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Jul. 27 2010 - 12:23 pm | 52 views | 0 recommendations | 4 comments

Investing in freight rail could help curb climate change

This is extraordinary:

In a study recently presented to the National Academy of Engineering, the Millennium Institute, a nonprofit known for its expertise in energy and environmental modeling, calculated the likely benefits of an expenditure of $250 billion to $500 billion on improved rail infrastructure. It found that such an investment would get 83 percent of all long-haul trucks off the nation’s highways by 2030, while also delivering ample capacity for high-speed passenger rail. If high-traffic rail lines were also electrified and powered in part by renewable energy sources, that investment would reduce the nation’s carbon emission by 39 percent and oil consumption by 15 percent. By moderating the growing cost of logistics, it would also leave the nation’s economy 10 percent larger by 2030 than it would otherwise be.

There’s more over at Reihan Salam’s digs, where he goes into some detail on a new Economist report on the logistical tension between freight and passenger rail investment, but I wanted to focus on the above passage for a moment.

Developing the infrastructure of the future strikes me as a much better idea than crafting legislation which would, in an effort to curb carbon emissions, create a vast, expensive and easily captured trading system for carbon (cap and trade). While the focus has largely been on creating new high-speed rail for passengers, investing in freight rail may be even more important. As fuel costs continue to rise in the coming decades, the cost of goods will be dramatically effected by the increased shipping costs. Laying the rail necessary to improve our freight rail lines would drastically improve our logistical prospects for future generations.

Furthermore, many of the nation’s roads are already overcrowded, and some are becoming dangerously so, a state of affairs exacerbated by the volume trucks on the road. This creates an immediate burden on local infrastructure across the nation that could be alleviated to some degree by increased rail capacity.

Nor are we simply talking about the rail lines themselves. More investment in rail spurs is also necessary if more and more freight is going to start moving this way, as well as technological investments. Many of these investments will need to come from the private sector, but modernizing and expanding the railways themselves can be a smart way to use public dollars to free up rail companies to invest in other areas.

A combination of increased freight and passenger rail makes sense to me in the long haul – certainly as a way to combat climate change, this is a much smarter move than cap and trade since it would use tax dollars to actually create something. America is a big country, and to keep our economy running at full steam, public investment in infrastructure is perhaps one of the best places to spend.

Reihan is concerned that an increased investment in passenger and freight rail capacity would create an unnecessarily high tax burden. This may be true. If I had to pick, at this point I’d say that freight – which is already largely in place – is the right place to start. But I’m a supporter of passenger rail as well. It may not make a huge amount of sense now, but I do see gas prices topping four and five dollars in the not-too-distant future, and as we move in that direction, it wouldn’t hurt to anticipate some of the new infrastructure needs our economy will face as more people turn toward public transportation.

Yes, teleconferencing and the internet can make many workplaces ‘virtual’ and can keep many commuters off the road entirely, but much of the future’s service economy will be unable to telecommute.  For much of the economy, driving to work – or taking the bus or train – will still be necessary.


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  1. collapse expand

    The externalities of not investing in increased rail capacity seem to be comprehensively negative. Investment will occur, if not in rail, then in new roads, bridges and regulatory expansion to enhance commercial trucking. The push for a dysfunctional cap and trade system will gain momentum. GDP will decline due to the inefficiencies of our energy consumption and the larger income share consumed there-in. The ability of the US to deal with other pressing problems will be impaired by the implied revenue loss due to declining GDP. A rail investment on a par with a failed stimulus plan that would grow GDP by 10% seems like a bargain. Throw in the energy and carbon benefits and rail expansion becomes a no-brainer.

  2. collapse expand

    “the cost of goods will be dramatically affected by increased shipping costs.”

    Have you an idea what the cost is of shipping against the value of say a truckload of running shoes? About 2%. Of that 2%, the fuel factor would be about 10-15%. So what we’re talking about here is a factor of 0.3% of the value of a consignment.

    Even if fuel doubles over the next few years, you’re only looking at a factor of less than 1% of the value of the goods.

    The truth is the cost of shipping has little bearing on what you pay in the stores to buy the goods. Higher fuel costs has been used as an excuse by slick companies to get the public to buy into higher prices. But it is not a significant factor in the cost of goods.

    • collapse expand

      The running shoe example aside, the cost of some goods will in fact be dramatically affected. One example that I am very familiar with in the automotive business: Steel is trucked from a fully integrated or mini mill to a primary former, who hot forms the specialty metal into a rough shape and trucks the material to a finishing plant, that further processes the prismatic shape into a near net shape substrate with target properties and trucks the substrate to to a machine shop, that creates the mechanical part that is trucked to the assembly plant, that builds the car or truck, that is trucked to dealerships.
      RT. 80 that crosses Pennsylvania from East to West is a treacherous sluice of rambling tractor trailers that congest the road, beat the shit out of it, and burn enormous amounts of fuel by the minute.
      This is a fantastic idea. The Northeast needs high speed passenger rail badly, too.
      Besides: Warren Buffet saw this coming and got in on he ground floor. That’s a pretty solid forward indicator of business potential and things to come.

      In response to another comment. See in context »
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