Menu lock

Cars & traffic

Sep 15, 2013

5 comments

Key constrains on existing Melbourne rail network (source: Public Transport Victoria)

I was disheartened to read in Sunday’s paper that the Victorian Greens want to win the balance of power in the Victorian upper house so they can insist a rail line to Doncaster be built instead of the State Government’s planned East West Link freeway.

According to the report (Bandt says Greens can stop east-west link with balance of power), Federal Member for Melbourne, Adam Bandt, said:

If you think ahead to the next (State) election, construction won’t have started on the tunnel. With the Greens in the balance of power, we’d be in a position to insist that construction not start, and instead, that Doncaster rail be built.

I don’t know what internal machinations result in a Federal Member taking the lead on what is primarily a State issue, but The Greens are wrong on this one. Worse, the party’s at odds with its stated principles.

My problem isn’t with The Green’s opposition to the $6-8 billion East-West Link. Given the Victorian Government continues to refuse to justify the road it’s hardly surprising it’s opposed by both Labor and The Greens (e.g. see here, here, here, here, here and here).

Nor is my issue with improving public transport. There’s an urgent need to invest in good public transport projects like improved signalling to boost capacity on existing lines; provision of a grid of cross-suburban services to connect up existing rail and tram lines (see How can public transport work better in cities?); and the proposed $9 billion Melbourne Metro.

The problem is a new rail line to Doncaster would be a very poor use of public funds compared to other options, as I’ve explained before (e.g. see here and here). It would be very costly and its environmental benefits would be slight. The study completed recently by the Government showed a Doncaster rail line would cost $8-12 billion and barely change the share of trips taken by car. (1)

It would of course be welcomed by the residents of Melbourne’s middle class eastern suburbs because it would provide them with a somewhat faster trip to the CBD than is provided by the existing Doncaster Area Rapid Transit (DART) service. It would also significantly increase the value of many properties.

Although it would be a poor investment, The Greens see political advantage in portraying Doncaster rail and the East-West Link as substitutes. They both service the eastern suburbs so it makes the party’s position easier to sell. But it’s simply not true – the rail line would service CBD trips whereas the function of the freeway is primarily to provide an east-west route 5 km north of the CBD.

Projects like improved signalling or the Melbourne Metro are much more important for the efficient and equitable functioning of the metropolitan area than a rail line to Doncaster. The Metro (or something like it) is required to address looming constraints on the ability of the city centre to continue to grow. It’s also needed before significant expansion of the metropolitan rail network can most efficiently proceed.

What’s really disappointing is The Greens support for Doncaster rail undermines its claim to “stand up for what really matters”. It’s inconsistent with the proud boast that The Greens:

provide a real alternative to the tired, cynical politics of Labor and the Liberal party. Unlike the two old parties, the Greens have a proud history of standing up for what is right, not just what is easy or what polls well.

This isn’t the first time The Greens in Victoria have shown themselves to be as cynical and opportunistic as the major parties.

For example, only last month Adam Bandt made the extraordinary claim that the party’s High Speed Rail scheme would create 200,000 jobs. Even the (then) Transport Minister Anthony Albanese only had the front to claim Labor’s similar HSR scheme would create just 10,000 jobs.

Another example occurred during the 2010 Victorian election. The Greens proposed they could build 10 new rail lines and 10 new tram lines for a ludicrously small $13 billion. It would be financed in part by diverting billions of dollars from road projects the then Labor Government was supposedly committed to building. Shamefully, as The Greens well knew, the funds simply didn’t exist.

I know that many people who’re interested in urban issues support The Greens and in many cases with good reason. But this is about more than party allegiances. The Greens shouldn’t get a free pass on accountability any more than the major parties should.

The Greens should be opposed to giving priority to a project like Doncaster rail when there are other options with a higher social, environmental and economic pay-off. To use its own language, the party should be standing up for what’s right and not just for what polls well.

Doncaster rail is not consistent with progressive values. The federal election showed Adam Bandt is obviously doing something that appeals to his constituents but he should be wary of trashing his and the party’s brand.

_________________________________________________

  1. Notwithstanding overwhelming evidence that governments around the world routinely under-estimate the cost of public transport projects, some believe the estimate for Doncaster is grossly excessive. But even if it were $2-4 billion, it would still be a very large sum and would  be better spent on other projects.

HSR High Speed Rail

Aug 8, 2013

5 comments

Christine Milne and Adam Bandt launch The Greens' plan to fasts-track East Coast High Speed Rail

Just when it looked like the Federal Government’s $20 million East Coast High Speed Rail (HSR) phase 2 feasibility study had been left on the shelf, The Australian Greens put it back on the table this week.

The Greens are promising to spend $1.23 billion to establish a High Speed Rail Authority. The new agency would draw up the business case for the proposed HSR line, obtain regulatory approvals, secure “ownership of routes”, and prepare a comprehensive EIS.

