Low future price for carbon puts us on the wrong route

Transport investment is particularly expensive. And two points are emerging in Ireland. First, some facilities are significantly overcapacity. Second, there isn’t enough capacity in areas set to grow as the price of carbon emissions rise: the failure to adequately price carbon emissions links both.

During 2009 freight by road and rail each fell by 12 per cent while car traffic on national routes declined somewhere in the region of 2 – 4 per cent, with final figures awaited from the National Roads Authority.

Viewed against the road plans formulated between 2002 and 2008, which rested on the continuation of year-on-year growth, these falls are significant.

For the fourth river crossing under the Shannon at Limerick, due to open later this year, the National Roads Authority envisaged traffic growth in excess of 10 per cent during 2010. Under the public private partnership contract used on this project, the taxpayer, through the NRA, will need to make additional payments to the tunnel operator if traffic passing under the Shannon falls short of projected levels. A similar arrangement is in place on the M3, also due for completion shortly.

Following a long sequence of approvals, An Bord Pleanála has recently requested the NRA to undertake redesign on two road projects. In February, the planning appeals board asked for a ‘more modest’ proposal in relation to a planned 19 km dual carriageway in county Mayo citing environmental grounds. Environmental reasons were also behind the board’s refusal of a 15 km roads proposal in county Donegal in late 2009.

Yet the National Roads Authority continues to prepare contracts for over-designed roads. A tender is being assembled for 80km of motorway in south Wexford while work is also being progressed on a 43km motorway between Abbeyfeale and Adare. Taken together these projects would cost in excess of €1.2 billion.

Concerns regarding overcapacity led to a commitment to review road-building being included in the revised Programme for Government, agreed last October. The review, which covers 94 projects, has yet to start (see extracts below).

Overcapacity is already apparent in aviation, with 12 – 13 per cent falls in traffic during 2009. While Cork and Shannon airports can each cater for 5 – 6m passengers, both are running at around half capacity, after recent expansion projects. Dublin airport is expected to handle just over 19m passengers in 2010, with broadly similar numbers expected for 2011 and again in 2012. A second terminal at the airport is due to open this November. But overcapacity concerns led chief executive of the Dublin Airport Authority, Declan Collier, to raise the prospect of mothballing the existing terminal once the new building is in operation. This suggestion has been challenged, however. While the second terminal would make for a more pleasant travelling experience for passengers, it is designed to cater for just 15m passengers a year compared to 23.5m million in the existing terminal.

Failure by the State to employ cost benefit analysis – properly or at all – is increasingly coming home to roost. An initial study carried out for the Commission for Aviation pointed towards not building a second terminal at Dublin Airport but the warning signs were ignored. And so the debt carried by Dublin Airport Authority has shot up from €188m in 2007 to around €1bn today while its credit rating has plummeted.

As well as the failure to undertake cost-benefit analysis, there are gaping holes in the cost benefit analysis process itself, such as a ridiculously low shadow cost of carbon. At a 2050 price of €39 per tonne, it is around one-sixth that prevailing in the UK or France. Last year the UK government substantially raised its shadow price on carbon dioxide. In its central estimate, the UK expects the cost of emitting one tonne of carbon dioxide to rise to €227 (£200) by 2050. Under 2008 guidance, the French estimate €150 – €350 per tonne by 2050.

The message in the UK and France is simple: energy-intensive transport links will be expensive to use in the long term; governments should be slower to fund their construction now. As better analysis sees a migration away from energy intensive road and air projects abroad, is Ireland going to be left building obsolete infrastructure?

In its Smarter Travel policy document published in early 2009 the Department of Transport set a target of 50,000 fewer journeys to work by car each year from 2010 to 2020, and pledged significant investment in walking, cycling and bus networks. But the lion’s share of capital investment is still going into roads – €1.4bn in 2010 alone.

What about providing for the future movement of freight by rail? As fuel costs rise and with higher prices on emissions, demand for rail can be expected to grow sharply and a number of freight forwarders are already embracing the mode. “There’s strong demand to rail containers from Dublin to Cork but it’s impossible due to the disconnection of the Cork rail depot in 2008”, notes Howard Knott, who heads up the Rail Freight Group, a coalition mainly compromised of logistics companies, which was formed in early 2009. As well as pressing for the re-connection of Cork, the group has sought an investment at Dublin Port to take rail tracks underneath the cranes, allowing containers to be exchanged directly between the ship and cargo train. This project is expected to start shortly with completion due in the autumn. Knott also draws attention to the surge in business through Ballina rail depot, fast becoming a ‘dry port’ for the North West, and he makes the case to replicate its success as more customers turn to rail. Knott sees a blind spot in the failure to invest in rail connectivity and is adamant such investment will serve Ireland’s exporters well into the long term. “During the cold snap there were difficulties moving produce by road”, he points out, “but the freight trains ran on time”.

