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.