Delivering Sustainably

The NSW Government must achieve more sustainable and equitable transport funding, and set future directions to support emissions reduction and mitigate significant weather events.

This chapter examines how we will deliver a transport system in a fiscally and environmentally sustainable manner, through:

  • Moving towards sustainability
  • Sustainable and equitable transport funding
  • Striking the balance between user contributions and taxpayer subsidies
  • A continued focus on spending efficiency
  • Transport's role in working towards environmental sustainability
  • Securing energy reliability and affordability
  • Managing a resilient transport system

Moving towards sustainability

Decisions we make today will build a future system that is sustainable and affordable for both customers and the community

Funding our network now and in the future

Greater financial sustainability in transport will help us deliver a modern network that is affordable for both customers and taxpayers. This is essential to deliver the transport services and ongoing improvements customers expect..

Today, the overall cost recovery from public transport users is 21.3 per cent[14], based on revenue from customers and the cost to government of providing services.

Transport for NSW is continuing to grow its asset base with over $50 billion worth of construction planned over the next ten years on our $119 billion network. This will mean significantly higher whole of life costs for the transport network - capital, operating, maintenance and disposal.

To achieve a financially sustainable network we will need to factor critical whole-of-life considerations into all transport decisions including the balance of investment and cost recovery; access, affordability and equity; better land use outcomes and reduced impact on the environment.

Transport's role in environmental sustainability

The transport sector, particularly private cars, contributes significantly to greenhouse gas emissions and it is important that we work with industry to achieve reductions in emissions.

Transport has a significant role in contributing to a more environmentally sustainable community by providing travel that is more efficient, productive, quieter and cleaner compared to private car use - public and active transport.

The Future Transport strategy aims to increase the mode share of public transport services and reduce the use of single occupant vehicles. Apart from reducing emissions through more efficient shared vehicles, this will also have positive benefits for congestion.

The Strategy also aims to work with industry to encourage the take up of Electric and Hybrid vehicles and other more fuel efficient vehicles.

We are also considering how active transport can play more of a role in our everyday journeys through providing better facilities and a more extensive network of bicycle paths and safer networks for cyclists and pedestrians where they share road space with vehicles.

Sustainable and equitable transport funding

There has for many years been a difference between who pays for investment in the network and those who directly benefit from using the network

The cost to the community is growing

Since 2012, the level of taxpayer funding to transport has increased on average by 4.5 per cent per annum and is anticipated to reach $5.7 billion per annum by 2026 ($2 billion above today’s level). This is despite efficiency initiatives that have reduced operating costs by more than $1 billion since 2011. To maintain current levels of transport investment we will need to make greater efficiency savings and identify new revenue sources.

In the future, a slower rate of NSW and Federal Government revenue growth is expected to occur, impacting the Government’s resources for service provision. This is in part a result of the ageing population, which reduces workforce participation, lowers taxation revenue growth and contributes to increasing pressures on other sectors, particularly health.

In addition, transport operational expenses are projected to be the third largest component of the growth in the NSW Government’s expenditure for services. Continued increases in funding requirements for transport will compete with the need to resource other vital services such as education and health.

Striking a fair balance on who pays

Improved network efficiency delivers more economic productivity for land and business owners through better access to markets and a more efficient supply chain. Direct users are also key beneficiaries through improved service levels, shorter journey times and safer systems.

Taxpayers who do not directly benefit from transport investments still contribute to the costs of the network. This is because public transport services deliver wider economic, health and environmental benefits to the community. While such benefits do justify a level of taxpayer funding, the imbalance between those who directly benefit from transport investments and those who pay for them should be considered and addressed.

Alternative sources of funding and approaches to service delivery need to be explored as part of delivering a sustainable funding model.

Striking the balance between user contribution and taxpayer subsidies

Sources of revenue for transport funding are limited and the funding available from those sources is constrained

Patronage is growing, but revenues are in long term decline

Public transport fares in NSW are regulated by the Independent Pricing and Regulatory Tribunal (IPART), which limits the amount fares can increase within a given year. The Government does not always increase fares to the amount allowed by IPART.

Sydney public transport fares are relatively low compared to other jurisdictions. Fare rates in London and Munich are more than double compared to Sydney. Brisbane, Milan and Chicago are up to 20 per cent higher, depending on the distance travelled.

While most recent figures show an increase of 7 per cent in passenger revenue and patronage, over the long term fare box recovery has decreased even as patronage grow and as services and customer satisfaction improve.

For example, cost recovery for rail has been in long term decline from around 50 per cent in the early 2000s to less than 20 per cent today.

Other jurisdictions have set specific targets for fare-box recovery. For example, Chicago’s target fare-box recovery is 50 per cent, whilst Singapore and London’s target is 100 per cent. London has set a long-term price path to reach this target over the period of a decade, increasing fares by CPI plus 1 per cent each year.