Greens MP Adam Bandt said at a media conference on Tuesday (see exhibit) that Australia is the only continent apart from Antarctica without HSR. It would be “nation and planet building” and would “solve some of the biggest problems Australia is facing as a growing country”. He says it’ll create 200,000 jobs.

The political appeal of HSR for The Greens is obvious. For most progressives rail is automatically a good idea – a no-brainer. The Greens committed to HSR long ago; indeed, the feasibility study was done at the party’s behest as a condition of support for the Gillard government.

Of course the 200,000 jobs claim is blatant politicking – if the money weren’t spent on HSR it would be spent on something else that created much the same number of jobs (but 200,000?! Really?) That’s not the key issue though. The real worry is that HSR in Australia would be a massive boondoggle and wouldn’t advance a progressive agenda.

It’s worth revisiting my earlier discussion of the phase 2 report (Would High Speed Rail really make Australia better off?). I reported back in April that the feasibility study estimated it would cost $114 billion to build the east coast network. Most of that (around $100 billion) would have to be paid for by taxpayers with no hope of getting the money back.

That’s a monumental sum. It’s more than six times larger than the $17 billion the Rudd government spent on the Building the Education Revolution (BER), even though that was an emergency program to bolster the nation against the unprecedented threat of the GFC.

It’s getting on towards three times the cost of Labor’s NBN scheme. There’s a crucial difference though – the NBN is designed to recoup the $37 billion outlay and ultimately make a profit.

In fact HSR might cost even more. The $114 billion figure is the P50 estimate. The P90 estimate is $127 billion i.e. “in 90 per cent of simulations, total construction costs are expected to be less than $127 billion”.

There’d have to be enormous benefits to warrant that sort of unparalleled public expenditure. There’d have to be a huge reduction in negative externalities like greenhouse gas emissions to justify such an extraordinary outlay of public funds.

But there’s the rub. While the feasibility study says the total benefits would equal the costs (Fn 1), the estimated net value of the benefits from externalities over the 50 year appraisal period is just $2 billion.

In fact externalities only account for a mere 3% of the total estimated benefits.

Almost all the economic benefits come in the form of savings in travel time. The largest group of beneficiaries numerically would be leisure travellers who journey between regional centres and capital cities.

But the time savings that count most are those made by business travellers journeying between capital cities. Although they would only number around a third of HSR users, their time is valued at a much higher rate than the more populous leisure travellers. Their time savings accordingly make a disproportionately large contribution to the value of the overall benefits.

The Greens don’t explain why taxpayers should subsidise business travellers so they can save time. If the saving is so valuable to business travellers, they should pay the full cost of constructing the line.

Nor do The Greens explain why taxpayers should divert circa $100 billion from other public purposes to replace a largely privately funded and competitive inter-city aviation industry with another form of public transport. There’s no explanation of why it would be good policy to use public funds to replace plane seats on inter-capital routes with train seats.

And The Greens don’t explain why taxpayers should spend such an extraordinary sum in order to gift east coast regional leisure travellers with a faster trip to the big smoke. There’s no economy or “planet” transforming change here – these are country leisure travellers!

Here’s a thought experiment I proposed in an earlier article: Suppose Boeing released an amazing but expensive new plane that could cut 15 minutes off the flying time from Sydney to Melbourne or Brisbane. Would there be anything like the same level of enthusiasm for public subsidy?

Would there be comparable pressure to provide $100 billion or more in public subsidies to the airlines so they could update their fleets with the new planes? I think it would be taken for granted that those who get the benefit should pay for it.

The feasibility study says HSR won’t deliver net economic benefits from regional development. The Joint study on aviation capacity for the Sydney Region concluded it won’t obviate the need for a second airport in Sydney.

As I’ve said a number of times before, HSR in Australia would be a boondoggle. The fact that countries like Spain have extensive HSR systems doesn’t make the case that it would work in Australian conditions; if anything they provide a cautionary tale about poor financial management (See High Speed Rail: if they’ve got it, shouldn’t we?).

High Speed Rail should not be part of a progressive agenda in Australia. There are far better and more transformative ways that an extraordinary sum like $100 billion could be spent on infrastructure: e.g. improving public transport within our major cities; replacing coal-fired power generation with renewable energy.

East Coast HSR would be corporate welfare, rural pork-barrelling and greenwashing. It would just suck public funds away from projects which could actually make a real environmental, social and economic difference.

 ________________________________________________________

(Fn 1) The Greens say they’ll implement the Accelerated Program set out in the feasibility study which would see Sydney-Melbourne connected five years earlier ( i.e. by 2035) than with the recommended program. However the feasibility study notes that “bringing the program forward would reduce the economic benefits, primarily because the market volumes would be lower when operations began.” This doesn’t appear to be acknowledged by The Greens.

