Should High Speed Rail be part of a green stimulus?

Australia, and the world, is in the midst of fighting the COVID-19 pandemic, and everyone is (quite rightly) pretty focused on the task of actually fighting the disease right now. But it is quite clear that this fight will tip us over into a recession - if not a full-blown depression - and so we're starting to see some early thoughts on what kinds of actions governments can take to get the economy moving once we're in that recovery phase.

One of the big-ticket items Federal Labor is pushing for is the East Coast High Speed Rail project they started groundwork on during their last term in government - a project that would see trains travel at 350km/h between Melbourne, Sydney and Brisbane (with spur lines to Canberra and the Gold Coast) and that was projected to cost $114-117 Billion in 2013 (but would clearly be more expensive in 2020). Labor's Transport spokesperson (and Member for Ballarat) Catherine King is calling it an "economic game-changer" for regional centres, and the director of prospective HSR company CLARA seems to be suggesting it would employ "tens of thousands of people".

The government's HSR Phase 1 study from 2011

Alan Davies, of The Urbanist blog, takes a very different view. He points out that the $117B price tag from 2013 was in all likelihood an underestimate of the true cost of building it, pointing to other big HSR projects that have blown their budgets in recent years. He also points out that the project is still in its infancy, and it would take many years to get going - quoting the government HSR report directly. Lastly he points out that the emissions reductions would take a relatively long time to manifest (because there would be substantial emissions involved in building it) and would be relatively small for the money spent, and suggests that money would be better spent on other ways of reducing emissions, like building renewable energy. 

Davies makes several good points here. If we're talking about stimulus to bring the economy out of the COVID recession, we need projects that are ready to go right now: "shovel-ready" is the term often used. Before any big infrastructure project really gets going, there is a long period of doing detailed design, acquiring land, and so on before the actual shovels hit the soil and people start actually building it.

Workers on the Regional Rail Link project in 2013 - part of the GFC stimulus

That "building it" phase is where most of the short-term jobs are, but you can't just skip ahead to that point at a moment's notice. If the government were to announce tomorrow that they were committing to build this project, it would still take at least five years to get boots on the ground - probably more like ten years. That's too late for a COVID stimulus package - governments will need infrastructure projects that are ready to go, that can be deployed within a year or two. HSR ain't it. 

But what I mostly want to address here is this idea that the money could be better spent on other ways of reducing emissions. This is an argument Davies has been making for several years now - every time HSR comes up, basically - and is a common view among economists who look at the problem of climate change. It is, to be honest, a view that I've held in the past - but it's not one I hold any more. 

For the last several decades, the "deadline" to deal with climate change has been looming off in the distance. Everyone sensible knew that we needed to act, and that we couldn't leave it all to the last minute. We knew that some technology was ready to go but was avoided for political reasons, we knew that some things would get easier as technology improved, and we knew that some problems would remain tricky for a long time - problems where the technological path was less clear. So the name of the game was: do as much as we can now, and do the more difficult or expensive stuff later. We may not have a way to make steel without coal (1), but we do have ways to make electricity without coal, so let's do the electricity now and leave the steel till the tech advances - so the logic went at the time.

An electric bus (via Wikimedia Commons)

And in this phase, economic analysis of the most efficient ways to spend our money was quite a valid pursuit. It made a lot of sense to take an economy-wide view of emissions, and try to focus our spending on where we could do the most good - which often meant less emissions, rather than zero emissions. For example, diesel buses and trains emit CO2, but they emit less CO2 per person-km than cars do, so getting people out of their cars and onto diesel buses and trains was a worthwhile exercise - it appreciably reduces emissions in the short-term, and makes it easier to transition to widespread electric bus use in the future. Electric buses have only become cheaper than diesel buses (2) quite recently, so it would have made no sense to waste our time waiting for that to happen before we acted. Similarly, the economics of electrifying a railway line stack up better when it's a heavily-used line with frequent services, rather than an infrequent service with low patronage, so improving frequencies and increasing passenger numbers on a diesel train actively help make the case for electrification. 

