Policy Framework for Greening Transportation in Georgia Jen JungEun Oh September 28, 2012 World Bank Sustainable Development Department

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Defining green transportation in Georgian context Reduced Fossil Fuel Consumption Increased Reliance on Indigenous, Clean Energy Sources Minimized Impacts on the Global and Local Environment (GHG, local emissions) Improved Balance of Trade and Energy Security Reduced Road Congestion Co-benefits Green Transportation in Georgian Context

Policy motivation for green transportation Transport sector’s contribution to economic growth Export competitiveness Lower prices of goods for Georgian customers Competitive position in international transshipment Attraction to tourist destinations Improved regional integration Improved access to market and services of rural communities Catalysis for service sector development  Good connectivity and low cost transportation brings economic benefits

Policy motivation for green transportation Challenge: Oil imports contributes to the current account deficits Opportunity: Current capacity and potential for hydropower is high

Policy motivation for green transportation Road transport accounts for major share of emissions CO Emissions by Sector NO Emissions by Sector Industry Energy Road Transport SO2 Emissions by Sector PM10 Emissions by Sector

Rationale for Government involvement Vehicle ownership growth trajectories vary greatly at same income level Possible trajectories of motorization rate growth in Georgia

Rationale for Government involvement Lock-in effect of infrastructure investments Transport infrastructure determines long-term trajectory of travel and land-use patterns and transportation costs Market failure exists in transport sector External costs: congestion, local emissions, GHG emissions Appropriate intervention by Government can correct the distortion

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Goal and Principle Goal: “to reduce the total cost of transportation including all direct and indirect costs, while maintaining total social welfare benefits” Principle: Influence and improve choices (without undermining the market economy) Influencing Choices Making green transport attractive to users (demand side) Improving Choices Making green transport available to users (supply side)

Instruments: how to influence/improve Institutions and Planning High-level policy integration Spatial planning Strategic transport planning Regulations Fuel quality standards Vehicle technical standards Enforcement Fiscal Policy and Pricing Taxes and subsidies Explicit pricing of externalities Technology and Infrastructure Greener modes of transport Infrastructure network and connectivity Advanced vehicle technologies

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation A. Integrate Environmental Concerns into Transport Policies 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

European Union Vehicle Emission Standards for HC and NOx Why this measure? No environmental objectives in transport policies A regulatory framework is not being enforced Local emissions vary by fuel quality and vehicle standards Environmental policies should aim to curtail emissions at source European Union Vehicle Emission Standards for HC and NOx

How can this be done? Fiscal Policy and Pricing Institutions and Planning Regulations and Enforcement Fiscal Policy and Pricing Integrate transport policy and environmental monitoring Reinstate fuel quality inspection Revise taxes on motor fuels to be differentiated by quality as incentives for cleaner fuel choices Maintain high fuel prices relative to income levels as a long-term policy

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation B. Achieve and Maintain a Greener Vehicle Fleet 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Why this measure? Dominance of second-hand vehicles and lack of vehicle standards enforcement Vehicle fleet age is significantly higher in Georgia than in EU-27 Vehicle fleet ownership will grow much faster as income grows

How can this be done? Institutions and Planning Regulations and Enforcement Fiscal Policy and Pricing Investments Strengthen institutions for effective enforcement Expand vehicle inspection requirements to include all commercial and non-commercial vehicles Scrap and recycle the old and polluting vehicle fleet Tax credits and other financial incentives for higher fuel-efficiency and technological improvements of vehicles Subsidize the scrapping and recycling of old and polluting vehicles

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation C. Promote Low Emission Freight Transport Modes 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Why this measure? Transit traffic is increasing; share of rail transit decreasing Growing share of transit cargo of total international road transport Decreasing share of rail transport of total transit cargo

Vehicle Emission Class Truck charges per kilometer (in EURO) Why this measure? Vehicle Emission Class Truck charges per kilometer (in EURO) Austria Switzerland Georgia 2-axle 3-axle 4+ axle No classification EURO 0–II 0.187 0.262 0.393 0.460 0.767 1.022 0.188 EURO III 0.399 0.664 0.886 EURO IV–V 0.165 0.231 0.347 0.339 0.564 0.752 EURO EEV 0.150 0.210 0.315 EURO VI 0.145 0.203 0.305 Containerized cargo volume handled in Georgian seaports has increased rapidly

How can this be done? Institutions and Planning Regulations and Enforcement Fiscal Policy and Pricing Investments Develop a coherent transport policy that focuses on intermodality and international collaboration with key trading partners and neighboring countries Apply vehicle inspection regime to domestically registered trucks and to Georgian transport companies Introduce and enforce regulations on vehicle emissions and axle loads for foreign registered transit vehicles Differentiate charges on transit trucks according to vehicle emission class and axle loads Allocate revenues to the maintenance of road network assets and green transport investments Develop multimodal, green transit corridors by improving intermodal connectivity, eliminating bottlenecks and supporting containerization

