Report No. 70290-ge
Introduction: Framing the Policy Questions
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- What is the Rationale for Green Transportation
Introduction: Framing the Policy QuestionsWhat is Green Transportation?The Government of Georgia is considering options for reducing fossil fuel imports in favor of introducing large scale use of domestic energy sources for public and private transportation. However, this must be considered within the overall context of green transportation—which would generate benefits well beyond the substitution of fossil fuels with domestic energy sources. The concept of green transportation has emerged in response to growing concerns about climate change; typically this refers to a transportation system characterized by low carbon emissions, i.e., green house gasses (GHG). In the context of Georgia, two other important development issues in green transportation in addition to GHG emissions are fossil fuel consumption and air pollution. For the purpose of this study, therefore, green transportation in Georgia refers to reducing the intensity of fossil fuel use and increasing reliance on indigenous energy sources (mainly hydropower), as well as minimizing adverse impacts on the global and local environment through reduced emissions of GHG and local pollutants. Greening transportation would create “co-benefits”: (i) reducing fossil fuel use would help improve the balance of trade and energy security; and (ii) employing measures to avoid unnecessary trips and using fewer vehicles for the same number of trips (i.e., public transportation) would reduce traffic congestion on the road network, particularly in urban areas.
What is the Rationale for Green Transportation?Role of the Transport Sector in Georgia’s Growth Developing transport infrastructure and services is essential to realize Georgia’s growth potential. Improved transport and services would support development of sectors that are key to national economic growthexports, tourism, and agriculture. Well-developed transport infrastructure and services would: (i) improve the competitiveness of Georgian goods; (ii) lower prices for Georgian consumers; (iii) strengthen Georgia’s position as an international transshipment country for the region; (iv) improve access to tourism destinations; (v) improve regional integration; and (vi) enhance rural communities’ access to markets and social services. Access to and affordability of transport services would foster transformational changes of the Georgian economy. Increasing transport sector efficiency helps create jobs and improve job quality, and generates productivity increases in agriculture, manufacturing and the services sector. This relates not only to market prices for transport services, but also to travel times, reliability and quality of transport services, and a connectivity between the different service providers. Low transport costs, which can be attained by well-developed infrastructure and competitive transport services, will help generate jobs and gradually improve productivity, first in agriculture and increasingly in manufacturing and in high-value services. Government has long recognized the importance of upgrading national transport infrastructure to international standards of serviceability and has allocated substantial public resources for this. In 2011 more than 50 percent of Government’s total planned capital investment was allocated for transport infrastructure or about 580 million GEL out of about 1.0 billion GEL (including donor funding). However, to achieve the goals of improving local industries’ competitiveness and achieving long-term sustainable economic growth, Government must also invest in the modernization of transport services. Balance of Trade and Energy Security
Catalyst for Service Sector Development Increasing international trade in the region provides opportunities for Georgia’s transport sector to increase national foreign currency earnings. According to the statistics for international trade in services, transport services, including deflated values of freight and passenger transport, account for more than 50 percent of Georgia’s commercial services exports. The tourism sector, a key service industry in Georgia, critically depends on improving transport connectivity and developing efficient transport services. Recently, tourist numbers have expanded rapidlyup about 45 percent during January-June 2011 over the same period in 2010. Tourism sector annual export value reached almost US$500 million by end-2010, or about 4.0 percent of GDP. New developments for the sector are ongoing throughout Georgia, which calls for more transport infrastructure development to provide reliable and high-quality transport services at lower costs. Potential for Increasing Hydropower Generation Greening transportation would provide an opportunity to utilize national hydropower potential more efficiently for economic growth. Georgia exports hydro-generated electricity and has potential to expand existing capacity, which supplies about 90 percent of total national electricity needs (Figure 2) and is estimated to be only 23 percent of the economically feasible potential of 32 TWh. However hydro-generated electricity supply is seasonal; during summerhigh seasongeneration is about 160 percent of domestic demand and part of the surplus—now about 1 TWh—is exported, mainly to Turkey. During the winter season, supply shortages are supplemented by thermal generation and an electricity-swap with Turkey. In the longer-term, Government aspires to meet Georgia’s electricity demand solely from hydropower and to increase exports of excess supply. To achieve this, five hydropower plants are now under construction and contracts have been signed for another 16. An additional 20 new plants under consideration would increase electricity generation capacity by about 3000 MW. This increased capacity, plus the future completion of transmission grids, led to Government expectations of being able to increase electricity exports to Turkey by as much as 10 to 15 times current levels. Electricity production from hydropower sources has gradually increased and makes up about 86 percent of total production, but this has not led to reduced dependence on imported energy. Instead, the share of imported energy in overall energy use has increased and reached almost 70 percent of all energy use before the financial crisis.CITATION Gla08 \n \t \l 1033
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