Policies for Sustainable Cities (Part 1)

Summary: Many cities and towns are considering how to become more sustainable. This post focuses on one aspect of sustainability, that is, how to reduce emissions from transport. To frame the discussion, we consider the New Zealand Government's target to curtail vehicle travel ("VKT") by 20 percent by 2035. This post presents a preliminary analysis that suggests this VKT reduction could be achieved via a package of pricing, land use, and transport reforms, with parking and land use policies emerging as especially effective. Although progress toward reducing emissions has hitherto been too slow, technology and policy are now evolving quickly in response to new challenges and opportunities. There are reasons to remain optimistic about the potential to reduce emissions from transport, even if the work involved is both urgent and challenging.

Sustainability and transport

Emissions from transport are interesting for at least two reasons:

• Transport makes up a large and growing share of emissions. The transport sector is the second and third largest source of emissions in New Zealand and Australia, respectively, and emissions have been growing fast [1].
• Transport makes a critical contribution to our well-being. Transport has direct implications for our freedom (“accessibility”) as well as many other aspects of well-being, like health and safety, social equity, and housing affordability [2].

For these reasons, efforts to reduce emissions from transport will have implications for sustainability not just in a narrow environmental sense, but also in a broader -- and oftentimes more complex -- socioeconomic sense.

Notwithstanding these complexities, reducing emissions from transport is simple in one respect: We know what must be done. That is, we need to reduce motorised travel by vehicles that are powered by fossil fuels. The latter observation points to two primary pathways through which we can reduce transport emissions: Policies can reduce the quantity of vehicle travel and/or we can reduce the carbon intensity of vehicle travel. Or, perhaps both?

New Zealand's "Emissions Reduction Plan"

Indeed, the transport chapter of the New Zealand Government’s Emissions Reduction Plan (ERP) opts for both. That is, the ERP sets three 2035 targets:

1. Reduce VKT by light vehicles by 20 percent,
2. Increase zero-emissions vehicles to 30 percent of the light vehicle fleet, and
3. Reduce the emissions intensity of transport fuel by 10 percent.

The first target seeks to reduce the quantity of vehicle travel, whereas the other two targets seek to reduce the carbon intensity of vehicle travel. In my view, the ERP provides a useful frame for thinking about transport emissions and helps to highlight some of the challenges that other countries may face, like Australia.

At the time of writing New Zealand appears to be making decent progress toward the second and third targets. Battery electric vehicles now make up 15 percent of new light vehicle sales (versus ~3 percent in Australia)—aided and abetted by policies that reduce their costs to consumers [3]. Similarly, the New Zealand Government has established an obligation for fuel retailers to steadily reduce the emissions intensity of their fuels to achieve ERP targets [4].

Progress towards the first target, however, is more mixed. The bad news is that, in the last two decades, VKT by light vehicles in New Zealand has increased by approximately 9%. The good news is that, in the same period, the population has grown more than twice as fast, such that per capita VKT has actually fallen by approximately 14%. Taken together, this data suggests that New Zealand may have turned the corner in terms of VKT per capita but that the rate of change is currently too slow to reduce total VKT. And the latter is indeed what many places will need to do in order to meet targets for reducing emissions from transport.

The question is, then, how might cities and towns reduce total VKT?

"All models are wrong, but some are useful"

This brings us to the nub of the post. That is, what policies might we adopt to reduce vehicle travel and, in turn, emissions?

To answer this question, I will rely on the results of some simple models. From the outset, I want to emphasise that "all models are wrong, but some are useful". The reason all models are wrong is simply that the future is inherently uncertain, as are the effects of policies that we might adopt. Nonetheless, a simple, "top-down" elasticity model, as I use here, can help to identify the most promising policy levers, which can subsequently be investigated in more detail.

Consider, for example, the effect of an increase in parking prices. In the first instance, evidence suggests this will directly reduce vehicle travel [5]. Evidence also finds, however, that higher parking prices lead to reduced vehicle ownership [6], which in turn has been found to increase urban density [7]. And both vehicle ownership and urban density also affect ... you guessed it ... vehicle travel! The diagram below traces some of these channels and their associated elasticities , at least to the extent that I have been able to find estimates for them.

By combining elasticities with a swathe of heroic assumptions, I have undertaken some preliminary analyses of the aggregate effects of seven commonly touted "meta" policies on VKT, per the table below. Here, I group the policies into three "themes" -- namely prices, land use, and transport -- and estimated the VKT reduction in 2035 to align with the aforementioned timelines for New Zealand's ERP. I describe these as "meta" policies because they don't specify individual policy changes, but rather they describe an outcome that could result from policy changes. The meta policy of higher parking prices, for example, could follow from a scenario where minimum parking requirements were removed and Councils applied land value taxes and parking levies to encourage redevelopment in ways that served to reduce the parking supply. Higher parking policies could, however, also be achieved by other policies, like parking restrictions.

