SESSION I: THE CHINESE TRANSPORT SECTOR AND ENVIRONMENT IN 2001

Dr. Zhu Gaofeng, vice president of the CAE, moderated the morning session that focused on the status of motorization in China and the response to problems that have arisen.

Issues related to Personal Vehicle Expansion in China—Liu Zhi, World Bank

Dr. Liu has been long involved in World Bank work on urban transport strategy in China. In 1995 he organized the symposium that led to the first official recognition of the problem.

The automotive industry in China has been designated a pillar industry, characterized by forward and backward linkages throughout the national economy. The designation is premised on the recognition of the sheer size of the potential domestic market for personal vehicles based on rising incomes, and it is motivated in part by the desire to prevent control by local governments. But the designation brings with it some concerns:

  • For the auto industry—how to produce an affordable, popular family car that is competitive with foreign-made cars before China’s admittance to the World Trade Organization.

  • For the environmentalist—how to prevent pollution, energy shortages, and land shortages. The voice of environmentalists is becoming stronger.

  • For municipal governments—how to provide the necessary road infrastructure and parking spaces, while limiting air pollution, traffic accidents and maintaining equity in land use and transport access. This issue has provoked a major World Bank project on urban transport.

Liu said there are also important social issues. Personal vehicle use expansion will change lifestyles—with winners and losers. Vehicle owners will benefit from increased mobility, while non-vehicle owners will suffer from increased congestion. At the same time there is new decentralization and more democracy in public policy decision making in China that will have a large impact on how the issues are resolved.

Dr. Liu showed graphs of motor vehicle ownership in the largest cities in China. The graphs showed clearly that Beijing has by far the highest proportion of vehicles to population, followed by Tianjin, Shanghai, and Guangzhou. Unlike the others, Shanghai has almost no private passenger vehicles. He then pointed out that 70 percent of the air pollution in Beijing is from auto emissions. Road congestion rises with car density, and Beijing leads the other cities in road traffic fatalities. In 1998 Beijing had nearly twice as many as fatalities as Shanghai.

Dr. Liu called this a “macro policy without the support of the micro environment.” A 1994 study predicted that the demand for passenger cars would reach 1.3 million to 1.6 million in the year 2000. The actual vehicle sales numbered 700,000. Some urban governments continue to exercise controls on vehicle ownership and use through taxes, surcharges, and other devices. Some use these instruments as devices to raise revenue.

A recent World Bank study showed that, world wide, personal incomes are the most important determinant of private car ownership. The income elasticities of PUV ownership are greater than 1 in the long run and less than 1 in the short run. The price elasticity is smaller than the income elasticity. Governments can still exert control with fees but as income grows, car ownership will rise.

Liu said that in China, the length of paved roads is expanding as fast as incomes are rising. At the