This is also the phase in which the practice of "offsets" made sense. If you couldn't directly reduce emissions in one sector - again steel-making is a good example - then you could offset those emissions by paying to do something else in another sector that would reduce the economy's emissions as a whole. This might mean tree-planting to actively draw down the carbon you were emitting, or it might for example mean funding a solar or wind farm that would pump renewable electricity into the grid, displacing coal-fired electricity. The key to these offsets, though, was that you had to be doing something that wasn't already going to happen. In the early days there wasn't a ton of uptake of renewable energy, so by committing to buy only renewable energy you could spark the construction of new renewable generation - it could genuinely be the difference between a wind farm going ahead or not going ahead. Now, though, these kinds of mechanisms are less effective; there is such widespread recognition that we need to transition to renewable energy, and the economics of building new renewable generation are so much more favourable than they used to be, that it's all sort of happening anyway. Unless you are actively building new renewable energy for yourself, or at the very least directly negotiating a large-scale contract with someone who is (like happened with Melbourne's trams), it's become a lot harder to claim that it wouldn't have been built anyway.

Albany Wind Farm (by Lawrence Murray)

A lot of environmentalists are quite critical of these kinds of economic tricks, pointing out the opportunities for double-counting and for effectively buying the right to continue business as usual - but I do think they were useful tools in the 90s and 00s. Even as late as 2013, when the government HSR study was released, this kind of thinking wasn't entirely without merit. The problem, as I see it, is that in 2020 their time has passed - but too few economists have been able to move on from the old mindset. We no longer have the luxury of picking the low-hanging fruit and waiting for better circumstances; we failed to pick enough of that fruit and our time has effectively run out. We're now in the endgame. We can no longer pick and choose which aspects of the economy we'll focus our decarbonisation efforts on; we have to move swiftly to decarbonise all aspects of the economy. 

Davies says "There are far better and more transformative ways we could spend an extraordinary sum like $200 billion: for example, on improving public transport in our major cities, or on replacing coal-fired power generation with renewable energy. There are many others." The problem is, that's no longer the choice we face. It's too late to choose between HSR and improving intra-city PT, or HSR and renewable energy; we unquestionably do need to improve intra-city PT and build a lot of renewable energy...and sort out how to decarbonise our interstate travel.

Beyond Zero Emissions launched an alternative HSR proposal in 2014 (source)

If there are lower-cost ways to decarbonise interstate travel than HSR, we should certainly consider them. Maybe it means using biofuels instead of fossil fuels in jet engines. Maybe it means hydrogen, generated via electrolysis with renewable energy. Maybe it's battery electric planes. Maybe it's HSR but not Labor's version - maybe it's BZE's or CLARA's version. Maybe it's cheaper and more modest improvements to the rail links - 200-240km/h rather than 350km/h, with higher frequencies than we have today. Hell, maybe in the post-COVID world we will decide we don't actually need to travel between capitals so often or so quickly, and we can do more by Zoom than we used to. Who knows. But we can't discuss the merits of HSR without considering it against its direct alternatives - not just in terms of our financial budget but also in terms of our rapidly-depleting carbon budget. 

The time has passed where we can simply reduce some emissions, somewhere. We have twelve eleven ten years to set ourselves on a path that will eliminate all emissions, everywhere. 

HSR is not the short-term stimulus project we need to launch immediately post-COVID. Projects like Melton and Wyndham Vale electrification, Melbourne Metro 2, and the Suburban Rail Loop will need to fill that role - projects that have already been well-developed and can be quickly brought forward. But we're going to need at least two decades of continuous, hard, expensive work to decarbonise our whole economy - so we still need to be thinking about what the next projects will be. And given the extremely long lead time, the time to start the groundwork is now.

1. The technology has advanced to the point where there are now some very promising signs that we will be able to make zero-emissions steel in the near future, but this was the archetypal too-hard-basket example for many years in this phase. 

2. There's now quite a bit of evidence that electric buses are cheaper than diesel buses across their whole life; the diesel bus is cheaper to buy, but more expensive to fuel and maintain, so it works out more expensive in the long run. However the fact that electric buses are still (slightly) more expensive than diesel buses upfront means that operators are still a little cautious about transitioning their fleets.