40c per kilometre depending on time of day, location and the type of network the travel occurs within. As a comparison, a rough estimate suggests current fuel taxes are about 6c per kilometre now. An example of how the pricing could differ is shown below.

ATAP - Interim Report - Road Pricing Differences

This would still need some infrastructure investment, particularly on PT to give people options and these were included into a fourth package for modelling. As you can see, this fourth package (in blue below) performs significantly better than the other packages above when it comes to congestion.

ATAP - Interim Report - Manage Demand

This initial work suggests that the package of ‘road pricing plus extra public transport investment’ makes a massive difference, for both congestion and accessibility as shown in the two images above. ATAP says more work is needed to determine the exact impact, but it seems that road pricing is likely to have a major role in Auckland in the future. This has also now been confirmed by Simon Bridges, whose predecessors were very negative about earlier tolling ideas. This is a significant change and a welcome one.

In addition, ATAP also considered the impacts of technology, such as higher occupancy vehicles, most likely through ride-sharing and connected vehicles. They say the results are encouraging but also warn they likely reflect a best case scenario. Furthermore, as they don’t include any potential impact on overall travel demand (which could be significant), those savings could disappear.

ATAP - Interim Report - technology

Emerging strategic approach

ATAP say they asked the question of Should we build more or should we address demand? Ultimately, they suggest the outcome is likely going to be a mix of infrastructure and demand management. They highlight that there are likely diminishing returns on infrastructure, since it is increasingly expensive to provide to the existing urban area, so building our way out isn’t an option. This is an issue being faced all over the world.

All of the work above leads to the high level strategy ATAP will take – which is not all that different to what we’ve seen suggested before in various documents.

ATAP - Interim Report - Emerging Stragetic Approach

Overall, ATAP seems to be on the right track with the approach they’re taking. With the government, the council and all of the relevant agencies working together, it’s likely we’ll end up with a lot more agreement on transport in Auckland than we’ve had in the past. Have you read the document, if so what are your thoughts?

Sunday reading 5 June 2016

Welcome back to Sunday reading this long weekend.

We start this week with a borrowed slide explaining the way that the quality of your city’s Transit system controls the quality of your driving commute:

DOWNS-THOMPSON PARADOX

This explains what’s wrong with current expansion of SH16 and the completion of the Western Ring Route. The Transit part of this project is woefully inadequate: Intermittent bus lanes on the shoulder of the motorway are unlikely to lead to sufficiently fast or reliable bus travel times, this means the choice of taking the bus will probably not be attractive enough to tempt enough people away from driving on the newly widened motorway. This will lead to more induced driving and an increase in traffic congestion [which ironically will further slow those buses, because they are not on their own RoW]. Perhaps not immediately on the new parts of motorway itself, but certainly on local feeder roads and especially in the city and CMJ where the State Highways 1 and 16 and city exits all meet.

The biggest beneficiaries of high quality Rapid Transit are those who need or choose to drive. The better the alternative; the better your drive.

Staying with the value of Rapid Transit let’s head to Montréal where plans for a new layer of Rapid Transit has just been announced [in Lime Green below, with existing networks], which raises important issues around driverless technology:

reseau-electrique-metropolitan-montreal-metro-subway-map-connections

Similar to Vancouver’s Canada Line, a system that CPDQ also has a financial stake in, trains will run every three to six minutes along the mainline and every six to 12 minutes on the three branch routes, including the train service from the airport to downtown. In contrast, the Deux-Montagnes commuter rail line is limited to every 20 to 30 minutes during rush hour and every hour outside of rush hour on weekdays.

But these high frequencies are only possible due to the nature of automation, which makes frequent train services significantly more economically feasible to operate. If there is a surge in demand, operators can easily and quickly increase frequency by deploying more trains by switching the controls at the operations centre.

With driverless technology, the operating costs are markedly lower than systems that require drivers and it has the potential to attract more ridership given that frequent services and superior reliability increase the utility of a transit system. Knowing that a train or bus will come soon, a transit service with a high frequency means transit users do not have to worry about service schedules. This reduces waiting times and connection times between transit services.

We really need to have a Transport Minister and Ministry just as excited about the opportunities for these technologies in the PT space as they are about them for private vehicles, the value is huge and the technology proven. SkyTrain in Vancouver has been driverless since 1985, carries 117m pax pa, and has run at an operating surplus every year since 2001.

Staying in Canada, here is how Montréal can have such ambitious city-building plans, central government is chipping in:

The new Canadian government is shifting investment to sustainable and social assets, away from Carbon intensive assets likely to become a burden on future citizens, and away from the failed ideology of austerity:

Investing in infrastructure creates good, well-paying jobs that can help the middle class grow and prosper today. And by making it easier to move people and products, well-planned infrastructure can deliver sustained economic growth for years to come.

At the same time, new challenges have emerged that make the need for investment more acute: things like the rapid growth of Canada’s cities, climate change, and threats to our water and land.

Congestion in Canadian communities makes life more difficult for busy families, and has a negative effect on our economy—when businesses can’t get their goods to market, it undermines growth.

A changing climate is also hard on communities. From floodways to power grids, investments are needed to make sure Canada’s communities remain safe and resilient places to live.

Investing in infrastructure is not just about creating good jobs and economic growth. It’s also about building communities that Canadians are proud to call home.