(Fn 2) The Greens claim a Benefit Cost Ratio of 2.3 but that’s misleading. It’s based on a discount rate of 4%, which is acceptable for social facilities like schools and hospitals but not for transport projects. The appropriate discount rate is 7%, which the feasibility study says gives a BCA of 1.0. i.e. the benefits equal the cost. As noted above, those benefits are mainly time savings for capital city business and regional leisure travellers.

HSR High Speed Rail

Nov 30, 2012

5 comments

Estimated benefits of HSR over 30 years, discounted at 7% p.a. (source data: Australian Greens)

A new “independent” report on High Speed Rail (HSR) by the Australian Greens claims the benefits of an east coast line from Melbourne to Brisbane would total $48 billion over 30 years.

This compares with an estimated cost of construction of around $80 billion. It seems bizarre that the Greens, who’re committed HSR boosters, would trumpet a report showing the cost of building it well and truly exceeds the benefits.

Trying to pass off a report prepared for a political party as “independent” is pretty bizarre too. This is a nakedly political document – Bob Brown committed the party to HSR before the last election – so it’s not surprising the construction cost estimate is in any event ridiculously low.

The Federal Government’s Phase 1 study estimated the risk-adjusted cost of building east coast HSR, with 10% risk of being wrong, as $108 billion. To that has to be added another 15% for management and procurement costs, plus rolling stock and more. None of it would be recovered from HSR fares (then there are operating and financing costs too….).

On the other hand, the Phase 1 Study assigned a confidence estimate to $80 billion of only 50%. In other words, $80 billion is a rubbish figure.

There are a number of questionable assumptions in the report in relation to the benefits of HSR too. For example, Robert Merkel argues the report over-estimates the benefits from fewer motor vehicle accidents and lower emissions.

I can’t find any reference in the report to the massive emissions that would be associated with construction. A British study by Booz Allen estimates a fast rail line from London to Manchester would emit more GHG during construction than it could recover from lower air travel over the 60 year time horizon adopted for the analysis.

Nor is there any allowance for the environmental impact of nearly 2,000 km of high speed track.

There are other convenient but arguable assumptions and omissions that undermine the credibility of the report, but that’s no surprise in an overtly political document. In any event, fiddling the numbers is not the main issue.

It’s clear from the Greens report that most of the benefits from HSR would come from savings in travel time (see exhibit). Moreover, those savings would mostly accrue to regional trip makers i.e. travellers journeying between major cities and regional areas.

The Phase 1 study forecast that regional travellers would make up 60% of all HSR passengers. Regional travellers who swap their cars for HSR or are induced to make additional trips by HSR would account for the great bulk of time savings. They’d mostly be leisure travellers.

In fact the Greens’ report quite properly counts no time savings from those inter-capital trip makers (who comprise the great bulk of high value business travellers) who’re assumed to transfer from air to HSR. That’s because HSR would be no faster than air between major cities.

The $48 billion in aggregate benefits over 30 years looks impressive, but that’s not surprising. Any large expenditure on infrastructure will produce benefits for some groups.

What matters is how those benefits compare against the costs.

In this case, as already noted, the construction costs exceed the benefits by a factor of at least two. That’s in the same ball park as the Baillieu Government’s proposed east-west road link in Melbourne.

What matters even more is whether there are better ways to spend the money.

Even if the benefit/cost ratio were positive, how important is it to the nation that regional leisure travellers should be able to travel faster to and from capital cities? Is that the best way to spend more than $120 billion?

On the basis of this study, the Greens call east coast HSR a “nation-building” project.  But it’s nothing of the sort – there’s no stand-out productivity benefit here.

Investing an additional $5 billion p.a. in education as Gonski proposed might qualify as a nation-building project. Investing an extra $120 billion plus in urban public transport, or in greening the nation’s power stations, might qualify as nation-building.

HSR looks more like (non means-tested) regional welfare.

One useful aspect of the Greens’ report is it puts the likely (operating) emissions savings from HSR in perspective. It estimates them at $2 billion over 30 years, assuming a carbon price of $34 per tonne rising to $107 per tonne by 2036. That makes it clear they’re modest relative to the cost of constructing HSR.

There’s no merit in spending more than $120 billion of public funds to replace one form of public transport (planes) with another (HSR). It would be an extraordinarily cost-ineffective way of lowering the nation’s production of emissions.

The Federal Government’s Phase 2 report is due any day now (it’s supposed to be released before the end of the year). Among other things, it’s intended to supplement the Phase 1 study’s analysis of the costs of HSR with an assessment of the benefits.

It should be a far more sophisticated and balanced effort than this one. I expect it will provide the evidence to show beyond doubt that HSR is a boondoggle. It’s unlikely mere evidence will be enough to change some minds though.

See ‘HSR’ in Categories list for more articles on High Speed Rail.

P.S. There are pollutions savings from HSR according to the Greens calculations, they’re just too small to show up on the chart ($64 million over 30 years)