Presentation by Professor Austin Smyth Transport Research Institute, Napier University E dinburgh

2. Scotland’s National Transport Strategy Dunblane 30th May 2006 Can growth be achieved without an associated rise in traffic emissions? Presentation by Professor Austin Smyth Transport Research Institute, Napier University Edinburgh ahsmyth@dnet.co.uk

3. Scotland’s National Transport Strategy Dunblane 30th May 2006 ‘In developing our transport strategy, we will need to put in place a set of coherent policies. ……developing a transport system that is compatible with economic growth, sustainable development, equality, social inclusion and health improvement principles, will be the major challenges of the NTS.’(Scotland's National transport strategy: A Consultation)

4. Scotland’s National Transport Strategy Dunblane 30th May 2006 Can growth be achieved without an associated rise in traffic emissions? …..or in the jargon Decoupling traffic growth from economic growth- Is this plausible ?

5. Transport and the Economy: Transport and Economic Trends The last 40 years have seen growth in both the national economy, as measured by GDP, and demand for transport. In the case of freight, road transport has become the predominant mode of moving goods in the UK over the last 40 years. Also rapid rise in air transport both freight and passengers. Many transport economists and politicians still argue that transport growth is inextricably linked with economic growth. However, research results clearly indicate that there is no linear relationship between the two.

6. Decoupling traffic growth from economic growth-is this plausible ? • The economic expansion of an economy (economic growth) is typically associated with a corresponding increase in traffic levels. • A greater number of economically active people boost commuting and work-related travel and higher disposable incomes increase the amount of money that can be spent on transport. • Between 1970-1995 the average number of kilometres travelled per person per year has increased from 6293 to 12,337, a 96% increase. • Economic growth over the same period has totalled 72% (24% less than traffic). • As the transport intensity of an economy increases it becomes less efficient. • The transport intensity of the UK is increasing. This is highlighted by the difference of 24% between traffic growth and economic growth 1970-1995.

7. Decoupling traffic growth from economic growth-is this plausible ?

8. Decoupling traffic growth from economic growth-is this plausible?

9. Trends in transport and economic growth in EU countries expressed as a percentage (Stead et al, 2002) Past Projected 1970-1995 1998-2010 GDP 83% 43% Passenger Transport 112% 24% Freight Transport 71% 38%

10. The Nature of the Debate about Transport and the Economy • Business argues that an efficient transport network is vital to a strong economy • Some commentators argue there is scant evidence for a causal link between transport improvements and economic growth. • In developing Transport Strategies the following Questions and Trade Offs need to be addressed: • Growth or Displacement? • Growth and the needs of the Global Environment • Globalisation, Transport Demand, Spatial Patterns of • Development and the Environment • Growth and the distribution of Prosperity - Spatial and • Demographic aspects

11. Macro-Level Relationship between Transport and the Economy Do Transport Improvements Lead to Increased, or More Efficient, Economic Activity? Conclusions about the effects of transport on the economy are strongly dependent on local circumstances. Theory suggests that there are a number of important mechanisms by which transport improvements could, improve economic performance.

12. Macro-Level Relationship between Transport and the Economy • These mechanisms include: • Reorganisation or rationalisation of production, distribution and • land use; • Effects on labour market catchment areas and hence on labour • costs; • Increases in output resulting from lower costs of production; • Stimulation of inward investment; • Unlocking' inaccessible sites for development; and • Triggering growth which in turn stimulates further growth.

13. Macro-Level Relationship between Transport and the Economy Geographical Aspects • Key aspect of the debate are the claims made about the impact of a transport project on a local area or region. • Some claims deal with issues of perception, of potential inward investors about the accessibility of particular parts of the country. • North Lanarkshire Council claimed success of Lanarkshire Enterprise Zone during 90’s in attracting investors compared with Clydebank Enterprise Zone can be explained by the different quality of road links serving the two areas.

14. Macro-Level Relationship between Transport and the Economy Geographical Aspects Initiatives to promote regeneration also recognise that the degree to which a transport scheme is complementaryto other policy tools is essential to maximising the contribution of that scheme. Transport improvements can also harm a local or regional economy, by exposing indigenous firms to competition from stronger rivals outside the area - the so-called 'two-way road' argument. UK Department for Transport has conceded that in rural areas improved transport links could run counter to regeneration and other policy objectives.

15. Micro-Level Relationship between Transport and the Economy A transport improvement which reduces transport costs enables firms to sell their products more cheaply. Parkinson pointed out transport costs were a small proportion of total production costs (5-10%). Importance attached by business to the need for transport improvements has been questioned.

16. ‘NITL Competitive Challenges: Chain Reactions’ on Business Competitiveness and the Role of the Supply Chain on the Island of Ireland Largely Macro Supply Chain Challenges ROI NI Source: NITL Competitive Challenges: Chain Reactions (2005)

17. ‘NITL Competitive Challenges: Chain Reactions’ (2005)Largely Internal Supply Chain Challenges ROI NI Source: NITL Competitive Challenges: Chain Reactions (2005)

18. ‘NITL Competitive Challenges: Chain Reactions’ (2005)Critical Factors for Competitiveness ROI NI Source: NITL Competitive Challenges: Chain Reactions (2005)

19. Satisfaction with Transport Systems ROI NI

20. Transport and Business LocationTheoretical Expectations • Changes in transport ‘costs’ have a range of potential economic effects: • the location decisions of firms; • their influence on regional patterns of commerce; • incentives to invest and to innovate; • the commuting and migration decisions of households • Porter's model of competitiveness highlights the interdependence of conditions necessary to attract and sustain competitive businesses.

