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22 the public. Great care must be taken to ensure that any subsi- between two points is by sea. Nevertheless, the area where dized program has the necessary business foundation to have Europeans have been least successful is in shifting domestic a reasonable chance of being successful. freight (defined as between two EU member countries) between The Congestion Mitigation and Air Quality Improvement two points over the open ocean. The dominance of trucking Program (CMAQ) is often mentioned as a potential mecha- for intra-European domestic cargoes is still relatively fixed, nism for funding NAMH projects. CMAQ is a federal program despite an environment in which there are high road costs, that provides funds to state departments of transportation, high levels of congestion, and a freight rail system that is, in metropolitan planning organizations, and transit agencies many instances, not competitive. The average speed of freight to invest in projects that reduce criteria air pollutants regu- transport moving within Europe over rail was recently esti- lated from transportation-related sources. Funding is avail- mated at 17 km/h. (22) These conditions should make the able for areas that do not meet the National Ambient Air European marketplace generally more favorable to marine Quality Standards (nonattainment areas) as well as former highway development than is the United States. nonattainment areas that are now in compliance (maintenance As of 2006, the share of EU inland freight transport handled areas). Several ports have used this source for surface trans- by road stood at 73%, an increase of 3% from 2000 to 2006. portation improvements in their areas. The Albany Express (23) By 2006, the share of inland waterway transport had fallen service (now defunct), the Red Hook container barge service in to 5% of total EU ton-miles. Germany and the Netherlands New York/New Jersey, and the 64 Express container-on-barge accounted for 77% of inland waterway ton-miles. Rail stood service on the James River have received CMAQ funding. at 17% of ton-miles. Lost in these aggregate statistics is the seg- Although its overall utility in creating viable corridors regation of containerized versus non-containerized cargoes; may be limited, CMAQ has the potential to become a good nevertheless, it is clear that when the total freight picture is source of assistance, primarily for intra-state moves (such examined, trucks play a dominant role. as the Albany Express and the 64 Express). The problem is Within the EU, several large countries are even less diver- that for movements between nonattainment areas or between sified. For example, in Spain alternative modes make up less one area that is in attainment and one that is not, the total than 10% of total inland freight shipments. In Italy, the per- benefit is reduced since only the benefits that occur within centage is also approximately 10%. At the same time, some the boundaries of a nonattainment zone may be considered. EU countries have a higher percentage of rail transport than Furthermore, it becomes extremely difficult to decide what does the United States. In Poland, for example, one-third of the benefits are, who receives the benefits, and who should total ton-km is by rail. Other former Eastern Bloc countries pay the costs. within the EU show a high percentage of rail shipment, par- Finally, there is a growing debate over the feasibility of using tially a legacy of the rail-centric Soviet planning model that surface transportation funds for marine highway projects-- steered these nations for decades. specifically, those that mitigate or solve a surface transporta- The European definition of "short sea shipping" or "marine tion issue. This debate is in its early stages, but it seems to be highways" includes feedering of international cargo. Within gaining attention. Europe, there has been a debate as to whether the definition should be narrowed to include only "domestic" intra-European services, yet for many of the feeder services that currently uti- The European Experience lize water a land-based alternative would be possible (though It is well known that European development of marine not desirable). Therefore, it is logical for purposes of compar- highway options has a longer history than those in the United ison to classify the European feedering strings as legitimate States. The use of inland barging for container operations has "short sea" operations. While the total modal share for inland long constituted a significant share of the total modal split transport has been relatively fixed in recent years, impressive for the extended hinterland of Rotterdam and Antwerp. The growth rates for SSS of containers have been realized in many hub-and-spoke network for intra-European deliveries is more EU member states. Between 2002 and 2007, Belgium recorded advanced, with small container vessels delivering containerized the highest growth rate in SSS of containers with a 23.8% cargo from major port hubs to secondary