Fuel Demand Modelling in the Transportation Sector The Road Transport Perspective Vienna, 20 January 2006 Jens Hügel Head – Sustainable Development © International Road Transport Union (IRU) 2005

The IRU’s Objective “The objective of the IRU shall be to contribute, in the interest of society as a whole, to the development and prosperity, in all countries, of domestic and international road transport…” Our statutory objectives are clear and havent changed since 1948. Thanks to these, the IRU has sucessfully developed into a global organisation Article 2, IRU Constitution Laeremans © International Road Transport Union (IRU) 2005

© International Road Transport Union (IRU) 2005

Evolution of IRU Membership 2005 179 Members 69 Countries (Yemen in process of joining) Created 1948 8 Founder States: Belgium Denmark France Netherlands Norway Sweden UK Switzerland Updated 25 May 05 © International Road Transport Union (IRU) 2005

Evolution of IRU Structure 1948 IRU founded in Geneva 1973 IRU Permanent Delegation to the EU established in Brussels 1998 IRU Permanent Delegation to the CIS established in Moscow 2005 IRU Permanent Delegation to the Middle East established in Istanbul Laeremans © International Road Transport Union (IRU) 2005

IRU Structure General Assembly Passenger Transport Council Goods Transport Council Presidential Executive Secretary General CIS Delegation (Moscow) EU Delegation (Brussels) Secretariat General (Geneva) IRU Academy (Geneva) Mid East Delegation (Istanbul) Task Forces Commissions Working Parties EU Liaison Committee CIS Liaison Committee IRU Constitution 1 Aug 2001 updated 1 May 2005 2.2 IRU Structure CGW May 05 © International Road Transport Union (IRU) 2005

IRU Priorities 2005 – Overview As per Art. 2 of the IRU Constitution Sustainable Development Innovation Incentives Infrastructure Facilitation Trade Tourism Road Transport These are also the priorities of the IRU Academy © International Road Transport Union (IRU) 2005

IRU Priority: Sustainable Development As per Art IRU Priority: Sustainable Development As per Art. 2 of the IRU Constitution IRU Charter for Sustainable Development (1996) IRU Initiative “Driving Towards Sustainable Development” (1997) IRU Guide to Sustainable Development (2000) IRU Reports on Road Transport Best Industry Practices (2002/4) Industry as a Partner for Sustainable Development UNEP (2002) © International Road Transport Union (IRU) 2005

3 “i”s for Sustainable Development 1. innovation – to develop ever more effective “at-source” technical measures & operating practices to reduce environmental impact. 2. incentives – to encourage faster introduction of best available technology and practices. 3. infrastructure – without free-flowing traffic, the above measures are useless. Adequate investment in new infrastructure to remove bottlenecks and missing links, plus fullest use of existing infrastructure, are essential. © International Road Transport Union (IRU) 2005

IRU has obligation as per Art IRU has obligation as per Art. 2 to act in the interest of society as whole Evolution of Commercial Vehicle Emission Standards in the EU - 87% - 81% - 86% - 97% Source: Eur Commission, Auto Oil II © International Road Transport Union (IRU) 2005

Improving Fuel Economy Evolution of Fuel Consumption of a 40-tonne truck 1970-2004: -36% Source: Verband der Automobilindustrie (VDA) e.V., 2004 © International Road Transport Union (IRU) 2005

Improving Fuel Economy IRU modules Benefits for the environment Benefits for the road transport operator Driver training and Well Driven Campaigns Less accidents Lower fuel consumption Less CO2 emissions Less vehicle downtime Lower insurance costs More reliability Lower fuel costs Environmental Management Systems (EMS) / increase in load load factor Less emissions (CO, NOx, HC, particulates) Less waste Less consumption of water, fuel and other resources Lower taxes and charges Lower water bill Lower power cost © International Road Transport Union (IRU) 2005

Road Congestion increases Fuel Consumption (40 tonne truck) Source: VDA, 2000 © International Road Transport Union (IRU) 2005

The congestion bill in US cities According to the Urban Mobility Report the congestion bill for 68 cities in the US for 2000 came to $78 billion in lost productivity, 4.5 billion hours of delay and 6.8 billion gallons of wasted fuel ! *Source : Rexas A&M University 2001 © International Road Transport Union (IRU) 2005

Road Transport and Oil Is there really a shortage of oil? © International Road Transport Union (IRU) 2005

Road Transport and Oil in the IRU IRU has constitutional obligation as per Art. 2 to act in the interest of society as whole Road transport is a vital production tool Road transport is 100% dependent of oil Our duty is to ensure that our children’s children can benefit from black gold through a sustainable energy policy. © International Road Transport Union (IRU) 2005

Road transport is a vital production tool in a global economy What does it take to have a cup of coffee in a café? The combined efforts of 29 companies in 18 countries If to have one cup of coffee at an affordable price, it takes 29 companies in 18 countries, you imagine how much more it would cost if all items came from the country where the end product is consumed? If we know that it takes 10’000 suppliers, which in turn have their own suppliers, to create an affordable motor car, you can imagine the vital role of road transport in a liberalised economy. Therefore, to stay in business, we need to see globalisation as an opportunity and not as a threat. To do so, we need to develop together the entrepreneurial spirit currently lacking in Europe. There is transport between each. Most of it is by road. Road Transport = Production Tool! Source: IRU © International Road Transport Union (IRU) 2005

