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The U.S. Transport Sector Is Moving in the Opposite Direction from Other National and International Efficiency Trends
The results are in, and the U.S. transport sector is bucking the trends. While the United States is becoming more energy efficient across its economy, including in manufacturing and services, one sector is moving in the other direction: the transport sector. As reported in a recent study of the International Energy Agency (IEA) analyzing and comparing the data from various industrialized countries, the U.S. transport sector has become less energy efficient over the last 15 years. (The IEA report uses as a proxy for efficiency the energy intensity of transport, namely the amount of energy required to move people or freight a specified distance. This simplification is also used here.) This is true for both passenger transport and freight transport.
When it comes to moving people across town or across the country, the United States spends about 7 percent more energy than it did 15 years before at the turn of the century. What is true for people is also true for merchandise: whether it is moving farm products to market or delivering packages to stores or homes, the United States is using more energy per mile travelled than it did 15 years before. This deterioration in the energy efficiency of the transport system has occurred while technological improvements have improved the efficiency of engines, information systems, and business practices generally.
In contrast to this observed deterioration in the efficiency of the U.S. transport system, the rest of the economy is becoming more efficient. Agriculture, mining, chemicals, and food production have all become more efficient over the same period. In fact, U.S. manufacturing overall became 38 percent more efficient over the 15-year period from 2000 to 2014. So while we are more efficient at producing food, we are less efficient at delivering that food to markets.
The decline in the energy efficiency of the U.S. transport sector also runs against the performance of the other industrialized countries in the IEA study. Whether it is Canada, France, Germany, the United Kingdom, Australia, Japan, or Korea, the energy intensity of passenger transport improved since 2000. In fact, of the 19 industrialized countries covered in the IEA study, only the Czech Republic and Spain saw their passenger sector energy intensities deteriorate along with the United States. The energy efficiency performance of the U.S. transport sector is trending against the reduction in energy intensity seen in other U.S. sectors and in other countries. Is that a problem?
What Key Factors Drive Transport Efficiency?
Before answering the question, it is useful to identify the major drivers of energy intensity in the transport sector and how they operate. Energy intensity in transport is basically a question about how much energy is required to move people or freight. Two principal factors drive these outcomes. The first is the efficiency of the mode of transport; for example, more fuel-efficient trucks require less fuel to deliver produce to markets. Different modes of transport also have different efficiencies; it takes less energy to transport someone from Washington, D.C., to Miami by train than by airplane. Consequently, the relative shares of different modes of transport will also affect the energy intensity of the sector overall. As the IEA report explains, the United States has a relatively high energy intensity because of the relatively heavy use of passenger cars and airplanes, rather than more efficient train transport (that is more prevalent in various European and Asian countries). A third factor is the “occupancy” rate, namely how many people are in the car (carpooling is more efficient), or how full is the freight truck (greater load factors will tend to increase efficiency).
These examples also illustrate another important aspect of the issue: the transport sector delivers a variety of important services beyond simply moving someone or something from point a to point b. One key service is the speed of travel. While it might be more energy efficient to take a train from Washington to Miami, it is a lot quicker to do so by plane. And most Americans, when faced with the two alternatives, favor speed over the more energy efficient train travel.
Energy efficiency is just one of several inputs and services bundled within our transport choices. This is well illustrated by consumer preferences regarding vehicles. U.S. customers care about fuel economy and related savings on gasoline, but they also care about size, comfort, price, engine power, and multipurpose uses, among other things. As the cost of gasoline dropped beginning in 2014, U.S. customers began to buy larger more powerful, but less fuel-efficient, vehicles (including more sport utility vehicles, SUVs). In fact, the average efficiency of U.S. new vehicle purchases in December 2017 was about half a mile lower than its peak in August 2014 (25.5 miles per gallon as compared to 25.0). Arguably, as gasoline prices dropped, consumer preferences for larger more powerful vehicles took greater precedence over the diminishing savings in fuel costs of more efficient ones.
Finally, it is important to distinguish between (i) the energy intensity of the United States relative to other countries and (ii) how that intensity is changing over time. The United States, like Canada and Australia, is a large country with a relatively dispersed population that relies heavily on personal vehicles, as compared, for example, to the United Kingdom or Japan, where rail systems are able to meet the transport needs of much of the population. As a consequence, it is arguably unsurprising that the energy intensity of the transport sectors of the United Kingdom, Japan, and similar countries is lower than that of the United States, Canada, and Australia. However, while Canada and Australia and most other countries surveyed have been able to reduce the energy intensity of their transport sector, the United States has seen its own rise. What raises a flag is this deterioration of the U.S. transport sector’s energy intensity while most other industrialized countries covered by the IEA survey saw improvements.
Should We Care?
In many ways, increased energy intensity in the transport sector is not necessarily problematic. As noted above, consumers may prefer less energy efficient modes of transport for a variety of reasons. This can include the desire for greater speed (flying versus ground transport); preferences for the additional size, power, utility, or convenience of SUVs or pickup trucks versus more energy efficient sedans; or the additional flexibility of single passenger car trips versus carpooling.
What is undeniable is that the movement to less efficient transport behavior increases energy consumption, and fossil fuel consumption specifically. At times of supply constraints, this can be extremely problematic (e.g., the long lines to fill up cars during the 1973–1974 oil embargo, or the supply disruption in Puerto Rico following Hurricane Irma), but as a general proposition, the United States currently does not face a tenuous energy supply situation that warrants in and of itself promoting energy conservation. In fact, the current U.S. government policy of promoting energy dominance, with its focus on increasing exports, seems to be directed more at expanding supply (notably domestic production of oil and gas) than energy conservation. Ironically, the absence of a tenuous supply situation and the increased availability of exports to support U.S. energy dominance are in part the result of improved vehicle fuel economy standards that were initiated in 1975 in response to the oil embargo.