21. Transport and Business LocationTheoretical Expectations • Competitiveness theory argues transport provision in an area increases the effective market size of an area and increases competition. • Transport can affect business location through: • financial costs for goods transport; • relative time costs and savings; • certainty/reliability of travel time; • the need to physically meet customers and suppliers; and • staff and customer travel costs.

22. The Drivers Of Business LocationKey Evidence • Empirical research highlights access to markets and availability of skilled labour, sufficient business accommodation and transport links as key drivers of business location. • The evidence suggests that transport is a necessary, but not sufficient condition in determining business location. • When combined with other measures, and integrated into part of a business development programme, transport can help to influence location.

23. The Drivers Of Business LocationKey Evidence • The evidence for road transport alone to attract business is mixed - some research suggests it can have negative effects in certain circumstances. • Businesses change location in discrete steps. Hence (re)location responses to changes in transport costs will occur only after a substantial cost saving threshold has been reached. • Transport infrastructure is likely to be relatively more influential at local levels of (re)location than at broader levels, where other factors may be relatively more significant.

24. Business Organisation and TechnologyKey evidence • Changes in business operations affect the role of transport in influencing location. • Tighter delivery and stockholding through practices such as Just-in-Time (JIT) and increasing demand for added value in components increase the logistical demands of businesses. • Outsourcing of many transport functions to third party firms and increased demand for part-assembled components has elevated the importance of logistics businesses in determining the location of other firms, reducing the direct effect of transport infrastructure on manufacturing and service firms.

25. Business CharacteristicsKey evidence • In the UK, air transport has greater influence on location of foreign investors and business services, whereas road transport has a larger influence on domestic investment, light manufacturing and commercial businesses such as retailers. • Air transport investment can be used attract foreign inward investment. It appears to be important in promoting the perceived accessibility of an area

26. Labour Supply, Travel To Work and Social InclusionKey evidence • Transport investment shown to increase workplace accessibility and therefore the labour market size and reduce job search costs. • Labour supply is often one of the most important factors in business location, transport can be used as a tool to boost labour supply. • Implications for social policy are also centred on accessibility - certain groups (e.g. those with dependants, part time or low paid workers etc.) are less able and willing to travel far to work.

27. Spatial ScaleKey Evidence • Transport investment is likely to influence business location at local or intra-regional level, rather than generating regional or national growth. • Evidence transport policies are more influential at influencing intra regional and city level location decisions than those on a wider scale. • Congestion is major problem to be tackled in urban areas - leads to unreliability of trips, adds to business costs and can drive business out of city centre locations. • Transport policies moving business into cities are most effective if combined with other urban policies.

28. Growth versus DisplacementKey evidence Policies aimed at inducing business to move from high to low growth areas can have positive effects for both areas. There is a lack of consensus on whether building transport infrastructure into low growth areas would be significantly helpful. Evidence that large-scale transport infrastructure policies successful in supporting growth in under-developed regions, but relatively ineffective in stimulating new growth. Investment in a monopoly situation will bring competition and attract business, but an already competitive area may not improve and suffer from externalities such as pollution and congestion.

29. Macro-Level Relationship between Transport and the Economy Now the question we posed at the beginning let us return to Can Economic Growth be 'Decoupled' from Traffic Growth? Traffic has been growing faster than the economy as a whole. Result is that 'transport intensity' of the economy has been increasing, i.e., each unit of output is associated with a greater amount of movement of people or goods.

30. Private car-kilometres, Private car CO2 emissions, and household spending, 1990 to 2003

31. Road transport, CO2, NOx, PM10 emissions from road transport and Gross Domestic Product, 1990 to 2003

32. Road freight, Heavy Goods Vehicle (HGV) CO2 emissions, freight kilometres, freighttonnes and Gross Domestic Product, 1990 to 2003

33. Summary of points made in SACTRA 1999 report on 'Transport and the Economy': • Initial transport related impacts of transport improvements are converted to economic impacts via, for example, • rationalisation of production/distribution/land use, effects on labour costs, increased output, inward investment, unlocking inaccessible sites for development, triggering growth which stimulates further growth • Policies intended to change volume of traffic that will arise from any particular level of economic activity are feasible, in principle.

34. Summary of points made in SACTRA 1999 report on 'Transport and the Economy': • Reducing traffic levels can contribute to economic performance when transport prices are below marginal social costs (e.g. due to congestion/environmental impacts) • If transport prices are too low due to uncharged congestion then a transport improvement could lead to additional costs for the economy. • Conversely, if transport prices are too high due to monopoly power then a transport improvement, which successfully opens the area to external competition, could lead to additional benefits for the economy • Optimal pricing often does not exist, so assessment of price conditions is vital to allow appraisal to identify conditions in which transport improvements may assist the promotion of economic growth

35. Decoupling traffic growth from economic growth-is this plausible ?

36. Questions and Trade Offs • In developing Transport Strategies and addressing the question Can Economic Growth be 'Decoupled' from Traffic Growth? the following Trade Offs need to be addressed: • Growth or Displacement? • Growth and the needs of the Global Environment • Globalisation, Transport Demand, Spatial Patterns of • Development and the Environment • Growth and the distribution of Prosperity - Spatial and • Demographic aspects

37. Scotland’s National Transport Strategy Dunblane 30th May 2006 Can growth be achieved without an associated rise in traffic emissions? Presentation by Professor Austin Smyth Transport Research Institute, Napier University Edinburgh ahsmyth@dnet.co.uk *