Road transport is 100% dependent on oil Since the first oil crisis in 1973, the IRU has been preoccupied - for our children’s children - with developing a sustainable energy policy, because road transport is 100% dependent on oil. Opposite: cover of IRU Study, 1980 © International Road Transport Union (IRU) 2005

Road transport is 100% dependent on oil - Energy Characteristics of Various Fuels Weight & volume of fuel tank for same amount of energy Weight coefficient Volume coefficient Petrol / gasoline 1 Diesel Fuel Propane (C3H3) 8 1.9 Butane (C4H10) 1.4 Hydrogen (H2) - Gas at 200 BAR 25 22 Hydrogen (H2) - Liquid at -253°C 4 5.8 Metal Hydride - Magnesium 5 3.2 Metal Hydride - Vanadium 10 1.7 Metal Hydride - Iron-Titanium 20 Methanol (CH3OH) 2.2 2.1 Ethanol (C2H5OH) 1.62 1.53 Lead Battery 70 12 © International Road Transport Union (IRU) 2005

Road transport is 100% dependent on oil - Need to diversify the energy market © International Road Transport Union (IRU) 2005

Road transport is 100% dependent on oil - Who benefits from high fuel prices? UK Diesel Taxation 1975-2004 Source: UK Energy Institute, 2005 / UK Department of Trade and Industry © International Road Transport Union (IRU) 2005

Road transport is 100% dependent on oil - The Road Racket: a huge source of revenue for government budgets United Kingdom, 2002-03 Fuel excise duty and VAT paid: GBP 26.5 bio HOWEVER… Total UK Govt. spending on Roads: GBP 7.5 bio UK Govt. subsidy to Rail Passengers: GBP 2.8 bio EVEN SO… UK Railway company debts: GBP 4.4 bio AND… UK Transport Secretary: “GBP 67.5 bio of public money is needed to upgrade railway system and make railways profitable.” A Bottomless Pit… Source: The Economist (Jun 2005) © International Road Transport Union (IRU) 2005

5 mio tonnes of oil are used for heating (stationary use).* Road transport is 100% dependent on oil - A Swiss example on how NOT to do it 5 mio tonnes of oil are used for heating (stationary use).* 1.5 mio tonnes of oil are used for diesel fuel (mobile use).* Only 8% of diesel fuel is used for trucking! Because we are 100% dependent on oil We pay the most! *Source : Union Pétrolier Suisse 2005 © International Road Transport Union (IRU) 2005

Road transport is 100% dependent on oil - Long term solutions are needed! Oil is black gold, so… Stabilise the market. Diversify energy sources where alternatives exist, such as heating, electricity, steel, cement, paper production (50% CO2); and reserve oil for truck transportation, for which no alternative energy sources exist. To obtain this goal… Governments should introduce taxes where viable alternatives exist and reduce taxes where there are no viable alternatives. © International Road Transport Union (IRU) 2005

It is our duty to ensure that energy policy is sustainable If the following facts were known, energy policy could be influenced to become sustainable: High spot price results from speculation by brokers and multinational oil companies and not from oil producing countries price. Spot price covers less than 10% of the oil purchase on the oil market and should not be systematically applied by the multinational oil companies in all their petrol stations. Spot price does not correspond with long-term contracts with oil producing countries. © International Road Transport Union (IRU) 2005

It is our duty to ensure that energy policy is sustainable If the following facts were known, energy policy could be influenced to become sustainable: Higher fuel price results mainly from government taxation and not from oil producing countries. 75% of fuel price is tax. Only ~10% goes to OPEC member countries. Wrong governmental taxation policies block diversification where viable alternatives exist. Taxation on road transport fuel penalises the economy twice because it is a production tool AND because the money is wasted in large subsidies to the totally inefficient rail transport sector. © International Road Transport Union (IRU) 2005

It is our duty to ensure that energy policy is sustainable If the following facts were known, energy policy could be influenced to become sustainable: Oil-producing countries should not be blamed for high fuel prices. It is their right to receive an optimal return on sales of black gold and on their investments. Western governments’ fuel tax revenues are up to 10 times higher than the oil and production costs. The shortage in supply is mainly fuelled by speculation which: 1) encourages increased storage 2) again increases speculation and 3) increases government revenues… Therefore the truck industry is penalised twice: 1. It has no storage capacity and 2. It has no economically viable alternative energy source to fossil fuel. © International Road Transport Union (IRU) 2005

Oil is a finite resource but there will be not a shortage of oil if it is used in a sustainable way © International Road Transport Union (IRU) 2005

So what can we do? © International Road Transport Union (IRU) 2005

IRU World Congress 2006: Dubai United Arab Emirates Note in your diary: 14 – 16 March 2006! © International Road Transport Union (IRU) 2005