With historic investments in public transit, green infrastructure and social infrastructure, Budget 2016 will take advantage of historically low interest rates to renew Canada’s infrastructure and improve the quality of life for all Canadians.

In Budget 2016, the Government will implement an historic plan to invest more than $120 billion in infrastructure over 10 years, to better meet the needs of Canadians and better position Canada’s economy for the future.

2.2-en

Frankly I expect this kind of approach to become orthodox this century. That is once we can shake the stultifying grip of last century’s habits and world view, and properly start to address the issues in front of us.

More on vehicle speed and safety, this time from Nate Silver’s 538:

Given the social and economic toll of speeding, one might assume that we set speed limits with careful calculations aimed at maximizing safety. But that’s not exactly how it works, and a history of questionable applications of data is partly to blame.

Roads are planned according to a concept known as design speed, basically the speed vehicles are expected to travel.3 Engineers often apply the 85th percentile rule to a similar road to arrive at the design speed for the proposed road. It might make sense, then, that the design speed would become the speed limit. However, in practice, the design speed is often used to determine the minimum speed of safe travel on a road.

Confused? So was I. Norman Garrick, a professor of engineering at the University of Connecticut, explained how this works using the example of a commercial office building.

“It’s completely unacceptable for someone to die in a plane crash or an elevator,” he said. “We should expect the same of cars.”

And for some local flavour via Stuff: Drivers not coping with Christchurch’s new central city 30kph limit:

Acting Senior Sergeant John Hamilton said police spent 90 minutes on Friday to see if drivers were abiding by the new limits. Stuff witnessed about 10 drivers being pulled over for speeding on the corner of Montreal and Cashel streets within 30 minutes, including two Christchurch City Council staff. 

Hamilton said most of the drivers ticketed were driving between 50kmh and 60kmh, with one motorist spotted driving 65kmh.

Now I have some sympathy with these drivers for the simple reason that the both street [see above] and vehicle design mean that to stay below 30kph in anything other than congested traffic takes a huge amount of attention and control. You might argue that we should be attentive and ‘in control’ whenever we are driving, and of course that’s true, but the fact is that most operation of the vehicle for anyone but learner drivers is a subconscious act, and in fact needs to be as we should be focussing on the environment and not constantly checking the speedo. But of course, in truth, half our minds are really elsewhere, on other things when we drive; we do it on a kind of human autopilot. So if we want drivers to keep to safer slow speeds in cities, or around schools, or wherever, we really need to change the physical environment to forcibly slow the ‘natural’ speed of those places.

As for the cars themselves, well that’s a lost cause, even the simplest little car is way overpowered and torquey for these environments: they just want to get up to highway speed and stay there. Perhaps these slow streets won’t really work until those law abiding pendants the bot-cars are ponderously pootling us around…? Note these drivers weren’t just breaking the 30kph limit they were all also breaking the old 50kph one!

CHCH slow streets

Christchurch 30kph network

Related: we do like this more creative communication from some Transport Department:

Below a very interesting chart showing population change in London. I like that it has a name, and a good one, for the cycle we are clearly in now: City Renaissance and that it dates its beginning unambiguously to the early 1990s:

London Population changes

Note also that London’s population growth in this City Renaissance period has decidedly been both up and out, not just up. The rest of the paper, City VillagesPDF, from the Institute for Public Policy Research is very interesting too and relevant to Auckland’s situation. Basically the housing supply problem can be pretty clearly matched to the abandonment of public housing construction under neoliberalism, same as in NZ. Despite population growth, State and Council dwelling numbers have been falling not growing in recent decades:

London Housing supply

And lastly, something from the energy transition department. Luís de Souza is a scientist from Portugal who is always worth reading on energy supply, especially for anyone interested in the longer term trends than the noise of the trader market as reported in the MSM. Here he is calling 2015 as the year of Peak Oil:

Titling the last press review of 2015 I asked if that had been the year petroleum peaked. The question mark was not just a precaution, the uncertainty was really there. Five months later the reported world petroleum extraction rate is pretty much still were it was then. This is not a surprise, but the impact of two years of depressed prices is over due. 

Nevertheless, during these five months of lethargy the information I gathered brings me considerably closer to remove the question mark from the sentence and acknowledge that a long term decline is settling in. Understanding the present petroleum market as a feature of the supply destruction – demand destruction cycle makes this case clear.

So happy Birthday Queen Victoria [yes it’s actually her birthday], and happy reading…

 

Budget day 2016, what we want to see

Today is budget and while we wait to see what, if any, goodies Bill English will announce, I thought I would list some of the things I’d like to see and what we may actually see. My gut says we won’t see anything too significant as the government often now announce or at least hint at changes in advance.

What we want to see

City Rail Link

Back in in January the government gave certainty to the City Rail Link when they agreed it should start construction sooner than they had originally anticipated. This was primarily in response to two things:

  • significant growth the rail network has been experiencing with sustained increases of more than 20% year on year
  • pressure from private developers like Precinct Properties – the ones behind Commercial Bay (Downtown Shopping Centre) and others – who we understand are keen to get on with their development and which is intrinsically tied in with the CRL.

But at the same event where John Key announced the government would support starting sooner the CRL happening sooner, he also said it would be subject to addressing a number of issues with the council.

We still need to work through a number of important and quite complex issues with the Council.

These include how project costs will be finally shared between the Government and the Council and how the Rail Link will be owned and managed.

