STU 03-03 : Special Topic - Belgian transport outlook to 2010 [ Short Term Update 03-03 - 17/10/2003]

Both confidence indicators and some hard data now suggest that economic activity in the euro area should register a moderate recovery during the last part of 2003. Even if risks are still present, they are more balanced than a few months ago.

During the last few months, confidence is rising again in Belgium. GDP growth is forecast to pick up slightly in the second half of the year, and amount to 0.9% in 2003. With a far less dynamic pace than was seen during the previous cyclical recoveries in 1996 and 1999, annual average GDP growth should amount to 1.8% next year.

This year, as a result of the stronger euro and the weakness of the euro area economy, net exports should make a very negative contribution towards economic growth (-0.9%). Real GDP growth should be exclusively driven by domestic demand (1.8%) as a result of the cutback in personal income tax rates and the improvement of business profitability. Next year, domestic demand should grow at the same pace as this year, but GDP growth should be more balanced.

A gradual improvement in domestic employment is not expected to take place until the last quarter of 2003. In response to this slowly improving labour market situation in 2004, the household savings rate should not begin to decrease until the second half of 2004. Next year, CPI inflation should be by 1.4%, as compared with 1.6% this year. This fall is inspired by the past appreciation of the euro and the moderate development of unit labour costs.

Transport is the activity that has experienced the most dramatic increase in energy consumption and CO 2 emissions during the last ten years and this trend is likely to continue in a “business as usual” context over the next thirty years. This last result is one of the main outcomes of a recent FPB study, “Belgian energy outlook to 2030”, describing and analysing long-term energy scenarios. Given this reference trend, an alternative scenario has been evaluated that simulates the impact of modal shift to the detriment of road transport and of higher vehicle loading factors, from the viewpoint of both energy consumption and environmental implications. The main results of this evaluation at the 2010 horizon are presented in this special topic.

The Belgian Energy Outlook to 2030 describes a long-term reference energy scenario and evaluates several variants and policy scenarios against this reference scenario. The reference scenario offers a coherent picture of the evolution of energy supply and demand, based on continuing trends and structural changes in terms of economic activity, energy prices and technological developments. As far as transport is concerned, the energy outlook covers both passenger and freight transport.

Overall trends in the reference scenario

In the reference scenario, passenger transport activity is projected to increase at a rate of 0.8% pa in 2000-2010. This constitutes a significant slowdown of activity in comparison to past trends that can be explained by a rather stable Belgian population and some saturation effects in the mobility of persons. Air transport is the fastest growing mode of transport. This trend results from rising real incomes leading to increased leisure air travel and from the development of low-cost airlines.

The growth rate of transport activity by private car is 0.7% pa in the period to 2010 compared with 1.7% in the period 1990-2000. Despite this slowdown and the dramatic increase in air travel, private cars remain the major transport mode for passenger transport. The share of private cars in total passenger transport stabilizes at 79% in 2010. In contrast, both rail transport and public road transport continue to lose market share.

During the past few decades freight transport has been growing more rapidly than GDP. In the period to 2010, freight transport (2.4% pa) grows at the same pace as overall economic activity (2.2% pa). Since the 1970s, freight transport by road has been growing more rapidly than overall freight transport. This trend is assumed to continue in the reference scenario. Both rail transport and inland navigation increase at rates well below average. Consequently, both modes of transport will lose market share but the decrease would be less marked than in the past.

Improvements in the energy efficiency of vehicles 3 cannot compensate for the growth of transport activity and energy consumption of the transport sector continues to increase at a rate of 1% pa in 2000-2010. Although this rate is higher than the rates of increase projected in the other sectors (industry, tertiary and residential sectors), it is below the growth rate of energy use in the transport sector in 1990-2000 (2.3% pa). Since the scope for fuel switching is limited in the transport sector (the sector relies almost exclusively on petroleum products), the increase in energy consumption leads to an increase in CO 2 emissions in 2000-2010 (+0.7% pa).

Impact of modal shift and higher loading factors

The alternative transport scenario has been constructed on the basis of the EC “White Paper on European Transport Policy for 2010” and Belgian government’s proposals. The focus was on modal shift and better vehicle loading and occupancy rates.

The measures in the White Paper combine correct pricing policies with revitalizing alternative modes of transport for road and investment in the trans-European network . The objective is to induce a modal shift and more specifically to allow the market shares of non-road transport modes to return to 1998 levels. These measures should also result in better vehicle occupancy rates and truck loading factors. The former impact is also an objective emphasised by the Belgian government through the promotion of car pooling.

In this alternative scenario (referred to below as the transport scenario), no change was assumed regarding total transport activity (both passenger and freight transport activity) as compared with the reference scenario. The evolution of the market shares of the different transport modes up to 2010 is in line with the trends in option C of the White Paper, with the additional constraint that the market share of rail passenger transport should represent at least 7.6% of total passenger transport activity, aviation excluded.

For passenger transport, there will be a shift from private car to urban road transport and rail (including metro and tram) and rail transport will gain passenger kilometres at the expense of air transport over long distances. The growth rates of transport activity involving private cars and aviation would shrink to 0.5% and 2.4% pa respectively over the 2000-2010 period.

As for freight transport, the shift towards freight trains and inland navigation gives rise to a lower growth rate for road freight transport (+1.9% pa) as compared with the GDP growth rate in 2000-2010. Nevertheless, freight transport by truck remains the dominant transport mode with a market share of 68% in 2010. Rail activity benefits most from the policy objectives and amounts to 18% of total freight activity in 2010. The market share of inland navigation grows by one percentage point as compared with the reference projection.

The new allocation between transport modes results in an energy saving of 14% of energy demand by the transport sector. This energy saving results from the combination of three factors: better loading, a shift towards less energy-intensive transport modes and delayed penetration of more energy-efficient technologies. The last factor mainly concerns aircraft, for which significant energy efficiency improvements are projected, and partly compensates for the impact of the two others.

Road freight transport contributes most to the energy saving. In contrast, the shift towards rail transport results in a higher demand for electricity. This, however, increases only slightly by some 50 GWh, which represents no more than 0.05% of total electricity demand in 2010.

The modal shift and better loading factors have a positive impact on CO 2 emissions. In absolute terms, road transport contributes most to the reduction of CO 2 emissions, followed by aviation. The impact on emissions from the increase in rail transport activity is limited, because most Belgian railway lines are electrified. The additional electricity demand from the railways (as compared with the reference scenario) increases CO 2 emissions by power generators. This increase, however, is negligible compared with the decrease resulting from the savings in petroleum products.

The objectives in terms of modal shift and better loading in the transport scenario make it possible to stabilize total energy-related CO 2 emissions in 2010 at 1990 level, compared with an increase by about 4% in the reference scenario over the 1990-2010 period. [More in the publication ...]

STU 3-03 was finalised on September 12th 2003.