What is also undeniable is that increased fossil fuel consumption does, under current technologies and practices, increase greenhouse gas (GHG) emissions. Less fuel-efficient cars mean that we need more gasoline to travel the same distances and, as a result, emitting more greenhouse gases for that same trip. This same reasoning applies to freight transport (less fuel-efficient trucks emit more per delivery), as well as the choice of less efficient modes of transport over more efficient ones (we emit less when we take the metro as compared to private cars). The transport sector currently generates about 20 percent of energy sector GHG emissions worldwide; reducing these emissions through improved efficiency of the sector is one of the pillars of the IEA and other low-carbon emissions pathways. In fact, the climate change mitigation modelling of the IEA points to energy efficiency as the most important tool to reduce energy sector GHG emissions consistent with the international two-degrees centigrade target; under this modelling, energy efficiency improvements provide nearly 40 percent of the reduction in emissions, more than renewables, which provide about 30 percent of the reduction.
There are also important competitiveness reasons to work to improve the efficiency of our transport sector. This is well illustrated by the aviation business in which U.S. airplane manufacturers (such as Boeing) need to compete with foreign companies (such as Airbus, Bombardier, even emerging competition from China) for sales to commercial airlines that are very concerned about fuel costs and the related energy efficiency of their planes. Continued investment and expanding experience in improving the fuel efficiency of airplanes will be critical to continued success in supplying the growing international market. A similar argument applies to the car sector, where the United States managed to reestablish a vibrant industry after numerous years of recession by reestablishing its prowess in technological innovation, including with regard to fuel economy.
This last observation points to a key factor: in today’s international trade environment, the ability of U.S. companies to compete means the ability to satisfy international market preferences. Major economies, including China, Europe, and India, are implementing increasingly stringent vehicle fuel economy standards. In parallel, countries are reaffirming their commitments to aggressively reduce GHG emissions. More efficient vehicles also help to reduce air pollutants, a major concern in many cities around the world. Developing products that satisfy fuel efficient and low-emissions market requirements abroad will be key to maintaining U.S. manufacturing competitiveness.
So, in summary, there are many discrete ways in which the increased energy intensity of the U.S. transport sector should not be a cause for alarm (e.g., if as a result of consumer preferences for speed, we see an increasing share for air travel within the transport sector). However, as a general proposition, the energy intensity of the U.S. transport sector is moving in the wrong direction with likely negative impacts on our international competitiveness and on efforts to mitigate climate change.
Things to Do to Reverse the Rising Energy Intensity of Our Transport Sector … If We Want To
There are various actions the United States can take to increase efficiency in the transport sector and also to improve competitiveness. The first is improving the energy efficiency of equipment, whether it is cars, trucks, airplanes, ships, or trains (improving efficiency within the transport mode). Road transport consumes 90 percent of our transport energy, with nearly three-quarters of that used in passenger cars. Worldwide, car ownership is projected to nearly double to 2 billion by 2050. Technological improvements to vehicle fuel economy, in particular those consistent with consumer preferences for safety, comfort, and other uses (pickup trucks continue to dominate the U.S. markets) can not only improve the efficiency of the U.S. transport sector, but also improve the competitiveness of U.S. manufacturers internationally. This will also simultaneously support reduced GHG emissions. We have seen the successes of the American car manufacturing industry when it set its money and talents to improved efficiency and innovation, with the attendant reemergence of American cars as a force in global markets.
A separate pole of actions involves initiatives to better manage the use of each mode of transport. This includes policies to encourage carpooling, improved business practices to better use available freight loads, even the improved use of technology to guide our travel to avoid traffic congestion. The use of passive toll systems not only speeds us along our way, but reduces the unnecessary braking at toll plazas that increases gasoline use.
Another important set of actions involve encouraging people to shift to more efficient modes of transport (movement across modes), for example shifting from passenger cars to trains. One of the reasons that we see lower energy intensities in various Western European countries is because of their more extensive and rapid train systems. While the United States is a relatively larger country with a lower population density than Europe or Japan or Korea, there are clearly many opportunities to improve our rail system (both intercity and urban transit) to attract customers out of their cars.
This last potential to shift people out of cars points to a critical dimension: to improve the efficiency of our transport sector, we need to satisfy the preferences of consumers. The key is to create more efficient transport systems that will attract customers through high-quality service. This is what Europe has seen with the creation of a high-speed rail link between London and Paris that competes effectively with airplanes in both speed and cost.
Government policies have a potentially important role to play in this effort. From fuel economy standards for cars and trucks, to tax incentives to encourage private-sector investment in research and development, to public-private partnerships, to infrastructure regulations to facilitate the construction of new efficient transport systems, to taxes on motor fuels, to public investments in mass transit systems (just to name a few), the list of possible government actions to improve the efficiency of the U.S. transport sector is long, and it is also well known and well established. What seems less clear is the extent to which federal, state, and local governments will want to actively intervene in markets to try to reverse this deterioration in the energy intensity of the transport sector, and the potential lack of alignment between the federal and local levels of government in this regard.
World markets are shifting, and the ability of U.S. companies to compete in those markets will largely depend on their ability to provide high-quality energy efficient transport products and services. While the increased energy intensity of the U.S. transport sector since 2000 is not a cause for alarm, it reflects a worrisome trend that will not only undermine efforts to mitigate climate change, but also arguably signals a sector that is becoming increasingly out of step with transport trends worldwide. We have lived through one crisis in the car sector in the 1970s when the Big 3 car companies failed to keep pace with international competition. To avoid a repeat, improving energy efficiency must be an important objective of our transport industry working together with government.
Philippe Benoit is a senior associate with the Energy and National Security Program at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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