ports. Finally, there average annual rate of growth, almost all of which is tied to is a system of hybrid passenger and freight ferry networks the Port of Antwerp. Denmark also saw impressive double- that moves trailer freight between different coastal locations digit annual growth in containerized traffic during this period. throughout the continent. France, which has historically made less use of the marine high- In general, the geography of Western Europe is ideally suited way network than the nations of Northern Europe, has never- for maritime activity given that the vast majority of the popu- theless seen robust annual growth of 7.6%, and in 2007 moved lation lives near navigable waterways. Europe's unique coast- 1.4 million TEU by short sea--a volume roughly equivalent line creates many port pairs in which the shortest distance to that of the Port of Houston. France's self-reported short

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23 sea volume in 2007 was higher than Belgium's in 2002. (24) ficulties in switching cargo to rail are exacerbated by the fact Growth in barge traffic from the Port of Rotterdam has slowed that the freight rail network, dedicated mostly to passenger in recent years. For this reason, the port is taking steps to ensure transport, has in general not served as a realistic option for a that users of its future terminal expansion, Maasvlatke 2, meet large enough pool of shippers. Most origin-destination dis- a higher target for non-road alternatives. tances for rail shipments are too short to be attractive minus Thus, the European situation can be described as successful outside subsidies. in achieving a somewhat diverse modal balance, yet far from The Marco Polo program is another EU effort to stimulate the goal of dislodging the dominance of trucking for internal modal shifts for freight transportation. By subsidizing the cost movements. In the last decade, the EU made the strategic deci- of initiating certain actions that will lead to a modal shift, the sion to invest in Motorways of the Sea (MoS), a series of start- EU is hoping to encourage more rail and waterborne freight up grants for new water corridors that would be a part of the transportation. Another program with potential applicability Trans-European Transport Network (TEN-T) and interline to the North American marketplace is Italy's Ecobonus pro- with established rail and inland waterway networks. The goal gram. This program subsidizes truckers who shift freight from is to achieve the same level of success for cargo that currently a heavily congested highway corridor to a marine corridor. moves overland by truck in coastal corridors that has been Figure 10 summarizes the three major EU efforts to achieve realized from inland barging and international short sea feed- a modal shift for freight transportation. ering. The concept is in its early stages and has not yet been The MoS program has been slow in developing. Despite sufficient to create a paradigm shift in modal choice. The dif- the fact that the initiative was announced several years ago, the Profile of European Transport Programs Marco Polo and Marco Polo II Marco Polo is the European Union's funding program for projects that shift freight transport from the road to sea, rail, and inland waterways. This means fewer trucks on the road and thus less congestion, less pollution, and more reliable and efficient transport of goods. The current, second Marco Polo Program runs from 20072013 and is a continuation of the first Marco Polo Program, which ran from 20032006. Source: Marco Polo: New Ways to a Green Program Ecobonus Program The Ecobonus Program is an Italian initiative that provides a direct subsidy to truck companies that elect to use marine alternatives for heavily congested corridors. The program has recently been suggested as a European best practice that could be implemented in other markets. The formal ecobonus program was launched by Italy in 2007. There are 28 eligible routes within Italy and an additional 11 international routes that have been proposed. Sources: "Italian Ecobonus Is Working", Lloyd's List, Accessed: October 30, 2009. "Ecobonus Extension Critical to Motorways of the Sea Success," Lloyd's List, October 27, 2009. Motorways of the Sea The trans-European network of motorways of the sea is intended to concentrate flows of freight on sea-based logistical routes in such a way as to improve existing maritime links or to establish new viable, regular, and frequent maritime links for the transport of goods between member states so as to reduce road congestion and/or improve access to peripheral and island regions and states. Motorways of the sea should not exclude the combined transport of persons and goods, provided that freight is predominant. Source: "Notification of an Open Call for Tender for Motorways of the Sea Projects in the North Sea Region. 20092013 ANNEX 1: Article 12a of the TEN-T guidelines" Publication date: November 9, 2009. _tender_ns_mos_2009_2013.pdf Figure 10. European modal shift incentive programs.