Sources of revenue from roads may also be impacted by the introduction of connected and automated vehicles (CAVs) and a move to car-sharing. Additionally, funding from federal sources for roads may also be at risk with Commonwealth fuel excise revenue declining from $13.5 billion in 1997-98 to $11 billion in 2014-15.

Sources of other revenue are constrained

Transport for NSW works with public transport asset managers to grow revenue from third party sources such as advertising on assets, retail leasing and customised number plates. These activities provide a useful supplement that can offset operating costs by a couple of percentage points. 

There are also opportunities to fund new and expanded interchanges and stations through developments of airspace on the transport estate, and by playing a more active role in transport-led development.

While a commercial approach will be taken to leveraging these opportunities to finance costs by finding third party sources of funding, this will not materially change the nature of the long term funding challenges the transport system faces. 

Future directions to investigate

NSW will establish funding arrangements for transport infrastructure and services that strike a balance between taxpayer contributions and the beneficiaries of these investments, to create a financially stable and equitable network.

  • Monitor cost recovery levels and review measureable service quality and quantity improvements
  • Identify balanced beneficiary models including value sharing and developer contributions aligned with improved land use planning
  • Investigate road network access charges for commercial users with revenue hypothecated for related network improvements
  • Identify supplementary sources of revenue across the portfolio including commercial revenues through internal advertising, commercial leasing and airspace use, particularly at new interchanges.

A case for value sharing

Sometimes known as value capture, value sharing is the process of identifying and quantifying the higher economic productivity and higher land values created as a result of Government planning decisions and infrastructure investments.

  • This process seeks to share value with those who have benefited from the decisions and investments Government makes.

  • When new or upgraded infrastructure is provided in an area, increases in local land values can reflect the market’s willingness to pay for the benefits catalysed by the investment.

  • Value sharing enables the Government, as the funder of the infrastructure, to share in the market uplift in value which can be immediate, or may take time to be realised.

  • Implementing a value sharing approach to some of the initiatives and planning decisions outlined in Future Transport 2056 has the potential to deliver the following benefits:

    • Unlocking new funding and financing options to make economically beneficial infrastructure more affordable;

    • Spreading the costs of new infrastructure more equitably among its beneficiaries;

    • Providing the opportunity to secure funding which contributes to the protection of long-term major infrastructure corridors.

  • Value sharing can take many forms, and the available options will vary depending on the particular circumstances of the infrastructure being provided.

  • The NSW Government will continue to assess opportunities for value sharing as investment projects are developed.

A continued focus on spending efficiency

We need greater efficiency to meet the increases in operational costs and our significant investment program

Operational and maintenance costs are continuing to grow as our transport network expands, and becomes safer and more efficient. As an indication, operating costs have grown at 3.4 percent on average over the last five years, against average growth CPI in the period June 2011 – June 2016 of 1.8 percent.

Fuel is a significant portion of the cost of operating transport services. This means we will have to continue to evaluate the fleet seeking alternatives that are more environmentally and financially sustainable.

We are continuing to drive efficiencies across the transport cluster when it comes to operating practices. However, as service levels increase and new assets such as Sydney Metro and the new Sydney CBD and South East Light Rail come into service, these costs are expected to continue increasing above CPI in the short to medium term.

In addition to operational costs, we are constantly improving the network for our customers, with public transport capital investment growing at 13 percent each year on average since 2012. A total of $32 billion has been invested in the network over the last five years, with more than $50 billion planned for the next ten years.

There are significant challenges ahead for maintaining and enhancing the transport system, including:

  • Addressing the road maintenance backlog reported by the Audit Office as $5.3 billion (June 2015)
  • Upgrading existing transport infrastructure to enable new technologies that support a ‘smart’ network’ that optimises traffic flow, enhances maintenance regimes to extend asset lives and creates a universally accessible system
  • Meeting the increasing demand for services resulting from a growing and ageing population

A growing burden on the NSW taxpayer means the transport system will need to be funded in an efficient, sustainable and equitable way, to ensure our investments provide value for money for the whole community now and for generations to come.

Future directions to investigate

NSW will consider options to recover more of what we spend and keep our spending efficient as we build, manage and operate the network.

  • Introduce commercial approaches to asset ownership that involve a greater level of scrutiny of funding arrangements and tighter budgeting, performance and efficiency targets and cost constraints
  • Ensure that in making all future capital investment decisions we consider and pursue opportunities to deliver commercial returns on new assets beyond their core transportation uses
  • Improve capital investment and upgrading practices to reduce whole of life costs
  • Continued transition to partnering and service commissioning models for delivery of services
  • Inclusion of tangible targets and benchmarks in planning, construction, operation and maintenance contracts

Transport’s role in working towards environmental sustainability

Decisions we make today will build a future system that supports the liveability and sustainability of our communities

Public and active transport lower environmental impacts

Addressing the environmental sustainability of the transport system is essential to minimise direct and indirect impacts on the natural environment. Direct impacts include noise, waste and urban stormwater runoff. Indirect impacts include air pollution, reduced liveability of urban environments and the environmental impacts of materials used by the transport system.