Providing these issues are resolved – and I’m confident they can be – we’ll aim to finalise the business plan later this year.

The government announcing that the issues had been resolved and that funding is being forward for the project would be welcome news.

Rapid Transit

Getting more in to the realms of funding fantasy, it would be great if the government were to announce a number of rapid transit projects to complement the CRL in a bid to keep Auckland moving.

Rapid Transit Map

Some specific projects that could do with a boost include:

AMETI

AMETI is really in need of some funds to get it moving faster because at the current rate just the busway just from Panmure to Pakuranga is not due to start till 2021 and it could be almost a decade from now before it is finished. East Auckland needed this busway built years ago and so anything the government can do to speed that up would be welcome.

AMETI Buslane - Pakuranga Rd

NW Busway

With so much growth planned and already happening in the North West it will be critical that we have some good quality PT options. We know the project is bubbling away slowing with Auckland Transport and it could do with a push to get moving faster.

A second batch of trains for Auckland

AT continue to say that they have enough trains and that it will remain that way even after the CRL is finished. My view is that they have severe case of wishful thinking. Given the trains have a two year lead in time it seems imperative that we get them ordered now. AT have also been talking about buying some with batteries attached so they can run to Pukekohe without them having to string up wires. If that’s a viable solution, then they could be ordered at the same time.

EMUs at the Depot

Photo by Patrick Reynolds

What we might see

Transport for housing developments

There’s been a lot of talk recently about housing and in particular about greenfield growth. As we pointed out last week, one of the issues is not so much the overall amount of land but the amount of land that is serviced with infrastructure. The problem is that building this infrastructure is very expensive with just the bulk infrastructure to support the proposed growth estimated at around $17 billion. Of course in some places within the existing urban area infrastructure also needs to be upgraded to support growth.

That’s why I think it is quite possible the government may attempt to start addressing the issue by directly funding infrastructure or by introducing other mechanisms to enable it.

Kiwirail Funding

In the last budget the government signalled a pre-commitment for this budget of $190 million for Kiwirail. We may see a change to that figure or alternatively another pre-commitment for next year’s budget.

Regional Highway projects

Last year the government announced $97 million a number of regional highway projects. It’s possible that funding could be extended to cover projects in more areas.

 

What would you like to see in the budget and what do you actually think we will see?

 

Opening up NLTF to all modes

The Green Party released a new freight policy yesterday. They’re looking at ways to invest to increase safety and reduce carbon emissions:

The Safer, Cleaner Freight policy sets a target for moving half of freight on rail and by sea within 10 years of the next election. It allows the transport budget to be used to fund rail projects, and commits to the electrification of rail between Auckland, Hamilton and Tauranga.

“National’s single-minded focus on a few expensive highways is downright irresponsible, and will ultimately force more and more trucks onto New Zealand roads,” said Green Party transport spokesperson Julie Anne Genter.

“National spends five times more on a few low-value motorways than it does on the entire rail network. National’s pet projects will actually increase congestion and the number of trucks on New Zealand roads, meaning within a decade Kiwis will have to share the roads with an additional 1.7 million truck trips every year.

“New Zealanders are sick and tired of more and more trucks congesting their towns and cities and bearing down behind them on the road. Every year, an average of 55 people are killed in crashes involving trucks, and over 850 are seriously injured.

“Rail is our second corridor. A single train can remove 70 heavy trucks from the road. By investing in rail and shipping we will not only make roads safer, but the air cleaner, and create a safer climate for future generations.

“We will invest $860 million to electrify rail between Auckland, Hamilton and Tauranga – New Zealand’s busiest freight corridors. This will help to move freight safely off the road, and create a zero emissions freight service in ‘the Golden Triangle’.

“Instead of demanding that rail return a profit, which has set rail up to fail, we’ll fund it from the transport budget in the same way roads are, providing the investment needed to move freight in the most effective and clean way.

“Moving freight by rail and ship is not only safer and cheaper, but better for the environment. Shifting half of New Zealand’s freight by rail and ship is the equivalent of replacing over 1.6 million petrol and diesel cars with electric vehicles.

Possibly the most interesting part of this is the proposal to open up the National Land Transport Fund (NLTF) to allow it to fund all modes. We’ve just seen an example of the problems with mono-modal transport funding, with NZTA charging on with planning a third road-only Waitemata harbour crossing rather than considering all the alternative ways to get people across the harbour.

Allowing rail infrastructure to be funded by directly out of the NLTF is an idea that we’ve long augured for. The NLTF is used to help fund public transport services and some infrastructure on the basis that those services help alleviate some pressure from roads and therefore drivers. Why should the same principle not apply to other areas of the transport space and while the Greens’ proposal focuses on freight, but surely it would also make sense for NZTA to adopt an all-modes approach for urban passenger transport as well.

Their proposal to electrify the “Golden Triangle” rail line sounds pretty expensive and there is no way Kiwirail in it’s current state could even consider it – although I suspect the economics of it would be challenging under any funding regime. However, this route is the busiest freight corridor in the country, so if there’s a case to do it anywhere then it’s here.

By way of illustration, the Ministry of Transport’s 2014 National Freight Demand Study found that the rail moved a total of 4.7 million tonnes of freight between the Auckland, Waikato, and Bay of Plenty regions in 2012 (see Table 4.4). That’s around 29% of the total inter-regional freight movements of 16.4 million tonnes (Table 4.7). The image shows rail freight movements by volume and comes of an interactive visualisation by Aaron Schiff who used the data from the National Freight Demand Study.