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24 first grants were issued in 2009. Development of the program marine transport, fisheries, and tourism. Like MoS, the inte- has been complicated by the fact that in order to be eligible for grated policy is regionalized within each sea basin (i.e., the funding, projects have to involve more than one member state North Sea or the Mediterranean). The European Committee (e.g., the connection between the northern coast of Spain and of the Regions (CoR) recently made a series of recommenda- France). Because the planning behind these projects has taken tions regarding European community (EC) maritime policy, so long, enthusiasm for launching them in the midst of the including freight investment policy. With regard to the MoS recession is tepid. Due to the reduction in economic activity program, the committee stated it would "like to see a more within Europe, and an associated drop in congestion, it is ambitious, comprehensive assessment of the type of opera- unlikely that the new MoS Program will achieve the modal shift tions and investment eligible for European subsidies, given goals, at least initially, that were envisioned when these cor- that the measures taken in recent years have not achieved the ridors were first proposed earlier in the decade. (25) Adding expected results, especially with regard to the short-term via- to the difficulty in predicting modal shift within Europe has bility of services." (29, p. 65) been the willingness of the trucking industry to accept less More specifically, France has recently recommended to the favorable working conditions in order to secure employment. European Commission a modification of the rules governing Therefore, assumptions that truckers would effectively cede investment in MoS in order to allow national governments to marginally profitable routes to short sea operators will need take a more direct role in purchasing and controlling vessels for to be reexamined. use in the motorways. The government of France argues that In certain established markets, SSS functions quite well. the current EU-directed pattern of incentives is not robust Shipments between Baltic countries, such as Lithuania, Esto- enough, and direct state support would be more effective in nia, Latvia, and the northwestern corner of Russia, are gener- creating and directing a fleet of short sea vessels. The French ally seen as a success story. It is interesting to note that the approach would allow national governments to finance and situation for shipping between the Port of Riga, for example, fully or partially own vessels. (30) This would clearly change and the Scandinavian countries is not fundamentally different the level of state involvement in MoS policy, as compared from shipping between the northern coast of Spain and France. with the current framework. Given the different characteris- Yet, while the former has been a great success, there has been tics of marine highway utilization around the EU, there is def- very little modal shift to water for proposed routes connect- initely an argument to be made for differentiating the strategy ing secondary ports in northern Spain with their equivalents of investment based upon national need, particularly for the in France. (26) Lowering trans-Pyrenean traffic has been a larger states. Conversely, direct state aid and ownership by one major priority for Spain and France. Each has agreed to invest member has the possibility of upsetting the balance if other 630 million for the establishment of two new MoS lines, the member states abstain from direct funding. In addition to first between the French port of Nantes-Saint Nazaire and the vessels, the French proposal also recommends a modification Spanish port of Gijon, and the second linking Nantes-Saint of the Marco Polo Program to allow states to provide "eco- Nazaire in France with Le Havre and the Spanish port of Vigo. bonuses" directly to shippers or transportation providers who (27) Two models are used for this service, one in which elect to use marine alternatives. The eco-bonus proposal is the driver parks the trailer and a second in which the trac- similar to an Italian initiative that has been viewed as a model. tor and the driver ride along. Ship capacity will vary from None of the initiatives that subsidize freight modal shift 300520 TEU. Payback provisions to the participating govern- has been completely without controversy. One of the key ments, should either of the lines become profitable, have been challenges within Europe is that there are so many preexist- incorporated. Also, at the time of this report, Spain and Italy ing services that already resemble MoS yet do not receive sub- were in the final negotiation stages for a designation of MoS sidies. With the collapse of shipping volumes that occurred routes. The target mode shift from the Italian/Spanish initia- during the 20082009 economic crisis, several of these pre- tive is to remove 400,000 trucks over the next two years. (28) existing services expressed the opinion that EC aid to the Each region within the European Union is currently devel- Marco Polo grant program and the MoS further weakened oping its own MoS Program consistent with the overall their business model and threatened to push existing services TEN-T plan. As an example, the East Mediterranean MoS out of business. If this were to occur, it could ironically divert coalition was formed in 2007 in order to establish guide- cargo to trucking. As an example, the Grandi Navi Veloci freight lines for investment. One of the first goals was to establish ferry service has launched a complaint against the Euro- the patterns of freight movements and future trends to iden- pean Commission for funding a BarcelonaLivorno service tify divertible flows. that serves essentially the same market as its preexisting MoS is seen as a component, not only of integrated trans- BarcelonaGenoa service. (31) port policy, but also of an integrated EU maritime policy that If the economic crisis in Europe persists, it is possible that would balance the demands and impacts of freight, passenger future funding schemes will endeavor not only to shift truck