Public transport and getting what you pay for

Carbon News asked me about the government's proposed shake-up around council public transport options. The government figures having councils run bus services again, rather than contracting out for them, would reduce national net emissions while getting better bus service.

They're nuts. But the union isn't nuts for supporting it. They'll probably do well out of going back to council monopolies. 

But will the plans – which could see most public transport back in public hands after a decade-old experiment in privatisation – deliver the promised reductions in carbon emissions?

The response from the NZ Initiative’s chief economist Eric Crampton is as predictable as it consistent: transport is covered by the ETS and therefore the proposals will make virtually no difference to overall emissions.

“Because transport is covered in the Emissions Trading Scheme, bus operators, whether Council- or privately owned, have plenty of incentive to weigh up whether to provide electric or diesel busses,” Crampton says.

“An all-electric bus fleet would simply free up emission credits for others to purchase and use instead.”

Former IPCC lead author and Massey University emeritus professor of energy and climate mitigation, Ralph Sims, on the other hand, says the ETS has done nothing to encourage public transport use to date and there’s nothing to suggest that it’s likely to have much impact in the future.

Yeah, this is one of those "We're all part of the equilibrium" days. If carbon prices going up to $200/tonne (or whatever it gets to) as the ETS cap drops on the path to net zero doesn't encourage flips to public transit, that is perfectly fine. The cap limits net emissions. It finds the most cost-effective ways of mitigating net emissions. We don't have a public transit maximand, we have a net emissions target. I'd expect, with fuel being maybe $0.30-$0.40 more expensive, some folks would flip to public transit. But the binding cap binds regardless. If they don't, that just means emissions reductions in other spots are more cost effective, so the emission reductions happen there instead.

I swear these people have a billion non-carbon objectives and then damn the ETS for not achieving them. 

And they've fundamentally misdiagnosed the problem, mainly because they just hate private provision through contracting of stuff they think should be provided by government or councils.

And that’s a point of view echoed by the NZ Initiative’s Eric Crampton. 

“People should not get their hopes up that councils taking over bus services will improve outcomes. While there have been obvious deficiencies in service in some places, the problem is not that some bus services are privately owned and operated. The problem rather is that councils have gotten exactly what they have paid for. Councils set contracts with fairly low penalties for missed or cancelled services.

"To win tenders, given council specifications, bus operators ran lean staffing models. Avoiding cancelled services means having enough drivers on staff to provide coverage even if many drivers are out sick or on leave. If Council had wanted fewer missed services, it would have had to set greater penalties for missed services. But it would have had to pay bus operators more to provide the service,” Crampton says.

If there's poor quality service, don't blame the private bus operator. Blame the terms of the tender for service. If council wanted frequent, reliable, non-cancelled, luxury services, they could have contracted for that. But it would have been really expensive. The costs would have been transparent. 

All kinds of worthy-sounding things could have been included in a contract for service:

• Reliable, frequent, non-cancelled services. How? Set a large penalty for missed stops and cancelled services. But the operator would demand to be paid a lot to run the route. A thin staffing model wouldn't have worked.
• Cleaner, more environmentally friendly buses. How? Require that every one of them pass an emissions test (SOx, PM 2.5) every four months (or whatever interval). But the operator would demand to be paid more to run the route, because they might have to upgrade the fleet to meet those requirements. 

Shifting it over to council owner-operators will mean either far higher and more opaque cost, or worse service, and probably greater risk of transit strikes where unions see councils as pushovers. A private bus operator is using its own money. Councils use ratepayers' money. And know what's something that encourages people to keep a car that they might not otherwise need? Threat of transit strikes. 

The few things not currently stupid and broken are being broken.