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation D. Support Commercial Development of Intercity Passenger Transport 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Why this measure? Under-regulated/underdeveloped intercity passenger transport market offers inferior service quality (lack of safety, environmental damage) Lack of intercity transportation options hinder future tourism potential Foreign transport services companies reaping benefits from the increasing number of visitors Clean and high-quality intercity bus services can compete with private road transport

How can this be done? Institutions and Planning Regulations and Enforcement Investments Improve the convenience of and access to intercity bus services through coordinated marketing strategy and passenger information services Control market entry through regulations and enforcement of vehicle and emission standards Introduce competitive tendering for strategic intercity routes and manage service quality Improve quality of infrastructure and consumer amenities through public and private investments

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation E. Transform Minibuses, Taxis into Modern Urban Transport Modes 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Minibuses fleet in Georgia is old and getting older over time Why this measure? Minibuses generate local emissions, congestion Contractual arrangement is not conducive to competition and long-term sustainability Unregulated taxi market contributes to negative externalities These modes need to be integrated into coherent public transport services Minibuses fleet in Georgia is old and getting older over time

How can this be done? Institutions and Planning Regulations and Enforcement Investments Develop a strategic vision and strengthen market competition for minibuses and taxis Develop a strategy for coherent multimodal public transport system Minibus market: introduce competitive tendering and gross-cost based contracting Taxi market: introduce partial regulations that control fare and quality but allow free market-entry Refrain from direct budgetary support for vehicle improvement Oblige commercial entities to maintain their vehicle fleet quality

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation F. Support Sustainable Development of Urban Transport 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Why this measure? High energy consumption of Tbilisi transport sector

Inverse correlation between energy consumption and density Why this measure? Inverse correlation between energy consumption and density Very low charges or other restriction on parking in Tbilisi city center

How can this be done? Institutions and Planning Regulations and Enforcement Fiscal Policy and Pricing Investments Develop a national-level urban transport policy framework Institute integrated city development and transport planning Make private car use less convenient by introducing parking restrictions in urban centers Make private car use more expensive through appropriate forms of road user charges Invest in high-quality and competitive alternatives to private transport Introduce intelligent transportation systems for efficient traffic management and better user services in urban areas

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Business-as-usual vs. Green Transportation Indicators Business-as-usual Green Transportation Moderate Aggressive Total vehicle-km on road (million) 258,235 249,319 (-4%) 244,075 (-6%) Total fuel consumption (thousand tons) 23,492 21,746 (-7%) 21,667 (-8%) Total fuel costs, excluding electricity (million GEL)a 96,226 87,434 (-9%) 87,331 Total electricity use (GWh) 46,249 63,255 (+37%) 75,992 (+64%) Total passenger-km by road (million) 730,502 664,955 689,451 Total passenger-km by rail and electric public transport (million) 30,490 62,600 (+105%) 77,633 (+155%) Total ton-km by road (million) 524,924 489,010 453,096 (-14%) Total ton-km by rail (million) 154,504 190,420 (+23%) 226,335 (+47%) Total CO2 emissions (thousand tons) 71,793 68,996 66,455 Total CO emissions (thousand tons) 1,200 392 (-67%) 941 (-22%) Total VOC emissions (thousand tons) 178 82 (-54%) 131 (-26%) Total NOx emissions (thousand tons) 458 351 (-23%) 406 (-11%)

Business-as-usual vs. Green Transportation Motor fuel consumptions Business-as-usual Green Transportation

Business-as-usual vs. Green Transportation CO2 Emissions Business-as-usual Green Transportation

Fiscal implications Reduction in fuel imports would lead to reduction of the current account deficits Can be designed not to undermine the small government philosophy Income (households) and cost (firms) effects of fiscal measures can partly be compensated Revenues can be allocated for development of green transport modes Compensated by reducing taxes that have negative effects on economic growth

1. Framing the Policy Questions 2. Defining Goal, Principle, and Instruments 3. Policy Framework for Greening Transportation 4. Economic, Environmental Benefits of Green Transport Framework 5. Road Map for Framework Implementation

Phased implementation of priority actions (1) Short-Term (2012-2014): Institutional Capacity and Preparatory Tasks Strengthen the institutions and policies at national and municipal level Carry out preparatory work and studies for medium-term actions, including Assessment of appropriate levels of transit truck charges Green logistics study: feasibility of transshipment facilities Strategy for intercity passenger transport Strategy for minibus reform, taxi regulations Urban transport strategic plans in cities other than Tbilisi Alternative analysis / feasibility studies for public transport modes in Georgian cities, including trams, ropeways, LRT, BRT

Phased implementation of priority actions (2) Medium-Term (2015-2020): Enforcement, Market Reforms, and Infrastructure Implement the improved regulatory framework Promote market competition through key sub-sector reforms Develop infrastructure for lasting transformation Long-Term (2020 and after): Transformation Transform mobility using advanced technologies Shape green mobility patterns

Thank you