Is there a need for new ports? Dublin Port is the main port in Ireland. Consistent with experience across the sector, its tonnage is back to levels seen in 2004 and 2005. But how is Dublin Port positioned if there is an increase in ship size over coming years? Larger ships typically need deeper berths but “you can’t dredge for greater depth right up against old quay walls as you’d run the risk of the old walls collapsing out”, says Seamus McLoughlin, head of operations at Dublin Port. Instead, using deep foundations, a new quay wall is constructed outside the old, and the quay is extended slightly. Deep dredging can then take place. An alternative super-port is envisaged at Bremore, a greenfield site just north of Balbriggan, in a proposal by Drogheda Port and property development company Treasury Holdings.

However, there remains significant under-used capacity at a number of existing ports, with Belview, just east of Waterford city, a case in point. It has long enjoyed the best rail facilities of any port in Ireland and is also set to benefit from the recent opening of the M9.

Just as with proposed roads, An Bord Pleanála has significant influence on port development. The absence of a rail link was a key reason for the board’s decision in mid 2008 to refuse the Port of Cork planning permission for a new facility at Ringaskiddy. A public consultation process to select an alternate location has been ongoing since the start of February and one of the sites under consideration, Marino Point, is rail-connected.

Fuel prices will rise as oil scarcity and legislation to reduce emissions (or a combination of both) come to the fore. The major question is whether we will put in place the financial planning to re-direct investment – or whether we’ll leave it too late.

Extracts from the 2009 Programme for Government:

“We will complete the Major Inter-Urban Routes (MIU) in 2010. We will review the completion dates and appropriate road standard of the remaining 94 road projects at the design stage or earlier stage of development in light of the economic circumstances, falling road usage and our climate change objectives. We will ensure new design standards for national secondary routes to take account of current economic and environmental circumstances (p 27)”.

The phrase “Major Inter-Urban Routes” (or MIUs) refers to five motorways: Dublin to the border, Galway, Limerick, Cork and Waterford, something confirmed by an examination of successive annual reports published by the NRA. These five motorways are either finished, or construction is very far advanced. Outside of these 5 roads, a commitment pertains to review “the appropriate road standard of the remaining 94 road projects at the design stage or earlier”. Page 26 of the re-negotiated Programme for Government includes the following paragraph:

“Having successfully focused on the delivery of major roads infrastructure in Transport 21 over the past five years, the emphasis on new projects will shift significantly to public transport. Following the completion of payments for the major motorways programme in 2011, the ratio of expenditure on new Transport 21 projects between public transport and the national roads programme will be 2:1 in favour of public transport.”

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3 Responses to Low future price for carbon puts us on the wrong route

  1. Bily says:

    very useful article. I can only assume the frenzy of road-building is connected to the fact that the beneficiaries – farmers selling land at obscene prices – and the concrete and road building companies, have been extremely well respresented among Fianna Fail’s donor lists for the last decade.

    Rail just doesn’t seem to have the same appeal as motorways to here, there and everywhere. Look to our more primitive neighbours on the Eurpean mainland. The continent is now criss-crossed by an integrated rail system. In France, the TGV is virtually zero carbon, since it runs on nuclear-generated electricity. When a train system is properly connected, it becomes a compelling means of transport.

    In contrast, we had the model of the highly successful DART – built in the bad old 1980s – to work with, but instead managed to build 2 strings of low-capacity Luas during the entire boom decade, and then ‘forgot’ to connect them! Flann O’Brien must have ghost-written that farcical ‘Transport 21’ document.

  2. Oisin O Nidh says:

    Great article James. Your spot on with regards to “Overcapacity”. Its very visible even to the naked human eye. Just travel any of the Irish Motorways and contrast the traffic volumes on UK and European Motorways. Website Advice – Can Facebook or Twitter links be added to the individual blog entrys? It would be great way to spread the blogs message further afield.

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