Sustainable urban transport strategies and job creation

1. Sustainable urban transport strategies and job creation Christophe Heyndrickx (TML) Rodric Frederix (TML) Joko Purwanto (TML)

2. Overview • Empirical facts on urbanization • Basic urban economic theory • Urban policies • Results from case studies • Job creation effects • Conclusion

3. Why the city? Source: World Urbanization Prospects (2012) The world is becoming more and more urban. By 2050 – 85.9 % of the population in the developed world and 64.1% of the developing countries will live in an ‘urbanized’ environment Socio-economic transition = larger and denser urban regions with intensive use of transport networks

4. What is the city - theory • Benefits of agglomeration of activities CITIES = + Positive returns to scale (scale economies) + Specialization + Spill-over effects between economic activities + Reduction of transport costs in firm-firm, worker-firm and consumer-firm interactions

5. SPECIALIZATION SCALE ECONOMIES 1 large firm with 100 employees Produces more than 100 firms with 1 employee Large cities = higher diversity of activities – labour is more productive than in smaller cities (access to different skills – input/output markets)

6. SPILLOVER between economic activities Take example of the mall. People start with idea of buying shoes, but end-up going to the clothes and toy stores. => Positive external impact on profits ‘Natural’ advantage of central location to reduce transport costs As old as the Central Place Theory of Christaller (1933)

7. The ‘workhorse’ model – The Alonso-Mills-Muth model (1964-1966) • There is a central business district where all ‘jobs’ in the city are located • Every employee gets the same wage, y • Total transport costs increase linearly when moving away from the center with TC = t. x • Every consumer uses either housing or a ‘numeraire good’ let’s assume this is food (bread). • Food costs the same anywhere, but housing varies in cost. • The location of consumers is IN EQUILIBRIUM, which means that everybody choses a location where people are equally well off (GET SAME UTILITY) • There are no moving costs!

8. Understanding the equilibrium Consumption of food Utility curve Consumption of housing

9. What do we take from this? • Intricate link between the transport system, housing, land prices and the system of urban settlements • Urban systems with very low transport costs -> spread out remarkably far from center and low population density • Link between highways and rise of suburban settlement (Baum-Snow N., 2007) • If cost of transport is too low (unpriced externalities) cities are too big and lower efficiency of land use. • Pricing externalities (congestion, environmental damages, accident costs, etc.) also leads (on longer term) to smaller cities with a better functioning transport system • Introducing a system of road charging, f. ex. Small & Verhoef (2007) or Anas A. et al (2006) leads to denser cities and the social optimum. However no single country has introduced a ‘universal road charging’ system

10. From theory to practical urban policy

11. Link with transport policy scenarios

12. Urban policy • Case of London, Milan and Copenhagen • Not-unique, but indicatory for ‘sustainable’ urban policy • Comparable strategies – divergent ‘historical track record’ • Economic centers • Particular problems for particular location – strategies to mitigate • Plenty of information available • Well-known examples for ‘innovative’ transport policy • Strategies: • Milan: Pricing – LEZ – Investments in public transport • Londen: Pricing – Technology – Investments in public transport • Copenhagen: Urban planning – Cycling (1/3) / Road (1/3) / Public (1/3)

13. Main policies Urban planning • Implementation of a ‘controlled’ urban extension plan (Copenhagen) in a very early stage of planning, did not stop urban sprawl, but directed it towards certain well connected regions. • Limitations: ‘Ørestad’ extension as the 6th finger (Majoor S.J.H, 2008)-Lower demand for land (-15%) & -Property tax income (-60%) -Higher cost (+66%)-Conflicts between authorities -Additional financing-Switch from ‘out-of-center’ office space to housing.

14. Road charging / LEZ • Not many cities have implemented a road charging system in the way it is theoretically intended, namely: ‘a kilometre and time-dependent road charge to optimise the use of the capacity and reduce external congestion costs. • In the cities where road charging or a similar type of charges were introduced (London, Milan, Stockholm), public acceptance grew substantially after introduction. • The impact of a road charge is largest when the charge is first introduced (-20 % / -30% in traffic) • The impact on longer term is often lower, as people tend the change their travel behaviour and/or location or exploit certain exemptions built into the scheme. • In fact, this makes clear that road charging is only one of the tools a city can use to improve the urban traffic flow and that its set-up should be considered carefully.

15. London (LCCS) • Only small area of the city • Large discounts to residents of the central area (-90%) and other exemptions • Little difference in timing, location and trip distance (not kilometre dependent) • High operational cost and implementation costs (£200 million) • The limited area it extends to (central city alone) -> Introduction (weakening of congestion charge) to a LEZ for Greater London EcoPass / Area C (Milan) • Ecopass = charge for ‘polluting’ vehicles in the center of Milan since 2010 • Short term: reduction in PM with -20% and traffic with 21% • After 2 years: traffic levels return to pre-introduction phase (older vehicles out-of-stock) • Area C: introduced in 2012 as sequel for EcoPass. • €5 for each vehicle entering the zone + 40 free entrances for residents

16. Public transport • Each of the cities discussed relies heavily on subway, tram and bus networks to move passengers across the city. • Improvements in ticketing, such as standard tickets across all intra-city transport and ‘fast-passes’ such the Oyster pass, can reduce waiting times substantially and make public transport more attractive. • Earmarking the taxes from the road charge, has substantially helped to gain public acceptance for the scheme. • This creates a direct link between the revenues collected from road charges (and thus from congestion) and investments in public roads and public transport. Promotion of fuel efficient vehicles • Free parking & free recharging for electric vehicles / hybrids • Tax discounts / subsidies on national level Promotion of cycling & walking • Milan – bike sharing program – only very limited cycling (<1%) • London – promotion of cycling – reaching 1% of trips • Copenhagen – reaching 33% of total trips

18. Job creation effects • Main idea: combine the ‘micro’ and ‘macro’ effects of urban policy • What happens for small moves towards ‘sustainability’, can we determine the ‘extra’ jobs that are created? • Combination of literature review and model based analysis • Run the EDIP model of D15.2 with a small shock in subsidies / investments or increase in efficiency • Calculate the small amount of additional employment this generates

19. Job multipliers

20. GDP multipliers

21. Winners & losers in electrification

22. Large inter-country differences

23. Impact of 1% electrification

24. Impact of shock in efficiency

25. Depends on share employment in transport

26. Impacts of urban policy • Compare different policies with each other on the basis of the theory, literature review, case-study and modelling • Implicit link with the global scenarios of D15.2 • Energy efficiency = strongest policy in terms of combining job creation effects & sustainability • Fuel efficiency / electrification: negative impact on congestion • Transport policies: promoting cycling is probably the policy with the lowest cost and the highest impact • Parking policy can be second-best for a road charging system, technological progress allows for: • Dynamic pricing according to hour of arrival and departure • Different charges for fuel-efficient or electric vehicles

29. Conclusions • Very diverse work – combination of different methods • Link between global scenarios and the micro-scenarios -> socio-ecological transition will be strongest at the level of the city • Road charging / road tolling very powerful policy to redirect traffic flows, but politically difficult to defend • Second-best parking policy may be used as a proxy • Effectiveness of cycling policy • Urban planning effective for long term city planning, when driven by ‘demand’ • Restrictions for urban freight / urban delivery center have questionable results

30. Thank you!Any questions?