Rail Freight in NZ

In the short term, the best way to get the most out of the upper north island rail network might be to build more passing loops to increase rail freight capacity. For example, the rail line from Hamilton to Tauranga is largely single track with a few passing loops, which limits it to only four trains an hour (two each way). The last passing loops added just a few years ago as part of a $13 million package of works and doubled capacity on the line between Hamilton and Tauranga, compared to many transport investments that is very cost effective.

Inside Auckland, building a third main line for the Southern Line is pretty crucial as there are already conflicts between passenger and freight services that will get worse after CRL. We understand the cost of doing so is fairly cheap compared to most transport investments we hear about but the project has been languishing as Auckland Transport and Kiwirail can’t agree on who should fund it.

While these are fairly specific examples, on the whole it seems like would be easier to make beneficial (and relatively cheap) investments like these if rail could compete for funding out of the NLTF just like other transport projects.

Additional Harbour Crossing ill-considered and over-rushed.

We are increasingly concerned that Auckland is in the middle of very poor process where by far the nation’s biggest ever infrastructure project is being forced along and at ill-considered speed without anything like the level of public participation nor detailed analysis that it should have.

AWHC Sulhur Beach

NZTA are relying on a 2008 study into possible future harbour crossings to just get on with designing and designating a road only crossing. This study started with the assumption that any additional crossing would be a road lane crossing. No kind of comparative analysis of all options like the Centre City Future Access Study that was done to be certain that the City Rail Link is the right mode and route for that need has ever been undertaken.

Looking at the current options across the harbour it is clear that the highest capacity urban transport mode is what’s missing. There are 13 general traffic lanes across two bridges, and some passenger ferries, but no dedicated Rapid Transit route. We hold that it is absolutely necessary to do a proper comparative analysis between modes for the next harbour crossing before any designation or final design work is undertaken, and have been consistent in requesting it. We are not claiming to know what the outcome would be but that it is frankly irresponsible to proceed any further without such a study.

Particularly as a great deal has changed since 2007 when that report was commissioned. Aucklanders have proven that they are just like city dwellers everywhere else in the world and are very keen to use good quality Transit systems when they get the chance. Since the upgrade and electrification of the existing rail network we have been piling onto our new trains at a rate well in advance of expectations. The Northern Busway too has excelled expectations even though it has to share lanes with general traffic on the bridge and therefore is not as Rapid as a dedicated route would be. These two top tier systems are attracting riders at a rate of 20%+ year on year, and while there is relief ahead for the rail network with at last the CRL underway, there is no plan to deal with an ever rising flood of buses into the city centre with this hugely expensive project.

The line that ‘Aucklanders just love their cars’ as an excuse to not provide quality alternatives to driving has been forever proven to be the nonsense it always was. Aucklanders are the same as everyone else; we love what ever works well for our needs. So when we get options like the example below from Panmure for reliable fast travel we take it.

Pete Clarke Panmure

Furthermore it is well understood that it is the quality of the alternatives that govern the speed and reliability of the surface routes. So that in this example the car and bus speeds and reliability would be much worse without the separate Rapid Transit alternative. The same will be the case for across the harbour; a great alternative means freer roads, another driving route means more cars everywhere; more congestion See here for a discussion on this:

There’s good science to back up the commonsense view. It goes like this: public transport operates to a fixed speed, a timetable. Most people will take whichever transport option is fastest. They don’t care about the mode. If public transport is quicker they’ll catch a train or a bus, freeing up road space. If driving is quicker, they’ll jump in their car, adding to road congestion. In this way, public transport speeds determine road speeds. The upshot is that increasing public transport speeds is one of the best options available to governments and communities wanting to reduce road traffic congestion.

Additionally the commitment to this road only crossing is made before the completion of the Western Ring Route, the current multi-billion dollar bypass for cross harbour traffic. It is also being made without any kind of business case. Existing estimates are up to $6Billion dollars for a return of 30-40 cents on the dollar. This desperately needs proper and thoughtful analysis, without the ridiculous haste from politicians.

All over the world cities are kept moving by building high capacity spatially efficient Transit systems. Auckland is simply at the point where it can no longer delay adding this essentially weapon to its arsenal of movement options. From statements by NZTA they agree that a Rail crossing is required but they insist, without any analysis or study, that this must come after another road crossing.

Three road crossings, and no more spatially and energetically efficient option? We would like to see analysis of what reversing this timing could achieve. What if the next crossing is high capacity electric rail? Especially driverless low operating cost rail.

  • What are the outcomes for traffic congestion across the wider city?
  • For land use?
  • For the local environment?
  • For Carbon Emissions?

We know that the people constantly say they want extension of quality Public Transport:

AA LTP Survey - PT v Roads

Survey of Automobile Association members

The public deserve to have a say in what is being done in their name and with their money. There are so many questions. NZTA know that this project will flood the city centre with cars and that there is simply nowhere for them to go. They also quietly discuss levels of tolling on both the new crossing and the old bridge. This massive project will not only soak up huge sums of investment funding closing off opportunity to make other decisions across the city and nation, but also induce more traffic everywhere on Auckland’s roads. It is also the reverse of future proofing as it commits us all to more driving:

AWHC - Induced Demand

The road only crossing is a huge Traffic Inducement scheme, as NZTA explain in this slide.

