The surface transportation sector is on the brink of a sea change and it appears that those potentially most impacted are unaware of this event.
The catalyst for this change is Canada’s ratification of the Kyoto Protocol, thereby signaling, as a matter of national policy, its commitment to reducing Greenhouse gas (GHG) emissions. The transportation sector is the single largest energy user and produces roughly 27% of GHG emissions. Road vehicles, of all types, contribute 70% of that total; rail contributes but 4%. These relative contributions set the parameters for the ensuing policy debate; Canadian public opinion remains favorably disposed to lowering emissions. In the result, railroads currently are on the winning side of a public policy issue.
In this embryonic Kyoto environment, the railroads are able to resurrect many of their perennial complaints which now seem to have some resonance. The first amongst these is that railroads are the most cost-effective means of transportation. The railroads repeatedly have said that their rates have decreased 30% and more over the last ten years. Service has increased, productivity, investment and the overall financial health of the sector has improved. More recently some railroads have started to used this metric: a 100-car freight train carries the equivalent of 280 trucks and one passenger train takes 1500 cars off the highways. If this is so, rail may indeed be the most cost-efficient means of transport. Secondly, the railroads say that the lingering regulatory burden remains an unnecessary cost on this sector. They insist that if the regulatory burden were completely removed, there would be greater investment in the infrastructure, and regulatory freedom would further drive productivity gains.
Kyoto has given the railroads new leverage to attack discriminatory taxes, particularly the fuel tax. The railroad position has consistently been that fuel taxes are inherently discriminatory against rail as it provides and operates on “private” infrastructure. To require it to contribute through tax dollars to the public highway system, which is used by competitors, motor carriers, is neither just nor is it fair. There is a secondary argument that flows from the fuel tax issue, viz., since the railroad provides its own right-of-way, so ought all other competing modes. If the motor carrier were required to compensate the state for some portion of the highway network which it consumes, over-the-road transportation would be priced higher recognizing the “true cost” of the service. In the result, rail would clearly emerge as the most effect means of transportation. For government to continue “subsidizing” the motor carrier which is acknowledged to be a large GHG emitters, this is hypocritical in the extreme, unwise and contrary to public policy.
Many of these railroad positions are familiar; the one that is new addresses a new concept, viz., public/private partnerships. The railroads say that to transition quickly to transportation services that are low GHG emitters, public/private partnerships could be the solution. Further, joint venture investments with government would expand and improve railroad assets and infrastructure immediately. The investments might target urban and inter-city passenger rail removing some of those 1500 motor vehicles in favor of one passenger (commuter) train. Investment might target major truck arteries where congestion is a problem and a proximate rail line could be twinned to absorb the excess traffic. Terminals could be built in major hubs permitting the railroad to transport more trailers between the hubs for the benefit of inter-city motor carriers. Every initiative pursued would promote a more sustainable transportation system, the existing infrastructure would be improved, greater numbers of passengers and volumes freight would be moved all the while being consistent with and furthering Canada’s commitment to lowering its GHG emissions.
To date the discussion of this issue has been a railroad monologue. Other industry stakeholders are not yet engaged and time is becoming of the essence. At the beginning of any major public policy issue it is a strategic error to be absent from the debate and cede the podium to “the other side”. In this instances not only does the railroad have the high ground because of its inherent advantage, viz., being the lower GHG emitter, but also, by being positively engaged in the government’s initiative, by offering positive solutions, it frames the parameters of the debate. Latecomers will face a formidable challenge to change the proposition from “more partnerships with the low emitter” to “increased research and funding for fuel cell technology”. This is not to say that federal monies will not be made available for such research, but that research is unlikely to produce a commercial solution within the next seven years. The railroad is offering an immediate solution to some 30% of GHG emissions, implementation thereof will require only time for new construction.
The transportation industry could legitimately be asking questions including: Who decides the type of transportation services offered to the marketplace? How will the taxpayer be affected by changes in tax laws and what will be the public cost of those public/private partnerships? How will commodity and resource producers fare in a transportation environment where rail will focus on hauling merchandise freight in preference to lower value commodities? Will this sea change alter established shipping patterns and if so with what result?
If these questions raise strategic business concerns, then the time to act is now.
Maria Rehner, Esq. practices transportation, and environmental law in Calgary, Ab.