Is Transport Appraisal Fit for Purpose in a Climate Emergency?
26 October 2020

Is Transport Appraisal Fit for Purpose in a Climate Emergency?

Climate change is increasingly recognised as the most pressing global challenge humanity faces. The Stern Review on the Economics of Climate Change back in 2006 stated that it “is presenting a unique challenge for economics”. Therefore, it has been recognised as an issue and challenge for appraisal for many years. Emissions from the transport sector being a major contributor to climate change comprising around 27% of annual emissions and as Climate Emergencies being declared on both a local and national level, addressing climate change and the contribution transport plays is crucial and should be prioritised. However, the overall approach to transport appraisal process has not changed to take this into account. Even Transport Appraisal Guidance (TAG) states that Greenhouse gas appraisal should be proportional to the scheme and its proposed impact”. There is even opportunity for it to be scoped out of the appraisal.

Given the nature of the situation we are facing surely the appraisal of greenhouse gases should be:

  • The most important part of any appraisal
  • Central to the case for any scheme; and
  • The first element of any scheme to be appraised.

Often road scheme appraisals present a higher Benefit Cost Ratio (BCR) than the active mode and public transport schemes. Therefore, are seen to offer higher Value for Money (VfM). However, around half of road schemes actually provide disbenefits in terms of greenhouse gases which does not sit with the current climate emergency. This in turn leads to an indirect tax monetary benefit to the Government.

Also, the proportion of benefits relating to greenhouse gases is small compared to the other benefits such as journey times for road scheme and health/journey quality benefits for active modes schemes.
We have identified a number of limitations to the current approach, both in terms of the what elements of the scheme are considered in the calculation of greenhouse gases and in the current assumptions and methodology set out in TAG:

  1. The omission of embodied carbon from construction – particularly as building and construction are responsible for 39% of all carbon emissions in the world.
  2. The omission of embodied carbon from vehicle manufacture – particularly as the embodied carbon for the manufacture of electric vehicles is double that of a vehicle with an internal combustion engine. In fact, an electric vehicle would have to drive around 120,000km more than an equivalent diesel vehicle to generate less greenhouse gas emissions overall.
  3. Does the Active Modes Appraisal Toolkit (AMAT) fully take into account the saving in tailpipe emissions?
  4. Does not take into account loss of forests and woodland which are a key component of the global carbon cycle, and they are an important mechanism for reducing atmospheric greenhouse gas concentrations by carbon sequestration and also contain a lot of carbon which can be released into the atmosphere if woodland is lost during construction.
  5. Vehicle fleet proportions in TAG are out of line with the latest thinking in terms of phasing out of the internal combustion engine.
  6. Indirect tax is a problematic measure which produces benefits from more driving. However, ultimately there will be a cost to Government as Offsetting 1kg of carbon by 2050 will cost in the region of £100 which greatly exceed the likely tax paid on the fuel.
  7. The valuation of carbon are based on values proposed in 2012 with significantly lower values up to 2030 with a steep rise in subsequent years. Is this a correct assumption when we should be prioritising carbon savings that are occurring now?
  8. Is it correct to be applying discount rates (which are essentially a way of comparing present and future benefits to greenhouse gases? This approach is fine for normal monetary values, but the concept falls down when applied to damage costs such as climate emergency.

Therefore, do we need to move away from a traditional BCR type approach when assessing schemes?

  • Should we be sifting schemes based on their carbon impact at the pre-appraisal stage?
  • Should we just priorities schemes based on carbon savings?
  • Do we develop another measure? For example, a Carbon Benefit to Cost Ratio (CBCR) i.e. Present Value of Carbon / Present Value of Cost?
  • Are we missing elements of carbon from the scheme appraisal (e.g. embodied carbon)?
  • Do we need to revalue carbon in the appraisal process?
  • Does traditional economic theory around discount rates and the treatment of indirect tax associated with fossil fuel use make sense in a world where the Climate Emergency is the most important thing?

SYSTRA has undertaken some research around these issues to determine what has the greatest influence on a range of different types of scheme and has concluded that:

  • It is clear that current appraisal approaches are not fit for purpose in the context of the climate emergency
  • Carbon consideration should be central to the appraisal not merely proportionate to the size of scheme
  • Missing Carbon (e.g. embodied carbon) should be considered in the appraisal process. However, the most important items to be included needs to be considered in order to maintain “proportionate approach” to appraisal and not make the process too onerous for smaller schemes
  • Discount rates and indirect tax should be reconsidered from the point of view of Carbon

If you wish to discuss the findings of our research further or would like discuss how SYSTRA could help you appraise transport schemes please contact Chris Robinson (crobinson@systra.com 0203 882 9014)

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