Three things jump out at me from the results of these preliminary analyses:

• First, increasing parking prices and allowing for denser and more diverse urban development appear to be relatively effective ways to reduce transport emissions. The reason for this is these policies operate on many different types of vehicle travel across a large number of locations ("scope effect"), while also acting to reduce vehicle ownership ("multiplier effect").
• Second, implementing this set of policies might be expected to deliver a reduction in VKT of approximately 20 percent. In practice, complex interactions between policies might serve to amplify or reduce these effects. Other policies might also be implemented on top of (or instead of) elements of this package [8]. Nonetheless, the main message is that our policy toolbox seems to have yuge potential for reducing emissions from transport.
• Third, this analysis suggests that investment in non-car modes may be somewhat less effective at reducing carbon emissions. The reason for this is two-fold: First, only a small proportion of the people that use non-car modes would otherwise drive, and, second, when people do switch from driving, then induced demand for car travel partly erodes the emissions savings.

In making these observations, I stress that policies that do not appear to have a large effect on emissions may still be worth pursuing for other valid reasons, and vice versa. Congestion pricing, for example, may have significant economic benefits in addition to reducing emissions. Similarly, strengthening the New Zealand Emissions Trading Scheme ("ETS") -- for example, by expanding coverage, raising price floors/caps, and curtailing the supply of free or discounted credits -- could help to efficiently reduce emissions across the wider economy, possibly to an extent that it alleviates some of the pressure on the transport sector. Intuitively, we might expect policies that deliver these sorts of broader "win-win" outcomes to end up being the most effective overall, and they are something that I'd like to consider in more detail in a future post.

And, to finish, although aggregate, top-down analyses like these are useful for understanding the order of magnitude of effects that might be expected, they should always be complemented with more detailed, bottom-up analyses. The latter seeks to model the choices that people make in response to specific policies within specific contexts, generating useful additional insights into their wider effects, e.g. relative economic benefits/costs and distributional effects.

Final thoughts

Many cities and towns around the world are currently grappling with how to reduce emissions from transport. Although progress to date has generally been too slow, both technology and policy are evolving quickly in response to new challenges and opportunities. There is good reason to remain optimistic about the potential for us to reduce emissions to the extent that is needed and in ways that contribute to -- or at least don't undermine -- our broader well-being.

This is not to understate the challenge: Many places, including but not limited to New Zealand, may need to implement a comprehensive package of pricing, land use, and transport policy reforms to reduce transport emissions with the necessary magnitude and speed. Not only can the design and implementation of such reforms be complex, but they will often need to be accompanied by robust analysis and comprehensive engagement. Over time, the challenges that we face -- and the responses that we need to deploy -- may act as catalysts for public sector reforms and/or new methods of community involvement.

This work is doable, but it must begin now and it must proceed at pace while remaining flexible as new information and opportunities come to light.

About the author: Stuart Donovan coordinates VLC’s activities in “Sustainable Cities ”, drawing on almost two decades of experience working in the transport and energy sectors in New Zealand and Australia. Stuart's core areas of expertise include spatial, transport, and urban economics; multi-modal transport planning; and strategic policy development. He is passionate about providing robust, evidence-based advice that helps communities respond effectively to the transport and land use challenges that they face.

References

[1] CO? and Greenhouse Gas Emissions - Our World in Data

[2] See, for example, the Queensland Transport Strategy—our 30 year plan for transport in Queensland (publications.qld.gov.au)

[3] Electric vehicle sales accelerate to record highs in New Zealand | New Zealand | The Guardian

[4] Biofuels and the sustainable biofuel obligation | Ministry of Business, Innovation & Employment (mbie.govt.nz)

[5] Kelly, J. A., & Clinch, J. P. (2009). Temporal variance of revealed preference on-street parking price elasticity.?Transport Policy,?16(4), 193-199.

[6] Ostermeijer, F., Koster, H. R., & van Ommeren, J. (2019). Residential parking costs and car ownership: Implications for parking policy and automated vehicles. Regional Science and Urban Economics, 77, 276-288.

[7] Ostermeijer, F., Koster, H. R., van Ommeren, J., & Nielsen, V. M. (2022). Automobiles and urban density. Journal of Economic Geography, 22(5), 1073-1095.

[8] See, for example, this article on the results of recent research. 12 best ways to get cars out of cities – ranked by new research (theconversation.com)