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The Future of Intercity Passenger Transportation

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The Future of Intercity Passenger Transportation V600 Capstone Course May 23, 2011 EXECUTIVE SUMMARY The purpose of this report is to explore the future of intercity passenger transportation in the United States. The report forecasts the share of travel that will be completed in 2060 by each of four modes—air, auto, bus, and rail. Specifically, a conditional logit model is used to predict consumer choice among the modes. The model predicts consumer choice based on two primary variables: user price and trip time. The forecasts incorporate anticipated technology advancements, as well as the economic and environmental factors expected to affect passenger transportation during the next 50 years. The primary factors that impact the consumer choice variables are fuel price, carbon price, rail subsidy, and level of innovation. Business travel and leisure travel are modeled separately due to the different attributes of business and leisure travelers. According to the 2009 National Household Travel Survey, auto currently dominates leisure travel at the average intercity trip length of 244 miles, capturing 88 percent of mode share. Over the same trip length, air captures nine percent, bus captures three percent, and rail captures 0.32 percent of leisure mode share. At a trip length of 500 miles, auto captures 41 percent, air captures 56 percent, bus captures two percent, and rail captures 0.14 percent of leisure mode share. At a trip length of 1,000 miles, air dominates with more than 98 percent of leisure mode share. Business travelers place a higher value on time, leading them to choose air more frequently than leisure travelers, especially at the 500-mile distance. Projecting out to 2060, this report forecasts only small shifts in mode share at short (less than 250 miles) and long (greater than 1,000 miles) distances, with auto continuing to dominate at short distances and air continuing to dominate at long distances. The largest shift in mode share occurs at the 500-mile distance, where auto captures mode share from air. Large relative increases in fuel efficiency for automobile relative to air account for this shift. The results of the model also indicate that carbon pricing, even at the highest levels, does not change overall mode share. Finally, the elimination of rail subsidies effectively reduces the mode share for conventional rail to zero. In addition to projecting mode shares on the national level, the report forecasts the mode share that high-speed rail would capture within the California corridor from San Francisco to San Diego. The results indicate that high-speed rail would require large capital subsidies to capture more than a few percentage points of mode share. Furthermore, high-speed rail would be highly unlikely to achieve the ridership necessary to avoid additional subsidies for operations and maintenance. As with the national model, the addition of a carbon price has little impact on mode share in the California corridor. In conclusion, this report predicts mode share in 2060 to remain similar to that in 2009, with the exception of a shift from air to auto travel at the intermediate distance of 500 miles. High-speed rail will only capture mode share with high levels of subsidization. Carbon pricing, even at high levels, does not strongly impact customer mode choice. COURSE INFORMATION Each year, the School of Public and Environmental Affairs at Indiana University, Bloomington, organizes several capstone courses intended to provide graduate students with the opportunity to apply their analytical knowledge and skills in a real-world interdisciplinary setting. Each course is designed to allow students in the various joint degree programs, including MPA/MSES, MPA/JD, and MSES/JD to employ their respective concentrations and address complex public policy issues in a collaborative manner in an effort to create logical and practical recommendations. The overriding goal of the capstone course is to challenge students and encourage them to delve into policy areas in which they may not be particularly familiar. AUTHORS & CONTRIBUTORS SPONSOR: GRADUATE STUDENT AUTHORS: The Future of Transportation capstone course is sponsored by the Indiana Center for Research on Yi-Min Chang Energy and the Environment. The generosity of Douglas F. Chapel this sponsor provided access to funds used to Tyler Coogan host guest speakers, obtain relevant research Elizabeth C. Cooke information and data, and offered students the Chris Crookham opportunity to participate in conferences and Shazia R. Davis workshops on pertinent topics. Zachary O. Evans Chloie M. Favinger Brian A. Gray FACULTY ADVISORS: Benjamin D. Hande* Jason E. Hewitt CLINTON V. OSTER, JR. Jeffrey C. Holabaugh Professor Martin R. Hyman Indiana University Wanisara Iangong School of Public and Environmental Affairs Recep Ince Whitney B. Johnson J. C. RANDOLPH Alyson C. Jordan Professor Jacob A. Knight Indiana University Taylor N. Larimore School of Public and Environmental Affairs Joshua J. Levering Carolyn M. Mehta Natalie M. Messer* ACKNOWLEDGMENTS TO OUR GUEST Michael J. Minnick, Jr LECTURERS: Nurul W. Mujahid Candene Y. Myers Donna McLean Joseph A. Pagnusat Vice Chairman of the Board Roslenn M. Richardson National Railroad Passenger Corporation Hana J. Ros Thea D. Roy David Greene Tabitha N. Silver Corporate Fellow Amanda M. Simmons Oak Ridge National Laboratory Martin H. Sorge Brett T. Tearney Andrew Baker Fatih Urganci Environmental Affairs Director Kristin J. Varella Rolls-Royce North America Inc. Sarah E. Vessel Lindsay D. Walker Christine Vujovich Nora W. Williams Former Vice President for Bradley J. Wollmann Marketing and Environmental Policy Cummins Inc. *Project Co-chairs TABLE OF CONTENTS Executive Summary Course Information List of Acronyms I. Introduction ................................................................................................................................... 1 II. Overview of Key Concepts .......................................................................................................... 4 Transportation Costs and Subsidies ............................................................................................. 5 Travel Time ............................................................................................................................. 6 Transportation Externalities ........................................................................................................... 6 Business versus Leisure Travel ...................................................................................................... 8 III. Background ................................................................................................................................. 10 Highway Background ........................................................................................................... 11 Introduction ............................................................................................................. 11 User Prices .............................................................................................................. 12 Full Costs ................................................................................................................ 14 External Costs ........................................................................................................ 15 Innovation ................................................................................................................ 16 Air Background ..................................................................................................................... 19 Introduction ............................................................................................................ 19 User Prices .............................................................................................................. 22 Full Costs ................................................................................................................ 23 External Costs ........................................................................................................ 24 Innovation ................................................................................................................ 24 Case Study 1: Brazil Aviation .................................................................................... 27 Rail Background .................................................................................................................... 32 Introduction ............................................................................................................ 32 User Prices .............................................................................................................. 34 Full Costs ................................................................................................................ 34 External Costs: Conventional Rail ........................................................................ 35 External Costs: High Speed Rail .......................................................................... 37 Innovation ............................................................................................................... 38 Safety and Security Considerations .................................................................................... 41 Current Mode Share ............................................................................................................. 50 IV. Overview of the Model ..............................................................................................................
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