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The Future of Personal Transport in China: Summary of a Symposium, January 12, 2001 SESSION I: THE CHINESE TRANSPORT SECTOR AND ENVIRONMENT IN 2001 Dr. Zhu Gaofeng, vice president of the CAE, moderated the morning session that focused on the status of motorization in China and the response to problems that have arisen. Issues related to Personal Vehicle Expansion in China—Liu Zhi, World Bank Dr. Liu has been long involved in World Bank work on urban transport strategy in China. In 1995 he organized the symposium that led to the first official recognition of the problem. The automotive industry in China has been designated a pillar industry, characterized by forward and backward linkages throughout the national economy. The designation is premised on the recognition of the sheer size of the potential domestic market for personal vehicles based on rising incomes, and it is motivated in part by the desire to prevent control by local governments. But the designation brings with it some concerns: For the auto industry—how to produce an affordable, popular family car that is competitive with foreign-made cars before China’s admittance to the World Trade Organization. For the environmentalist—how to prevent pollution, energy shortages, and land shortages. The voice of environmentalists is becoming stronger. For municipal governments—how to provide the necessary road infrastructure and parking spaces, while limiting air pollution, traffic accidents and maintaining equity in land use and transport access. This issue has provoked a major World Bank project on urban transport. Liu said there are also important social issues. Personal vehicle use expansion will change lifestyles—with winners and losers. Vehicle owners will benefit from increased mobility, while non-vehicle owners will suffer from increased congestion. At the same time there is new decentralization and more democracy in public policy decision making in China that will have a large impact on how the issues are resolved. Dr. Liu showed graphs of motor vehicle ownership in the largest cities in China. The graphs showed clearly that Beijing has by far the highest proportion of vehicles to population, followed by Tianjin, Shanghai, and Guangzhou. Unlike the others, Shanghai has almost no private passenger vehicles. He then pointed out that 70 percent of the air pollution in Beijing is from auto emissions. Road congestion rises with car density, and Beijing leads the other cities in road traffic fatalities. In 1998 Beijing had nearly twice as many as fatalities as Shanghai. Dr. Liu called this a “macro policy without the support of the micro environment.” A 1994 study predicted that the demand for passenger cars would reach 1.3 million to 1.6 million in the year 2000. The actual vehicle sales numbered 700,000. Some urban governments continue to exercise controls on vehicle ownership and use through taxes, surcharges, and other devices. Some use these instruments as devices to raise revenue. A recent World Bank study showed that, world wide, personal incomes are the most important determinant of private car ownership. The income elasticities of PUV ownership are greater than 1 in the long run and less than 1 in the short run. The price elasticity is smaller than the income elasticity. Governments can still exert control with fees but as income grows, car ownership will rise. Liu said that in China, the length of paved roads is expanding as fast as incomes are rising. At the

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The Future of Personal Transport in China: Summary of a Symposium, January 12, 2001 end of 2000, the total length of expressways reached 12,000 km. There is a surcharge on vehicle sales for road construction paid directly to the ministry, so highway financing is linked to vehicle ownership and use. Urban transport is most problematic. The rise in the number of personal vehicles is linked to land use changes, congestion, and decline in public transport and bicycles. Some public officials view the bicycle as a cause of road congestion and are trying to “build their way out” of congestion. In the long run this is impossible because of increasing urbanization of the population. Dr. Liu then discussed the evolution of the urban land use pattern in China. Municipalities tend to cover large areas and include the central city and the suburban counties. Traditionally this encouraged a compact form of land use suitable for walking and bicycling. Newer cities like Chungqing, whose urban development is similar to Western cities, are characterized by rapid urban sprawl and declines in overall population density. What are the options available to Chinese cities to deal with motorization? They can build new roads, build or expand a subway system, give priority to public transport, tighten traffic and parking management, and control access to vehicles. Liu noted it is instructive to compare Beijing with Shanghai to see the efficacy of some of these policies. Beijing has over 1.5 million vehicles and a traffic pattern with four circumferential roads. Shanghai has fewer than 600,000 vehicles, one circumferential, a subway, and more extensive control and management of vehicles. By all measures, Shanghai has better control of its vehicle population. Liu said for smaller cities, control of equity and land use change may be easier. There are hundreds of cities in China with populations between 0.2 million and 2 million that will have to confront these changes. He said they should be encouraged to think small, plan carefully, and manage prudently. Automobile ownership is not the same as auto use, and a comparison of the cases of Bangkok, Thailand, and Curitiba, Brazil, can point the way to some effective strategies. Dr. Liu urged the committee to consider two questions: (1) what is a useful definition of “popular family car,” and (2) what would be the impact on world fuel prices if car ownership were to reach 100 million in China. Dr. Liu was asked how motorcycles fit into the equation, since China is the world’s largest producer and user of them. He replied that the contrasting examples of Italy, where motorcycle use is declining, and Taiwan, where it is increasing, show that motorcycles have a deservedly bad safety image. He said motorcycles will not replace cars because they are not good for commuting. Dr. Liu was then asked (1) how China is preparing to control vehicle emissions and (2) how the World Bank and others are lending assistance. He replied that China has adopted “Euro II” standards for air quality. The World Bank will finance vehicle inspection and maintenance facilities, and a non government organization (NGO) will publish the daily pollution level for every city. A committee member asked Dr. Liu for recommendations for a case study, and whether the World Bank has carried out projections of increased motorization in China. Liu said that there were no projections, but he suggested that a look at a smaller city, perhaps in the Pearl River Delta area, would be valuable. Dr. Liu was questioned on his concern about the impact on world fuel prices of a hypothetical 100 million Chinese vehicles when the United States already has twice the number of vehicles. Dr. Liu

