(Cross-posted at shorewalker.com)
I like trains. For a while when I was a kid, I spent Saturdays clambering around Adelaide’s Mile End Railway Museum and most of my pocket money buying items for an elaborate train set. Which may explain how I found myself today reading KPMG’s Phase 2 report in the federal government’s High Speed Rail Study, looking at a high-speed rail line from Melbourne to Sydney and on to Brisbane.
Sadly, the Phase 2 report essentially restates, with arithmetic, everything that most analysts keep concluding about a Melbourne-Sydney-Brisbane High Speed Rail (MSB HSR) project. It would be, like my old train set, a bit of a money pit. It would be very expensive ($114 billion in 2012 dollars), would never earn back its capital costs, would take decades to build, and would not be very green. It would doubtless be a buzz to see shiny locomotives surging through the countryside, but its economics don’t stack up.
It’s useful to have this point repeated. There’s a stream of public commentary that says, essentially, that anyone who opposes high-speed rail is just lacking in vision, because, well, to quote a cringeworthy lead paragraph from The Age’s transport reporter, “High speed rail would be the best“. The low point of this vein of commentary was probably Gordon Weiss’s evidence-free paean to HSR in the Global Mail last year, memorable mostly for a bizarre string of approving references to totalitarian governments: “Benito Mussolini not only made trains run on time, he made them run fast … Unfortunately, Mussolini’s equally manic support for Hitler interrupted HSR technology … the Central Committee changed 1 with Mussolini-like bravura.”
When that’s the quality of policy debate, a little realism about costs and benefits should be welcome.
Predictably, HSR boosters are arguing the toss. Their first objection is that the $114 billion estimate is way too high. Hey, another study says we could do the job for a mere $70 billion!
This is an unlikely criticism to anyone who understands the recent trends in major developed-country infrastructure projects. The clear trend is for projects to come in way over their original cost estimates.
Why’s that? We don’t know for sure, but the University of Minnesota’s David Levinson has compiled a list of 39 hypotheses.
2 and other studies of cost development in major transport infrastructure projects reveal the same overall pattern: cost overruns above 40 per cent are common, especially for rail projects, and overruns above 80 per cent are not uncommon … Cost overrun today is the same order of magnitude as it was ten, thirty or seventy years ago.”
The core point remains: $114 billion is not on its face ridiculous.]
The most likely sources of additional and unbudgeted costs (not that I would see them all as important) include:
- Commitment to tunnelling for road and rail rather than tearing up big chunks of cities, My first guess is that this is the biggest single factor in high costs.
- High build standards generally (safety, social, environmental, architectural).
- The one-off nature of the projects. (China, building 20,000 kilometres of HSR lines, will get some economies of scale, as has Europe to a lesser extent. Australia won’t.)
- High labour costs.
- High land costs.
- Process costs to get the power to acquire and use land. (The Chinese government can happily tell 1.3 million people to move when it wants to build a dam; Canberra rightly cannot.)
- Insufficient commitment to detailed benefit/cost analysis, which in turn leads to a get-it-done-at-any-cost mentality.
- Lack of competition among construction services providers.
- Poor government oversight.
- Political pressure to add extra features (tunnels to protect creeks and forests, extra stops at smallish towns etc)
- Updated 11 May 2013: Intentional underestimation of costs by the promoters in order to get the projects signed off is probably very important. As Flyvbjerg puts it: “Strong incentives and weak disincentives may have taught project promoters what there is to learn, namely that cost underestimation and overrun pay off.”
I would add that the Sydney-Brisbane HSR line faces particularly unfriendly natural terrain, compared to most of China and anywhere else.
By far the best public analysis of the high-speed rail issue appears to be Alan Davies’ work at The Urbanist, and he does not appear very surprised by KMPG’s estimate.
So I think it’s hard to argue those numbers are on their face ridiculous.
Just as troubling is the tendency to ignore the report’s conclusions on the MSB HSR’s environmental impacts. “I’d think HSR would have considerable … environmental benefits which don’t seem to be mentioned in the report” suggested one Troppo commenter. Actually, the environmental benefits are in chapter three of the report, which has a sub-section titled “System-wide environmental impacts during operation”, and in Appendix 5G, which goes through the modelling of those impacts. The problem for HSR boosters is the environmental story that the report tells.
The report claims, for instance, that an MSB HSR will cause a net increase in emissions. Why?
Partly because building a new rail system uses a heap of cement and steel, which are high-emission materials.
And partly because when you build new pieces onto an existing traffic network, you encourage activity on other parts of the network.
But mostly because right now there’s a lot of unmet demand for flights out of Sydney Airport. When we build our rail line, we won’t get less traffic through Sydney Airport; we’ll just get new traffic replacing old.
This is a variant of the point often made by critics of new freeways: they don’t reduce congestion, because they pull new users onto the roads. (Note by the way that we do get benefits in these situations; those benefits just don’t include reduced congestion.) Because this point is so often made by anti-freeway, pro-rail types, I suspect it will be a little hard for HSR fans to deny.
Yes, when it’s up and running the MSB HSR should create less greenhouse gas emissions than air and road travel (though this depends on the trains being pretty full). But it ends up producing a lot of net new transport activity, which means emissions go up rather than down. The report estimates “a net increase in overall transport emissions of 32 million tonnes of CO2–e over the evaluation period up to 2085”.
You can construct a scenario where HSR reduces emissions. That’s the scenario where Sydney gets a second airport, so that HSR is no longer filling unmet Sydney airport demand. But of course an extra Sydney airport makes the economic case for HSR weaker. And even in this scenario, HSR remains an extraordinarily expensive way to reduce CO2 emissions.
High-speed rail has rarely been economically compelling anywhere. But like many forms of infrastructure, it has most appeal when you are starting with a relatively clean slate and high population densities, like Japan after World War II. In Australia, with its built-up cities and long inter-city distances, HSR makes less sense.
For Australia, high-speed rail looks a little like a very expensive hobby. We have far better ways to spend $100 billion.
- China’s rail system
- Update 11 May 2013: The paragraph above is wrong. Commenter derrida derider correctly notes that Levinson lists reasons why infrastructure projects are expensive, especially in comparison to Chinese equivalents, but not reasons why they come in over budget. The better source for the nature of budget overruns is Danish economic geographer Bent Flyvbjerg, author of Megaprojects and Risk: An Anatomy of Ambition:
“[The Aalborg study