Some interesting assumptions in the Greens HSR benefit report

The Greens’ Adam Bandt has released a report which purports to identify “$48 billion in benefits” from a high-speed rail network connecting Melbourne, Canberra, Sydney and Brisbane.

The Greens’ support for high speed rail clearly works for them politically – every time it’s mentioned they end up getting a run in the media. But, thus far, it doesn’t appear that the numbers stack up. The report, written by Naomi Edwards, is being used by Bandt to claim otherwise. In the accompanying press release, he states:

“High Speed Rail’s time has come. The government now needs to make a clear financial commitment to taking the next steps towards putting High Speed Rail in place.”

In response, it’s first worth noting that the claimed economic benefits still represent less than half of the cost of construction as estimated in the Australian Government’s High Speed Rail phase 1 report.

But the purported $48 billion also deserves some scrutiny. These kinds of reports are notorious for the “interesting” assumptions that tilt the figures to support the project or activity in question. It appears to me that this report, in at least some aspects, follows this trend.

The first assumption relates to the benefits of avoiding the costs of road accidents. Page 13 of the report assumes that the cost to society of accidents relating to car travel is $74.00 per passenger/1000km. HSR’s accident costs are expected to be approximately equivalent to air travel, at $1.50 per passenger/1000km. Valued over a 30 year period, this is supposed to be worth $4.2 billion.

There is little doubt that high-speed rail is very safe, far safer than private car travel in 2012. However, the calculation of avoided accident costs assumes that accident rates per passenger/1000km will stay constant for the next three decades, which is unlikely. While exact figures are not available, annual road deaths in Australia have gradually reduced from 2,331 in 1991 to 1,277 in 2011. I don’t have statistics for passenger kilometres going back that far, but they have grown by 10% in the last 5 years. My guess is that fatalities (and injuries) per passenger/1000km have reduced by at least a factor of 2 in the last two decades. Furthermore, there is no reason to think this trend reduction has finished. While the big wins from enforcement of drink driving and speeding laws are unlikely to be repeated, we have only barely begun to adopt active crash-avoidance technology. As such, I think that the $4.2 billion in crash avoidance is a substantial overestimate.

A similarly dubious assumption is made in the “climate change benefit” section – namely, that the fuel efficiency of road and air travel will improve by only 0.5 percent per year, despite the application of a carbon price of $34 per tonne rising to $107 per tonne by 2036. This is unrealistically low. Most of the avoided emissions seem to come from the aviation sector. Historically, aviation fuel usage has reduced by about 1.4% per annum over the past few decades. Given that airlines are likely to be facing carbon price pressure, it would be surprising if improvements declined so radically. Similarly, the assumption of an improvement of only 0.5% per year for passenger vehicles seems very, very low. The United States’ new CAFE fuel efficiency standards will require car companies to improve the fuel efficiency of their vehicle fleet by 5% a year for the next ten years, and light trucks and SUVs by 3.5% per annum. Given Australian vehicles are based on designs sold in the United States and Europe (which has similarly ambitious targets) it seems highly likely that Australia’s fleet fuel efficiency will improve faster than the 0.5% per annum assumed (even though it will take some time for fuel guzzlers to drop out of the Australian vehicle fleet). As such, the value of the climate change benefits is exaggerated substantially, though calculating exact values would take far more time and wading through data than I have!

I should add here that the two areas that I’ve criticised represent a minority of the quantified benefits claimed for HSR. Most of the benefits come from the value of the time saved by the faster trips, and I don’t see any obvious problems with those, but I may be missing something. The pattern from the other claimed benefits makes me suspicious that there is an assumption favourable to HSR embedded in the calculation.

As I’ve said all along, it doesn’t hurt for Australia to take a good look at high-speed rail. But every which way the numbers are crunched, it doesn’t really seem to add up, and this report doesn’t convince me otherwise.