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The Future of Personal Transport in China: Summary of a Symposium, January 12, 2001 stated that ownership is different from use, and that second cars are not used as much. Current air quality problem and control strategies for vehicular emissions in China— Professor Shao Min, Center for Environmental Sciences, Beijing University Shao stated that China has long suffered from serious air pollution characterized by high ambient concentrations of SO2 and particles. The reason is that more than 75 percent of China’s primary energy source is coal combustion. Ambient concentrations of SO2 and total suspended particles (TSP) in most big cities are much higher than national air quality standards (NAAQS) and the guidelines of the World Health Organization (WHO). In 1995, total SO2 emissions in China reached 23.7 million tons, and one third of China’s territory suffered from serious regional acid deposition. Since 1980, great efforts have been made to abate SO2 and particles emissions from coal combustion. Ambient SO2 concentrations, especially TSP concentrations, have dropped gradually. However, in the process of economic development within the last two decades, the vehicle population increased dramatically. Pollution from traffic exhaust has worsened in some big cities. In 1995, the total number of vehicles in China was more than 20 million, with an average annual increase rate of 15 percent, and most of the vehicular increments are in mega-cities such as Beijing, Shanghai, and Guangzhou. Pollutants such as NOx, CO, volatile organic compounds (VOCs) and fine particles are emitted in large amounts from vehicles and have deleterious effects on human health and ecosystems. More important, under favorable conditions such as intensive sunlight, low humidity and low wind speed, ambient NOx and VOCs will react and produce oxidants such as ozone and H2O2, creating photochemical smog. These secondary pollutants are more harmful and present great threats to human health and agricultural ecosystems. Shao said photochemical smog will be of increasing importance in next decades in China. Ground-level ozone concentrations are already very high in some big cities, and it is foreseen that this problem will rapidly spread across China as other regions, especially in central and western parts of the country, develop economically. Ozone pollution may become a regional, rather than a local, issue. High levels of oxidants in both urban and rural areas will cause heavy negative impacts on human health and also on agricultural yields, and this is going to be a critical issue for the sustainable development of China. Shao said the major environmental problems of China are water pollution and water shortage, acid deposition, urban pollution, eutrophication of offshore seas, ozone-depleting substances, and global climate change. Historically, the pollution problems are accumulating. In the 1970s the major problem was dust from coal burning. In the 1980s, SO2 and acid rain were added. In the 1990s, concerns also included NOx and greenhouse gases. SO2 concentrations declined in 1990, but even though industrial sources were leveling off, they increased again in 1996 because the pollution from vehicles was rising. The reason was increasing urbanization of the population. The Chinese population is now 70 percent urbanized, but the present growth rate is over thirty percent. The pollution level is growing rapidly, although less so than the gross domestic product (GDP). The corresponding increase in the vehicle population is reflected in an increase in the ratio of SO2 from industry and an increase in the ratio of NOx from exhausts. Shao said particulate matter is also a problem. The PM2.5 index (referring to a certain size of particle) is four to five times higher than the U.S. standrd, but the source is unknown.