To minimise the impact of the transport network, all investments across the transport cluster will improve the resilience of the network in a changing climate and support the NSW Government’s aspirational target to achieve net-zero GHG emissions by 2050.

New technologies that deliver vehicle efficiencies are expected to reduce emissions over time. Future Transport places government in a position to work with industry to encourage the take up of these technologies, particularly electric vehicles.

Improving the accessibility and attractiveness of public transport also has significant potential to reduce GHG emissions and road congestion.

There is an opportunity to consider innovative and creative ways to encourage greater use of active and public transport. This would reduce the amount of vehicle kilometres travelled per person, which in turn would reduce the carbon intensity of each trip. Essential to this will be reducing private passenger vehicle trips, which produce ten times more GHG emissions than rail and light rail, and thirty times more GHG emissions than buses in NSW. 

To encourage more people out of their cars we need to make public transport, walking and cycling more attractive options. This will include designing infrastructure that better caters to customers’ needs, improving the amenity and comfort of public transport vehicles and providing fast and frequent connections to the places people want to go. It will also include the provision of a safe system that allows pedestrians and cyclists to confidently travel the network.

Securing energy reliability and affordability

Uncertainty around energy supply and future energy costs are long term risks to the transport network

A transport sector with reduced emissions

As we build more infrastructure and increase service levels to meet demand over the next 40 years, our energy requirements will continue to grow.

Over the same time period, the NSW Government is working towards achieving a target of net-zero emissions by 2050. To meet this target, while meeting increasing energy requirements, we will need to rethink how we power transport.

Today, transport energy consumption is dominated by non-renewable coal-fired electricity and petroleum fuels, which create GHG emissions. The transport sector is a major contributor to GHG emissions in NSW, and these emissions are growing.

Effective policies and programs are needed to provide information, tools and incentives for businesses and consumers to switch to cleaner and more fuel-efficient vehicles, reducing emissions and generating positive health impacts due to improved air quality.

A current Transport for NSW initiative is participating in the whole of government program to embed climate change in government decision making. This is evidenced by Sydney Metro’s Sustainability Strategy for the North West Metro which commits to offsetting 100% of electricity needs during the operational phase of the project, and 20% during the construction phase.

Sydney Metro City and Southwest Sustainability Strategy also commits offsetting 100% of GHG associated with operational electricity. This commitment is being progressed via the procurement of electricity from a new renewable energy source.

In addition, Transport for NSW’s Sustainable Design Guidelines require:

  • All projects with a Capital Expenditure greater than $15 million to reduce construction related GHG emissions by a minimum 5% from the project baseline GHG footprint which is established using the Carbon Estimate and Reporting Tool.
  • Buildings to be designed and built to reduce energy consumption.

Future directions to investigate

The NSW Government has an objective to achieve net-zero emissions by 2050.

  • Encourage a shift from private car use to public transport
  • Promote low emission vehicles
  • Transition to a cost-effective, low emission energy supply, using power purchase procurement to increase renewable energy mix
  • Work with industry partners on new fuel efficient vehicle technologies and transition to a low emissions passenger vehicle fleet

Managing a resilient transport system

Transport assets have long economic lives and are vulnerable to the direct impacts of climate change

Preparing for extreme weather events

In June 2016, weather events along the NSW coast caused widespread rainfall, damaging winds, and flash flooding, and many roads, bridges and wharfs were significantly damaged as a result. The Insurance Council of Australia estimated costs from this event to be in excess of $304 million.

Severe weather could increasingly impact the environment and communities in every part of the state, including transport infrastructure and services essential in moving people and goods around NSW.

To maintain a reliable transport system and meet passenger and freight needs, weather related risks to transport assets and services and interdependencies of other types of transport, energy, water and telecommunications infrastructure need to be understood and managed.

[1] Full fuel cycle refers to emissions resulting from end-use energy consumption plus those resulting from feed stock extraction and refining, power generation and energy distribution.

To maintain a reliable transport system and meet passenger and freight needs, weather related risks to transport assets and services and interdependencies of other types of transport, energy, water and telecommunications infrastructure need to be understood and managed. 

Future directions to investigate

NSW will ensure the transport network is more resilient to significant weather events in an unpredictable climate.

  • Identify and quantify the probabilities of significant weather events and other impacts on transport, to determine a risk profile for existing and planned infrastructure assets
  • Continue to work with the Office of Emergency Management (OEM) on State Level Emergency Risk Assessments as well as mitigation, prevention, preparedness, response and recovery activities
  • Identify the interdependencies amongst transport, water, energy and telecommunications infrastructure during significant weather events, to inform future asset management and emergency response

Develop a model to illustrate the effect of extreme weather events to inform planning and asset design.