Contradictory policies – buying votes vs. saving the climate

The Austrian government plans to increase the subsidies for commuters. People who live at least 2 km away from their working place have, in principle, the possibility to obtain a tax discount on their fuel expenses.

The current level of subsidies is shown in the following table:

Distance           EUR/year

2-20 km           373

<40 km             1476

<60 km             2568

>60 km             3672

For the sake of completeness we have to say that the above-mentioned subsidy level applies only if there is a) no means of public transport available, or b) using public transport would lead to an extensive traveling time.

Let us examine the case of a commuter living 60 km from his/her place of work. He travels 5 days a week, the car consumes about 6 l/100 km and the current price of gasoline is about 1.50 EUR. The total gasoline expenses will therefore be around 2400 EUR per year. The expected tax benefit compensates his entire travel costs.

In case the commuter has the option of using a different means of transport the subsidy levels are somewhat lower as shown in the table below:

Distance          EUR/year

20-40 km        696

<60 km             1356

>60 km             2016

This is the current state of affairs. The government is now to increase the subsidy by 1 EUR per km. Thus, the tax benefit for our example will climb up to 2628 EUR, making it even more profitable to use the car for going to work.

Critics say that this move by the two governing parties is due to the upcoming elections later this year. There may be some truth in it, as it is common practice to distribute benefits during the electoral period. In that context it may be worthwhile to mention that Austria has about 1 million commuters. This is a non-negligible part of the electorate given that the total population is about 8 million.

There is, however, one more striking issue which should not be overlooked. Austria has committed herself to strict carbon emission targets. Now the policy of making car use even more beneficial is in stark contrast to these environmental goals which are never missing in public statements by the very same politicians.

These subsidies which have a long-time tradition are supposed to compensate people for their extra expenses for going to work at a distant location. It goes without saying that, over the time, commuters have got used to this kind of state subsidy. Nevertheless, there is no real justification for this sort of tax benefit. People always have to choose between options. And the alternative to commuting is moving to a location which is closer to the place of work. In an ideal world the higher cost of living in a city would more or less be equivalent to extra expenses for travelling to and from the job.

Now as the subsidies come into play the choice between living in the city or in the countryside is distorted by the simple fact that people who do not have to commute have to pay higher taxes in order to compensate for the cost of traveling of the commuters.

This is not only a waste of public money, it also creates more traffic, thus more energy consumption, more carbon emissions, more accidents etc.  And it reveals the true priorities of the political class.

Energy and Transport

Transport is one of the big consumers of energy. As we have seen in some of my previous posts, there is a clear tendency to become more energy efficient. Does this also apply to energy used for transport purposes?

Eurostat provides a collection of data on this issue which may give us an answer.  Let us look at the transport energy per unit of GDP. This is certainly a sensible measure since we may consider a link between economic activity on the one hand and transport (of both people and goods) on the other. So whenever the economy is growing (or shrinking) transport is likely to follow suit.

We consider here the case of Germany, France and UK, i.e. the biggest economies of Europe. The figure below shows how energy demand for transport per unit of GDP has developed since 1995. The curves are indexed with 2005 = 100.

Energy demand for transport purposes per unit of GDP.

The message behind this figure seems to be obvious. Over the past 15 years there has been a certain decoupling of economic performance and energy demand for both passenger and goods transport. Thus per unit of GDP less energy is used for transport. We are becoming more energy efficient.

Having a closer look at the figure we may also observe that the downward trend is still unbroken, i.e. there is no flattening tendency. This leads us to the conclusion that there is room for further improvement of energy efficiency in the transport sector.

Energy Efficiency – A Sectorial Approach

Becoming more energy-efficient is one of the major challenges of our time. Modern societies are highly energy-dependent and thus all efforts to save this valuable resource are more than welcome. For many years, or rather decades, the responsible people, politicians and experts, have urged the importance of using less energy.

We may ask ourselves what has been achieved so far. We may equally ponder about future developments. How much more can we save?

In this posting we investigate the achievements of getting more energy-efficient in the UK from a sectorial point of view. The country can serve as a typical example of a European state trying to do both, using less energy for the same economic outcome and reinforcing its potential of renewable energies. The raw data for our analysis have been taken from UK National Statistics.

We consider the following sectors: Industry, domestic, services, passenger transport and freight transport. The energy consumption of the various sectors is measured as follows: industry (Mtoe/unit of output), domestic (Mtoe/household), services (Mtoe/unit of value added), passenger transport (Mtoe/person-km), freight transport (Mtoe/tonne-km). The transport sectors cover road transport only. In order to see how well each sector is doing compared to the others, we have indexed the quantities as 1980=100.  The results is given in the figure below.

Energy efficiency in the UK for various sectors.

This picture reveals immediately who the good and the bad guys are. Let´s start with the good ones. Both industry and services managed to reduced their energy use per unit of output considerably. In fact, in 2010 British industry was able to produce more than twice as many goods per unit of energy as in 1980. Within 30 years the index went down to less than 48. The services sector was even more successful. During the same period its specific consumption plummeted to an index value of 43 only.

The situation looks quite a bit different for the other sectors with passenger transport being the most successful among those. Since 1980 the use of energy per passenger-km has decreased by almost 20 % (index 81.9). Unfortunately, freight transport cannot compete with that value. Instead its energy consumption per tonne-km went up by almost 12 % during the reference period. This finding is both, surprising and disappointing at the same time. Surprising, because car producers make us believe that modern vehicles need less gasoline than older ones. Disappointing, because freight transport is the only sector showing a clear increase in its energy hunger.

When looking at the figures for household consumption we may equally feel disappointed. There is a slight tendency to use less energy per household, with the index being at 93 in 2010. This is a rather weak performance when compared to the other sectors with the notable exception of freight transport. Countless public campagnes have been run with the clear goal of getting more energy efficient. It is hard to imagine that millions of households have not got the message. However, the results are meagre. Why is that so? Is there too little incentive for households to save energy?