New research reveals true value of rail

BY GREG MILLER

THE LATEST “Value of Rail” report has been released, providing useful and interesting analysis of the benefits of rail, aside from the obvious ones of getting people and freight to their destinations.

Rail is a critical enabler for the New Zealand economy, providing broad ranging benefits economically, socially, and environmentally. Rail networks have long been part of the infrastructure of New Zealand and are a significant investment for the nation. While we know the costs, there is an economic value of rail in New Zealand which is often overlooked. This value accrues to the community and in the latest report “The Value of Rail in New Zealand” by independent consultants Ernst & Young, some of these social, environmental, and economic values of rail transport are identified and quantified. The value of rail to New Zealand was first modelled by EY in 2016 when the Ministry of Transport, in partnership with KiwiRail and Waka Kotahi NZ Transport Agency, asked what the effect on the roading network would be if rail was removed. This model1 has now been updated and shows the benefits of rail to New Zealand range in value between $1.7 billion to $2.14 billion per annum. This value is made up of costs which are often hidden:

• Reduced congestion ($997m) • Reduced air pollution ($332m) • Reduced fuel use ($216m)

• Reduced greenhouse gas emissions ($180m) • Reduced road maintenance ($105m) • Improved safety outcomes ($96m) Viewed through this lens, the importance of rail is even more significant than is already recognised and reaches beyond the economic benefit to the customers KiwiRail services directly. The general approach taken in assessing this value has been to model the potential economic cost to New Zealand from not having a rail network. The value is indicative because, for example, it doesn’t consider any second-order or behavioural effects that might result if there were more vehicles on the road. on New Zealand’s roads. Heavy commercial vehicles cause 90 per cent of damage to our roads2, so moving freight by rail greatly assists in reducing road damage. Each year commuter rail in Auckland and Wellington avoids more than 26 million car trips. Rail also contributes a wider range of benefits to the economy, and these can be measured when we consider what might occur if we didn’t have rail. When we do this, we see that rail generates fewer costs in terms of accidents, congestion, and emissions than road. The benefits include:

• Air quality benefits from rail are equivalent to saving 70 lives each year; • Rail freight avoids the need for over 150 million litres of diesel each year, or approximately 1m barrels. As a result, rail helps the environment by reducing CO2 emissions by 2.5m tonnes per year; and • Rail helps to make our roads safer through 288 fewer injuries and fatalities per year. The value of rail calculated by EY excludes further qualitative benefits from rail, such as connectivity, land use and resilience benefits. Nor does it consider the direct contribution

Moving passengers and freight by rail contributes significantly to the New Zealand economy.

The total economic value of rail is: $1.70B- $2.14B

EVERY YEAR

Total value is derived from: $997M

reduced congestion

$322M

reduced air pollution

$216M

reduced fuel use

$180M

reduced greenhouse gas emissions

$105M

reduced road maintenance

$96M

improved safety outcomes

This value far exceeds the government’s annual investment in rail

The latest “Value of Rail” report has been released, providing useful and interesting analysis of the benefits of rail to New Zealand range in value between $1.7 billion to $2.14 billion per annum. Rail also has a significant part to play in assisting with the climate change emergency as every tonne of freight moved onto rail from road delivers a 70 per cent reduction in carbon emissions for the environment. Photos: KiwiRail

rail delivers to support New Zealand’s economic growth and Gross Domestic Product through its commercial operations. KiwiRail provides resilience to the national transport system supporting the country’s export growth carrying approximately 25 per cent of all export goods, and around 12 per cent of New Zealand’s total freight task – the equivalent of 4 billion tonne kms and anticipated to grow over the next 10 years to 5.4 billion tonne kms3. Through inter-island operations, KiwiRail also creates a critical freight and passenger linkage for State Highway 1 connecting the North and South Islands across the Cook Strait.

The Government has signalled rail has the potential to contribute further through the significant investment in rail infrastructure, locomotives, and ships. This will help drive further economic growth both regionally and nationally, all the while providing employment and career opportunities for New Zealanders and flow on partnership opportunities for New Zealand businesses. Rail has a significant part to play in assisting with the climate change emergency as every tonne of freight moved onto rail from road delivers a 70 per cent reduction in carbon emissions for the customer, the country and the environment, contributing to a cleaner, greener New Zealand. The benefits of KiwiRail are for our country, our company, and our customers. Moving passengers and freight by rail contributes significantly to the New Zealand economy as well as providing a significant intangible public benefit. We are excited about the transformational journey we are on and providing a renewed rail foundation for the benefit of all New Zealanders.

The updated report is available online here: www.kiwirail.co.nz/assets/Uploads/ documents/2021-Value-of-Rail-report.pdf (kiwirail.co.nz) – or https://bit.ly/2R04fjO.

Notes:

1 Value of Rail modelling takes account of rail freight across New Zealand and passenger rail in Auckland and Wellington. Inter-island ferries and long-distance passenger rail within the KiwiRail network are out of scope. This study includes direct, indirect and externality benefits, consistent with the Waka Kotahi Monetised Benefits and Cost Manual. The majority of benefits are calculated in net terms, with air pollution, fuel use, greenhouse gas emissions, maintenance and safety values reflecting the difference between road and rail impacts. Time savings are the one exception, with impacts on the road network being calculated in gross terms. Such an approach is required to maintain consistency with previous (2016) modelling.

2 Modelling carried out through a 2020 study by EY which uses the fourth power rule to model Heavy Commercial Vehicle versus Light Vehicle contribution to road damage. Greg Miller KiwiRail Group Chief Executive

Greg Miller was appointed Chair of the KiwiRail Board and Chair of The New Zealand Railways Corporation Board in November 2018, after a 32-year career in supply chain logistics domestically and abroad. In May 2019, he was appointed Group Chief Executive Officer.