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9 Responses to Some interesting assumptions in the Greens HSR benefit report

  1. The big assumption in the travel time savings relates to the number of trips that will shift to HSR. Numbers for Canberra to Melbourne only are given. 45 000 trips shifting from car, bus, train to HSR – why would you switch to HSR from car, when you already had the option of using a plane instead of a car and HSR/plane are assumed to be equivalent in terms of cost and travel time? The romance of train travel? There is a good reason I used to drive from Canberra to Melbourne when I lived in the nation’s capital, I wanted to use my car in Melbourne when I arrived.

    More than half the people currently flying between these two cities are assumed to switch to HSR, even though the two are equivalent. This is required to achieve the massive savings in urban travel resulting from reducing congestion at airports. (Of course, train stations attracting millions of passengers will not cause congestion.)

    Finally, there are assumed to be 95 000 induced trips. Why? Why would the option of catching a train, which is the same as the already available option of flying lead to an additional 95 000 trips between Canberra and Melbourne each year. The benefits of these 95 000 trips are assumed to be half the travel time saving of moving from car to HSR. About $55. Why? This makes no sense. It isn’t even consistent with the lazy rule of thumb used in most tranport CBA.

    • Romance is probably too strong a term, but HSR *does* have some not insubstantial advantages over air travel. You don’t have to check bags in and there’s no security theatre – you just rock up and get on the train. And the experience from Europe suggests that a substantial fraction of people will switch to HSR over flying even if the travel time is the same or slightly longer.

      Your point about train station congestion is well made.

      As far as the induced trips go, a lot of them are to and from intermediate stops like Shepparton, Albury-Wodonga, and so on.

  2. wilful says:

    This article here: http://www.theglobalmail.org/feature/fast-times-fast-trains-catch-up-australia/366/ links to Infrastructure Partnerships Australia’s report here: http://www.infrastructure.org.au/Content/veryfasttrains.aspx and I’m confused about what links there are to the Green report, but it is clear from the IPA report that they don’t expect any mode shift from cars at all, it is all to come from planes. Whether planes can continue to cut their carbon intensity is a very big if, but it’s easy enough to speculate that electric trains could have no motive carbon footprint.

    • I’m pretty sure both the Phase 1 report and the Greens report are based on a modeshift from cars, particularly on regional routes (to Canberra, Albury-Wodonga etc).

      I’m also pretty sure that planes can continue to cut their carbon intensity. Engine tech continues to improve, and there are a number of things that could be done to improve aerodynamic efficiency. Heck, just switching the planes on the Melb-Sydney route from narrowbodies to widebodies would cut per-passenger fuel use substantially.

  3. Solid article Robert. I personally love the idea of HSR but loving an idea and supporting it are two different things. It’s impossible to support something which is so unjustifiable economically…

    You were quite conservative as well in your analysis. Knowing that electric vehicles will most likely have found a niche by 2030 – or as is most likely the case, dominate the market – reduces the HSR argument even further.

    It’s always amusing to watch HSR proponents have to deal with the prospect of electric cars.

    • You’re right – I was deliberately rather conservative in this post.

      One interesting question with autonomous vehicles – particularly electric – is whether freeway limits can be raised. If nobody crashes any more and the car is powered by clean electricity – why would you need to limit vehicles to 110 kmh?

  4. BilB says:

    While I wait for the HSR, something far more probable is getting a lot closer. My next car, the VW XL1 is nearing production

    http://evworld.com/news.cfm?newsid=28611

    94 klm per litre diesel sounds like an important step forward. The Sydney Melbourne drive will cost about $18 in this vehicle. If you go back over those old national commuter fleet fuel consumption figures I think that you will find that it is almost believeable that the daily commute could be powered from Palm oil bio diesel. This is a very useful interim step while we wait for mass production efficient batteries to arrive.

    To that end there is a “back to the drawing board’ project getting underway in the US.

    http://blog.cafefoundation.org/?p=7281

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