To claim all environmental and traffic congestion concerns can be waved away because of future technology is very weak. That argument suggests that the time to build this kind of infrastructure is when we all do have electric cars, not on the prospect of their arrival some time in the future. And if driverless cars are to be that revolutionary then perhaps all this expensive additional road space will not be required? Meantime there is current electric and driverless technology that can be invested in right now.

In Vancouver the SkyTrain mass transit system shifts 117m people per year, at frequencies often down to a train every 2 minutes, running from 5am to 1:30am daily and all at an operating surplus. Driverless, Electric Light Metro. North Shore people have already shown they are not too posh to bus, they certainly won’t be reluctant to use a quicker, quieter, cleaner, more direct, 21st century movement system like this.

skytrain-millennium-line-wide

 

Removing the RUB won’t necessarily work as planned

Yesterday Phil Twyford announced that it would be Labour’s policy to abolish Auckland’s Rural Urban Boundary (RUB), as part of a policy to improve housing affordability.

Labour wants the Government to abolish Auckland’s city limits to get people out of cars, caravans, garages and tents.

Labour housing spokesman Phil Twyford said the urban growth boundary had to go because it has fuelled the housing crisis and people would not be forced into bad circumstances if the Government acted.

“The Government should rule out any possibility of an urban growth boundary in Auckland Council’s Unitary Plan if it is serious about fixing the housing crisis,” Twyford said.

“Over 25 years the urban growth boundary hasn’t prevented sprawl, but it has helped drive land and housing costs through the roof. It has contributed to a housing crisis that has allowed speculators to feast off the misery of Generation Rent, and forced thousands of families to live in garages and campgrounds,” Twyford said.

“Labour’s plan will free up the restrictive land use rules that stop the city growing up and out. It will stop land prices skyrocketing, and put the kibosh on landbankers and speculators.”

There’s no doubt Auckland has a housing crisis at the moment, with house prices increasingly dramatically over the past five years. Rents rose more slowly but the impacts for some families are still alarming. There’s also no doubt that planning restrictions have played their part in creating this crisis – by making it too difficult to build the required number of houses that Auckland has needed.

Addressing regional scale issues like housing and transport was one of the key reasons Auckland Council was amalgamated in the first place and why one of its first tasks was to rewrite the city’s planning rulebook through the Unitary Plan.

But will abolishing the Rural Urban Boundary help? To answer that question it’s important to understand what the boundary is, and what it isn’t. As its name suggests, the RUB is the boundary between land where urbanisation is anticipated and provided for over the next 30 years and land which is intended to remain rural over that time. If you take a look at the map below, it is the black dashed line that separates the yellow-coloured “future urban” zoned land from the brown rural zones:

rub

It’s also important to recognise that the RUB doesn’t exist yet as it’s part of the Unitary Plan being decided by the Independent Hearings Panel. It’s quite a different tool to the old metropolitan urban limit (MUL) that was typically set up against the edge of the existing urban area and made any urban expansion a significant challenge.

The RUB, by contrast, isn’t designed as a permanent boundary. It provides for a substantial amount of greenfield growth – enough to meet 40% of Auckland’s growth over the next 30 years.  The scale of the areas in yellow is highlighted in an Auckland Transport video that looks at the future transport requirements to enable their urbanisation:

The main argument against the RUB is that it creates a scarcity of land where urbanisation is possible, which drives up the price of that land. Over time the high price of land translates into higher house prices and reduced affordability. Fair enough. But what can we actually do about that?

As Auckland Transport’s consultation video above shows, the RUB isn’t simply a line on a map: it’s a plan to provide publicly-funded infrastructure to new urban areas. If you wanted to expand the yellow future urban zoned areas on the map, you’d also have to find the money for additional infrastructure.

In other words, greenfield land is in scarce supply because it’s currently farmland that requires roads, pipes, train stations, parks, schools, hospitals and a myriad of other infrastructure investment to take place before development can actually happen. Making a dent in the housing shortfall by enabling more urban expansion to occur is therefore entirely about speeding up infrastructure, rather than whether or not there is a line on a map.

As we’ve talked about before, the costs of supplying bulk infrastructure to greenfield areas are large. It is time-consuming to investigate, design, consent and build these projects. There’s no quick and cheap way to make a whole heap more greenfield land “development ready”.

In fact, removing the RUB could easily disrupt existing infrastructure plans and slow down overall development. If you take a look at the work that’s been done on transport for future urban growth, the networks are optimised around the location of the RUB. Scattering small developments around the region could force AT and NZTA to react to piecemeal development rather than taking a more strategic approach to infrastructure development.

I suspect that the first thing to get cut due to funding pressure would be the city’s rapid transit plans, which have already been delayed long enough. This would have the perverse effect of putting a damper on the 60-70% of development that’s intended to occur within the existing urban area.

TFUG - Draft Preferred Plan - Northwest

In short, abolishing the RUB isn’t a straightforward proposition. It’s not actually obvious that you could abolish it, as infrastructure plans would simply turn into a de facto RUB.

