Carbon footprint and the cost of GDP

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Presented by: John Thompson at the 2009 Railways and Harbours Conference in Cape Town.

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Carbon footprint and the cost of GDP

  1. 1. RAIL ROAD Association of South Africa Presentation to RAILWAYS & Harbours Conference – CAPE Town 2009.03.05 l OPTIMISING TRANSPORT COSTS. CARBON FOOTPRINT & THE COST OF GDP. John I Thompson.
  2. 2. <ul><li>Focus on freight </li></ul><ul><li>Price and Cost, the difference </li></ul><ul><li>The Status-Quo, the need for change </li></ul><ul><li>Internalisation of External Costs </li></ul><ul><li>Modal Co-operation </li></ul><ul><li>Market pressures from Trading Partners </li></ul><ul><li>The way forward </li></ul>CONTENTS R R A 2009.03.05
  3. 3. <ul><li>The economic viability of RSA depends on its ability to manage its balance of payments </li></ul><ul><li>Primary cost of logistics (CSIR 2006) amounts to 14.6% of gdp R246bn </li></ul><ul><li>Overseas Trading (1 st World) Nations’ figure averages 8% gdp </li></ul><ul><li>Are we competitive? </li></ul>FOCUS ON FREIGHT R R A 2009.03.05
  4. 4. <ul><li>Price is a policy number determined by the Operator to maximise revenue and profits whilst retaining sustainability of business </li></ul><ul><li>Cost is a mathematical fact being the total monetary effect to the Country (including the taxpayer) of the operation under consideration </li></ul>PRICE and COST R R A 2008.03.05
  5. 5. <ul><li>What are the relative Modal freight volumes at present? </li></ul><ul><li>What are the recent trends? </li></ul><ul><li>Are these figures conducive to achieving a competitive platform? </li></ul>STATUS QUO R R A 2009.03.05
  6. 6. Freight Traffic in South Africa 2006 (CSIR) R R A 2008.03.05
  7. 7. MODAL INPUT COSTS <ul><li>Rail (300km plus) more cost efficient by a factor of at least 2:1 </li></ul><ul><li>Average rail distances longer than road by 14% </li></ul>R R A 2008.03.05
  8. 8. Historical modal share indicators R R A 2008.03.05
  9. 9. Transnet Freight Rail’s rolling stock <ul><li>Average age of locomotives 28 years </li></ul><ul><li>International best practice age average 15 years </li></ul><ul><li>Wagons show similar figures </li></ul>R R A 2008.03.05
  10. 10. INTERNATIONAL COMMENT <ul><li>Quote from FORTUNE Sept. 2008 </li></ul><ul><li>“ According to the American Association of Railroads, trains can move a ton of freight 431 miles on one gallon of diesel - about three times as far as a truck can” </li></ul>R R A 2008.03.05
  11. 11. EXTERNAL COSTS <ul><li>External costs are born by the State, and therefore by the taxpayer </li></ul><ul><li>In Europe these costs reach 7.3% of gdp </li></ul><ul><li>In RSA it is recognised that costs reach or exceed this level </li></ul><ul><li>The modal external costs in Europe have been well researched </li></ul>R R A 2008.03.05
  12. 12. European transport externalities R R A 2008.03.05
  13. 13. European freight externalities R R A 2008.03.05
  14. 14. MODAL CO-OPERATION <ul><li>Road Freight Association asserts “Without Trucks South Africa Stops” </li></ul><ul><li>The Rail Road Association agrees with this </li></ul><ul><li>The RRA adds a rider that “Without efficient and predictable Rail Freight Services South Africa becomes a non-player in the Global Village” </li></ul><ul><li>There must be a way to manage modal choice to both satisfy customer demands and to reduce total costs of freight </li></ul>R R A 2008.03.05
  15. 15. MARKET PRESSURES <ul><li>Consumers worldwide are demanding environmentally friendly products </li></ul><ul><li>Purchasing managers echoing these demands </li></ul><ul><li>Tenders often include such requirements </li></ul><ul><li>Supermarkets labelling gives carbon “facts” </li></ul><ul><li>Suggestions of import duties based on carbon footprint </li></ul><ul><li>Low carbon economy is demanded </li></ul>R R A 2008.03.05
  16. 16. NFLS executive summary <ul><li>“ The freight system in South Africa is fraught with inefficiencies at system and firm levels. There are infrastructure shortfalls and mismatches; the institutional structure of the freight sector is inappropriate, and there is a lack of integrated planning. Information gaps and asymmetries abound; the skills base is deficient, and the regulatory frameworks are incapable of resolving problems in the industry.” </li></ul>R R A 2008.03.05
  17. 17. THE WAY FORWARD <ul><li>TFR needs time in order to reap the benefits of its recapitalisation programme </li></ul><ul><li>TFR has called for Expression of Interest for some of the railway branch lines </li></ul><ul><li>We need urgently to build strategically located best practice intermodal exchange facilities in order to enjoy the benefits of road/ rail co-operative opportunities </li></ul><ul><li>We need to understand the growing requirement for “green” transport solutions in order to avoid falling into the ‘green laggards’ stable </li></ul><ul><li>We need to enter professionally into the Carbon Credits trading arena </li></ul>R R A 2008.03.05
  18. 18. THE WAY FORWARD (cont) <ul><li>Can we not develop best efficient practices scenarios for freight movement? </li></ul><ul><li>Let us keep talking at all levels in an open way to improve the utilisation of what we have at present </li></ul><ul><li>Let us plan for the future on the basis of new and improved assets, always looking for what is best for South Africa Inc. After all there is enough cake for all to enjoy </li></ul><ul><li>If we get our plans right the added volumes that will flow, at lower cost and environmental impact, will steer the whole freight industry into a new dimension to the benefit of all stakeholders. </li></ul><ul><li>“ South Africa Scenarios 2025: The future we choose” states that exports need to grow to 35% of gdp from current level of 18% </li></ul>R R A 2008.03.05
  19. 19. R R A 2009.03.05 THANK YOU

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