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The Future of Personal Transport in China: Summary of a Symposium, January 12, 2001 Dr. Shao next described a United Nations Development Program-funded case study of Guangzhou city. The study includes an air pollution source inventory and measurement of SO2 and NOx,, the latter being the fastest growing component. The study estimates the costs of control and concludes that adoption of Euro I and II standards along with the elimination of older vehicles is necessary to reach the established targets. Dr. Shao concluded by stating that China must not retrace the path of other countries, with its rise and later fall in pollution. It must adopt the appropriate technology to reduce pollution at an early date. Features of Chinese Vehicular fuels—Qiu Yansheng, Deputy Chief Engineer, Research Institute of Petroleum Processing Dr. Qiu described the close relationship between the automotive and petroleum industries and environmental groups in the United States where environmental interests advocate changes in the automotive industry and lead the industry to seek new, cleaner technologies. The most important objective is to reduce emissions. This depends in part on advanced engine design, but advanced engines also require cleaner and more technologically advanced fuels to achieve this objective. China has the tenth greatest crude oil reserves in the world, but these reserves constitute only 2.4 percent of the world’s petroleum reserve; Asia in total has 4 percent of the world supply. By 2010 China will need 270 million to 310 million metric tons (Mt) per year, but it will produce only 170 million to 200 million Mt per year, and it will need to import around 100 million Mt of crude oil to meet the domestic demand. Chinese petroleum has a low content of naphtha, which is needed for gasoline production. Qui noted one of the features of the Chinese petroleum refining industry is that the catalytic cracking capacity is much greater than the capacities for catalytic reforming and catalytic hydrotreating. Chinese gasoline has a high content of olefins and sulfur and a low content of aromatics. In recent years, environmental protection regulations have become more stringent, and consequently, the quality of Chinese fuels has improved markedly. The olefin content of gasoline and the sulfur content of diesel fuel have been reduced. The updating of gasoline and diesel fuel specifications is underway. The highest priorities are to decrease sulfur content and control olefins and aromatics. Chinese industry must improve the catalytic reforming process and install catalytic hydrotreating facilities to produce products with low olefins. China presently produces more diesel fuel than gasoline, most of which is used by agriculture. Fifty percent of the total fuel is used by the transport sector and a third of that is used by automobiles. There are separate specifications for diesel fuels for use in cities. These “SINOPEC” (China Petroleum & Chemical Corporation) specifications are under review, and the cetane number is rising while the limits on sulfur are declining. The new generation of specifications will be based on EU-II of the European Union. Dr. Qiu was asked about new oil exploration. He replied that there is prospecting underway in northeast China and also off shore. Only 30 percent of the known reserves, however, are of low sulfur content. Since 1993, China has been importing oil, especially the Middle East. Most of the imported petroleum is high sulfur, however, and this presents a catalytic problem for the refineries. The next question was about lead content. Dr. Qiu explained that last year China phased out lead additives in gasoline, but some refiners are using small amounts of MMT (methylcyclopentadienyl

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The Future of Personal Transport in China: Summary of a Symposium, January 12, 2001 manganese tricarbonyl, a manganese-based additive) in the blending composition, which has a negative effect on engine performance. Predicting the development of personal vehicles in cities of China—Lu Ximing, Director, Comprehensive Transportation Planning Institute, Shanghai City Lu stated the increasing urbanization of China is putting new demands on the transportation system. At the same time the degree of mobility in Chinese cities is increasing. The number of PUCs exceeds 6 million and taxis exceed 800,000 units. Local governments are putting heavy emphasis on massive infrastructure construction. Even so, traffic is increasing, with a corresponding increase in pollution and decrease in average vehicle speed. The Japanese experience shows that with every ten percent increase in the number of vehicles on a road, average speed declines by one percent. A study was carried out to compare the experiences often cities in different countries, including Los Angeles, Bangkok, Tokyo, Singapore, and Hong Kong. The relation between average speed and emissions level was tested, with low speed signifying high emissions, particularly of particulates and NOx. PUVs exact significant costs on the city. Each vehicle requires 1–1.4 parking berths, or about 40 square meters. In Paris, two-thirds of the available road area is used for parking. Shenzhen has developed a stereotype parking garage that is required for each residence area. PUVs also require a highly efficient transportation management system. Strict traffic management is necessary to keep traffic flowing smoothly. Traffic management must deal with high volume traffic three times a day. In order to keep traffic moving, many cities attempt to cut traffic volumes at peak times and to shift them to off-peak hours by instituting flexible working hours, vehicle pooling, and land use reorganization. The social cost of PUVs high and includes greater energy consumption, environmental damage, and more traffic accidents. Lu explained that in order to prepare for the increase of PUCs, cities have adopted three strategies. Strategy A allows for unlimited numbers of PUCs, using the model of Los Angeles and Bangkok. Strategy B introduces PUCs in a gradual way to maintain a stable situation, as is done in Seoul and Tokyo. Strategy C puts more long-term control on the use of personal cars, drawing on the models of Singapore and Hong Kong. The predicted results of these strategies for China were analyzed by time series modeling and correlation and the experience of the model cities. Some results were: Based on an estimated growth rate of 30 percent per year, the number of PUCs will reach 42 million in 2010. Based on an economic growth rate of 8 percent per year, per capita GDP in cities will increase to $4,000, and PUC ownership per 1,000 population will rise from 10 to 100 vehicles. For the 300 million urban residents, the number of cars will reach 30 millions. Meanwhile the capacity of the roads in China will reach 42 million vehicles. Overall, it is predicted that the number of cars will increase from 3.04 million in 1999 to 30 million-42 million in 2010, with most of the increase being in the cities. The policy options development process will draw on urban planning policies, traffic engineering policies, traffic management policies, and transport services policies. The policy options will have