Ironically, Twyford acknowledges as much in his press release, where he says:

There is a smarter way to manage growth on the city fringes by properly integrating land use with transport and infrastructure planning. There should be more intensive spatial planning of Auckland’s growth areas in the north, north-west and south. Land of special value can be set aside, like the northern coastal strip or Pukekohe’s horticulture soils. Corridors should be acquired and future networks mapped for transport and other infrastructure

Let’s unpack this. First, he says that he’d like to see “intensive spatial planning of Auckland’s growth areas” with “future networks mapped for transport and other infrastructure”. That sounds a lot like the process that Auckland Council and Auckland Transport are currently undergoing for the yellow-coloured future urban land.

Second, he says that “land of special value can be set aside, like the northern coastal strip or Pukekohe’s horticulture soils”. That sounds a lot like some sort of boundary between urban land and non-urban land, which is exactly what the RUB is intended to be. Basically, if you read beyond the headline soundbite, Twyford’s policy starts to sound a lot like Auckland Council’s current policy, just under a different name.

That shouldn’t be a surprise. After all, the current government has been looking at this issue for half a decade now, and they’re pretty critical of restrictions on land supply. If it was a simple matter to abolish the RUB, they probably would have done it by now.

So what could we do differently?

There aren’t necessarily any “magic bullet” solutions to land supply. Greenfield land needs infrastructure to be useful, and infrastructure is expensive and slow to build. Shifting some of those costs onto developers, either through development contributions, targeted rates, or design rules that reduce the need for hard infrastructure (e.g. stormwater pipes) can allow more of it to happen. But the problem is that the developers push back, which limits the gains that can be had in this area.

Consequently, other policies are also needed to enable housing supply. That means relaxing or removing restrictions on building height and density within the urban area. While Tywford and Labour have also said they support this approach, they devoted only a single sentence to it:

Freeing up growth on the fringes needs to go hand in hand with allowing more density – so people can build flats and apartments in parts of the city where people want to live, particularly around town centres and transport routes.

That’s a great aspiration, but to be useful it needs to be backed up by specific policies to limit the use of height limits and other density-killing rules like minimum parking requirements. For example, would Labour lift building height limits throughout the urban area? If so, how high?

Lifting building height limits and density controls would have some immediate benefits for housing supply. For one thing, the transport networks and water pipes have mostly already been built, meaning that there’s no lag time waiting for the infrastructure providers. For another, it would make the housing market a hell of a lot more competitive by opening up lots of new development opportunities in the places that people most want to be.

This would also have the benefit of allowing people to avoid the high transport costs associated with sprawling development patterns. Even given Auckland’s dispersed employment patterns, the further out from the centre people live, the further they need to travel to work. This map from a Ministry of Transport analysis of the 2013 census data which shows how far people travel to get to work based on where they live:

This trend is repeated around the world, with more spread out cities requiring a greater amount of travel and, consequently, a higher proportion of income being spent on transport. In some cases this can end up outweighing any savings in housing costs. If we’re going to lift restrictions on housing construction, it makes sense to prioritise lifting the ones that also pose a barrier to efficient travel patterns.

Locked Out

6:45pm tonight at the AMI Netball Centre Northcote there is a housing affordability debate with some interesting speakers, head along:

Locked-Out-twitter-image

 

Housing Issues Hotting Up

Housing issues in Auckland have become a fairly constant news piece in recent years and the affordability issue has become louder and louder. And it’s not just people wanting to buy a house either but also for renters as rental prices rise too, something that is particularly tough for those on low incomes.

We know that one of the key tools to helping unlock development in Auckland is of course the Unitary Plan – depending on what final form it takes. It reached a new milestone last Friday as the Independent Hearings Panel held its final hearing on it. The amount of work the panel has undertaken has been significant. There were 9443 submissions and 3951 further submissions. The hearings began in September 2014 and there have been 242 days of hearings and there were more than 10,000 pieces of evidence.

Between now and July they’ll be working on their final recommendations to the plan which will be voted on by the council. With elections coming up it’s anyone’s guess as to which way councillors will vote. One thing that does seem clear though is that pressure is increasing on them from the government, in particular Housing Minister Nick Smith.

On the weekend he told by both TVNZ’s Q&A and Newshub’s The Nation that he will be imminently releasing a National Policy Statement (NPS) under the RMA which will put pressure on the growing councils like Auckland to open up land.

“Next month I will be producing a national policy directive under the [Resource Management Act] that will put far tougher requirements on growing councils to ensure they are freeing up long-term the land that is required so that we don’t get into the sort of juggernaut that has been at the core of the unaffordable housing problems in Auckland.”

At first blush that sounds similar to the “throw open the gates” type statements he made when he was made housing minister however since that time he seems to have moderated some of his comments and gained a better understanding of some of the finer issues such as density restrictions that prevent intensification. As such I am hopeful that the NPS he’s developing will also address these constraints too.

I also hope the government consider the impacts on infrastructure as part of any policy. Just throwing open the land might sound like the immediate solution but that land also needs infrastructure to support it and that isn’t cheap. The Council, Auckland Transport and NZTA have been working on the Transport for Future Urban Growth which is planning for about 110,000 dwellings on greenfield land and just the major infrastructure is likely to cost around $8 billion.

Yesterday Smith also became a bit more personal calling Councillor Mike Lee a NIMBY, a hypocrite and part of the problem for opposing intensification in Herne Bay.

“Mike Lee is guilty of Nimbyism,” said Dr Smith.

The Government has designated the site of the old Gables pub a “special housing area”. That allows for fast-tracked development, with between four to seven of the apartments “affordable housing”. It’s about getting more housing into inner-Auckland’s “urban intensification”.

But neighbours don’t like it, and, local councillor Mr Lee is on their side. Mr Lee wrote earlier this year, saying the development was “overriding the civil rights of neighbouring property owners”.

Dr Smith responded, saying he found Mr Lee’s position “ironic”, “odd” and “part of the problem”.

“We cannot have that sort of Nimbyism. That’s at the core of where Auckland has gone wrong. That’s why I’ve politely written back to Mr Lee and said ‘actually, you are being a hypocrite’.”

Nick Smith on Housing

Unfortunately, in many ways Nick Smith is right, over the last few years Mike Lee has fairly consistently voted against rules that would enable more housing, especially in the in inner suburbs.

John Key is also threatening the council and at his weekly press conference yesterday said:

The Prime Minister also warned that the Government would not be able to “sit back” if Auckland councillors did not deliver enough houses in the city.

Asked to elaborate, Mr Key said ministers would make announcements in this area soon.

Could the government ultimately force the Unitary Plan through if the councillors don’t approve it or worse could they install commissioners?

While I don’t agree with everything they’ve said, one positive is that the government have made some better noises around some housing issues. In saying that they also remain very quick to blame the council for the current issues when they need to take a share of the blame too. The reality is the Unitary Plan process is one the government created and more so, some of the ideas like an NPS could have been pushed years ago. Other tools that they’ve implemented such as the Special Housing Areas have resulted in at least some developers using it as a tool for to increase the value of their land-banking.

The bad news is that even if the government and council’s all do their bits well, our housing issues are something that could take decades to resolve. We’ll now have to await with interest to see what comes out of the budget and out of the NPS the government are preparing.

Subsidies for Electric Vehicles – How do you like them lemons?

*** Note: This post has been updated to correct errors in the initial version. Correcting these errors has not, however, affected the conclusions ***

Imagine, for a moment, that I was trying to sell you a bag of organic lemons. Now imagine that my bag of organic lemons costs 25 times the normal price. They’re very good ***organic*** lemons, I would say, while flashing a Simon Bridges smile. Well-fertilized by a lovely labradoodle called Lexie, I might add.

When confronted with such a scenario, I imagine (hope) that most of you would tell me to stick my organic lemons somewhere nice and dark. Like Norway.

P1000993

View of Bergen, Norway

How is this relevant to EVs? Well, the Government has just announced policies to subsidize uptake of electric vehicles (EVs). The Government is subsidizing EVS so as to reduce carbon emissions. A noble objective, you might think. Except for one small problem: My analysis suggests the Government’s is paying 25 times more to reduce emissions via EVs than what it’d cost to reduce emissions via other channels. Put another way, if we took the money being used for EV subsidies and instead used it to offset carbon emissions elsewhere in the economy, then we’d be able to buy 25 times more for our money.

Doesn’t sound like a very good deal does it? Let me first present some numbers to support this conclusion.

First, let’s consider the benefits side of the EV subsidy equation. Information available on the MoT website suggests (from my reading) that the main objective of the Government’s EV subsidies is to reduce emissions from transport. To achieve this outcome, the Government is proposing a suite of measures (subsidies) that are designed to increase the number of EVs on New Zealand roads from approximately 5,000 now to 64,000 in 2021. Of course, under a counter-factual (do-nothing) scenario the number of EVs on NZ roads would also be expected to increase, simply because EV technology is improving over time. For the sake of this analysis let’s say that under the counter-factual scenario (i.e. in the absence of the Government’s subsidies for EVs) we’d see an additional 10,000 EVs on NZ roads. From this we can deduce the Government’s subsidies cause a ***net*** increase of 50,000 EVs.

Second, on the cost side of the equation we find that two of the nine policies are costed at $42 million per annum in 2021. However, we’d expect the cost of the subsidies to start off low and ramp up progressively over the five year period, as more people buy EVs. Let’s assume the subsidies amount to an average of $20 million p.a. over 5 years, or $100 million in total. Let’s also keep things simple and use undiscounted monetary values. To sum up, the Government’s subsidies for EVs amount to spending approximately $100 million over 5 years, which is expected to result in an additional 50,000 EVs on NZ roads. This subsidy can be broken down further: $100 million divided by 50,000 EVs equates to $2,000 per EV, which over five years amounts to $400 per EV per annum. If we further assume an individual EV will be driven an average of 12,000km p.a., then we find the subsidies amount to approximately $0.03 per kilometre travelled.

So what do New Zealand taxpayers get for this investment? Or more specifically, how much of a reduction in CO2 emissions do we get from this investment? The Government’s analysis suggests that EVs will save 0.15 kg CO2 per kilometre traveled compared to a normal car. At 12,000 km p.a. this equates to 1.8 tonnes of CO2 saved per vehicle per annum. If we then apply the current carbon price of NZD $10 per tonne, then we find the Government’s EVs subsidies cost approximately 25 times more per year than the market value of the carbon emissions that they save.

I want to pause for a second to let this sink in: The Government’s EV subsidies cost 25 times more than what it would cost to reduce emissions in other ways. Oh. Dear.