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The Future of Personal Transport in China: Summary of a Symposium, January 12, 2001 three aims: to allow a rapid growth in the number of PUCs; to enable PUCs to operate effectively; and to achieve a balance between the transport needs and the health of the city. The ultimate objective is sustainable development for the cities of China. Dr. Lu said that in city planning, land use should conform to group type forms along a city’s axial directions in order to increase the utility of PUCs, in long and middle distance travel and reduce centripetal traffic flows. An example is the experience of Tokyo, with its possible application to Guangzhou. For traffic engineering, the aim is to classify roads in terms of function so that road capacity can be optimized. Vehicle operating conditions must be improved and controlled to maintain a reasonable vehicle speed. Singapore and Bangkok will be the models, to be applied in Shanghai, Beijing, Tianjin, Urumqi, and Harbin. He said traffic management plans should seek to adopt intelligent traffic (IT) techniques to divert the traffic flows in real time, to disperse the congested areas, and to assure smooth working of the road network. Seoul is an example to be examined, with applications to Shanghai, Shijiazhuang, Changsha, and Zhaoqin. For transport services, Dr. Lu said a high standard, multi-mode coordinated transport system should be adopted for passenger services in order to create a rational transfer regime between the transit system and PUC users. International examples are Curitiba, Brazil, and Kuala Lumpur, Malaysia, and Beijing, China. Dr. Lu concluded by stating the rapid development of the Chinese economy has brought China rapid urbanization and mobility. An increase in the number of PUCs is an inevitable outcome of these forces. The massive increase in PUCs is placing great pressure on the cities, for which society must pay a cost. Nevertheless, the trend for development of PUCs in China is clear, with a great potential demand that must be met. It is necessary to adopt suitable policies, so that PUCs will play a positive role between urbanization and mobility in sustainable development. During the discussion period, a questioner noted that the best policy seemed to be to get people to purchase cars and then not use them. He asked whether ownership restriction or congestion tolls were under consideration. Dr. Lu noted that use control policies are ad hoc. When traffic volume gets too high, the government considers issuing permits for odd and even day use. But some people park cars outside of the city and thus avoid control. The World Bank has promoted electronic congestion pricing in Singapore and Hong Kong, but in China the car users are a powerful elite, and the political will to limit use is not present. Another questioner asked if public-private partnerships to capitalize road construction had been attempted. Dr. Lu replied that many methods have been attempted. The central government may allow local governments to build highways. Sometimes highways are built and then sold on the stock market. There is a great variety of financing methods for highways, but in urban areas, it is hard to collect revenue from roads, except on toll roads and toll bridges. License fees seem the only option. A questioner noted that road area is increasing as a proportion of city land area, and asked if there is a practical limit. Dr. Lu said that the problem is not the lack of roads but traffic management. Road area per vehicle is comparable with London. But most of the roads are local access. The Chinese government puts emphasis on freeways, but freeway ramps are congested.