Some of you may argue that a carbon price of NZD $10 per tonne of Co2 is too low – and I’d most definitely agree. Recent research suggests a carbon price closer to $200 per tone would be more accurate. However, I think it’s worth keeping in mind that the current carbon price is the direct consequence of deliberate policy decisions implemented by this Government over the last 8 years. Specifically, the Government has chosen to give out large volumes of free carbon credits, which have suppressed the price of carbon. Hence, I’d argue that the current carbon price at least reflect the Government’s views on how much New Zealanders should be paying to reduce carbon emissions.

Other people who are reading this may be thinking that I simply can’t be right. That somewhere I’ve missed out some zeros, or got a decimal point out of place. Perhaps I’ve been doubling-down on a few too many space-cakes here in Amsterdam, and/or skipped a few too many economics classes.

To try and get an independent perspective on my calculations I undertook some further research into the impact of EV subsidies in other countries. In doing so I stumbled across a very interesting paper titled The Norwegian support and subsidy policy of electric cars. Should it be adopted by other countries?, which was published in 2014 in Environmental Science and Policy.

This paper evaluates Norway’s subsidies for EVs and concludes (pg. 167; emphasis added):

Our main conclusion is that the Norwegian EV subsidy policy should be ended as soon as possible, and that this policy certainly should not be implemented by other countries. The solution to the GHG problem of the transportation sector in the next few decades in a world in which the GDP and population growth are the main drivers of the road traffic volume (Bosetti and Longden, 2013) is not to offer subsidies making it cheaper to buy and run EVs, or other alternatives, but to introduce more taxes and restrictions on car use. There are simply too many social costs associated with car transportation (Sterner, 2007). The subsidization idea, which informs so much of environmental policy today, not least within Europe, is ineffective, has several unintended consequences and will in many cases be counterproductive (Helm, 2012). The Norwegian policy for the support of EVs is an example of this.
Reading further, one finds that the authors have reached this conclusion based on an analysis of emissions savings from Norway’s EV subsidies. And guess what? They find the cost of the subsidies was approximately 2,700 times higher than the equivalent cost of offsetting the same amount of carbon (pg. 167; emphasis added):

Under certain reasonable assumptions, we then find that the EV subsidy package that the single EV owner gains amounts to about 13,500 USD/tCO2. As pointed out, this is about 2700 times higher than the current CO2 emission price. Therefore, under similar assumptions, subsidizing 20,000 EVs adds up to the value of more than 50 million permits, or about the present yearly GHG emission in Norway. Rather than supporting EV owners, the Norwegian Government could have bought emission rights in the same amount in the quota market and kept these rights unused, meaning that the quota supply would actually have shrunk. This would have driven the quota price up and possibly contributed to a technology push along different lines. At the same time, this measure would have made Norway ‘carbon neutral’.

Also contained in the paper is some interesting information on who seems to benefit from EV subsidies (pg. 167; emphasis added), with the authors commenting as follows:
It is widely believed that this EV policy will result in less energy consumption based on fossil fuels and a reduction in the local emission and noise problems. However, our discussion and analysis show that unfortunately the issue is not that simple. One of the most worrying aspects of the current EV policy incentives in Norway is that they motivate high-income families to buy a second car. At the moment, two-car households make up a minority. However, if two cars per household become more common, they will pose an environmental challenge across several dimensions and will doubtless mean that the EV policy as a GHG emission reduction instrument is totally missing its point.

“Totally missing its point” is not something you read in academic papers everyday. It’s worth mentioning that political parties in Norway recently reached consensus on rolling back EV subsidies, by removing EVs’ ability to use bus lanes and lifting their exemptions from tolls.

If you’re looking for a sound-bite from this post then this is it: The Government is proposing to spend $100 million to subsidize wealthy households to buy electric cars in order to achieve a relatively paltry reduction in emissions.

At this point I should point out that the Government is not alone in proposing that the New Zealand taxpayers subsidize EVs. The Green Party, for example, has also proposed removing FBT from EVs. While I haven’t evaluated their policy in any detail, on the basis of the numbers I’m seeing here I’d be ***extremely*** skeptical about the effectiveness of such a policy, especially when considered from an environmental and social justice perspective.

To finish, I want to make two moderating comments in relation to my criticisms of EV subsidies.

The first caveat is that I think EV technology is really cool and has a lot of potential to make our lives better. However, observing something is a “cool technology” is not sufficient reason to implement subsidies. Call me square if you will, but I personally believe that good policy should try to 1) achieve its stated outcomes and 2) to do so in an effective manner. Spending $100 million for what appears to be little gain seems to fall outside of this definition of “good policy”..

The second caveat is to acknowledge that EVs have benefits which extend beyond carbon emissions, and include things like air quality and noise benefits. These benefits should definitely be considered as part of a detailed benefit cost analysis. However the onus for demonstrating these benefits, I would argue, lies with the Government / MoT – not some strawberry-blonde punk blogger like myself. Specifically, the Government should really be doing detailed benefit cost analysis before announcing policies. For this reason I think it’s fair for us to evaluate Government policies in terms of their stated objectives.

Notwithstanding these moderating comments, my conclusion is that the Government’s is spending about 25 times more on EVs than they should.

Personally, I feel like this is a shame because I would love to see New Zealand take some serious steps towards reducing carbon emissions. The EV policies announced by the Government, however, do not qualify as a serious step. I’m left with the distinct impression that these EV subsidies are a superficially attractive way (“greenwash”) designed to distract New Zealanders from what is a very real problem: Our carbon footprint is too damned high.

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