Public Disclosure Authorized Sustainable Transport Options for Sri Lanka February 2003 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) Contents Acknowledgement .............................................................................................................v Abbreviations and Acronyms ..........................................................................................vii Executive Summary ...........................................................................................................1 E.1 Background and Results ......................................................................................... 1 Approach.............................................................................................................. 3 Air quality trends ................................................................................................... 6 Vehicle fleet.......................................................................................................... 7 Fuel prices............................................................................................................. 8 Emission factors .................................................................................................... 9 Health damages..................................................................................................... 9 Results................................................................................................................ 11 E.2 Implications for Policy.......................................................................................... 13 Fuel taxation policy .............................................................................................. 13 Local environmental impacts................................................................................. 14 Fuel quality.......................................................................................................... 16 Unleaded gasoline ................................................................................................ 17 Reducing sulfur in auto-diesel............................................................................... 17 LPG conversion of gasoline cars........................................................................... 18 GHG emission reduction and carbon trading........................................................... 19 Transportation infrastructure projects .................................................................... 21 Mitigation of congestion........................................................................................ 21 1. Introduction..............................................................................................................23 1.1 Background......................................................................................................... 23 1.2 Approach............................................................................................................ 28 2. The Vehicle Fleet.....................................................................................................33 2.1 Past trends .......................................................................................................... 33 2.2 Vehicle fleet estimates ......................................................................................... 37 2.3 Fuel consumption ................................................................................................. 38 Annex 2.1: Model Calibration.........................................................................................41 3. Fuel Prices, Characteristics, and Emission Factors ................................................47 3.1 Fuel prices........................................................................................................... 47 3.2 Fuel characteristics .............................................................................................. 55 3.3 Emission factors .................................................................................................. 59 4. Air Quality, Health Effects, and Damage Valuations ...............................................66 4.1 Local Air Quality in Colombo................................................................................ 66 4.2 Health effects...................................................................................................... 70 4.3 Local damage valuations ...................................................................................... 73 iii 5. Price Elasticities.......................................................................................................85 5.1 Vehicle price elasticities ...................................................................................... 85 5.2 Aggregate fuel demand ........................................................................................ 89 5.3 Vehicle -km elasticities ......................................................................................... 96 5.4 Public transport fare elasticities............................................................................. 96 6. Traffic Congestion Externalities..............................................................................99 6.1 Theory...............................................................................................................100 6.2 The value of time: empirical estimates ..................................................................104 7. Transportation Futures ..........................................................................................109 7.1 World trends in vehicle ownership ........................................................................110 7.2 Scenarios for the future.......................................................................................117 7.3 Forecasts ...........................................................................................................120 7.4 Policy implications...............................................................................................123 8. Reduction of Road Congestion..............................................................................127 8.1 Congestion pricing...............................................................................................128 8.2 Reintroduction of full school bus schedules ...........................................................142 Annex 8.1: Report of the Committee of the Colombo Municipal Council for Introduction of Road Taxes.........................................................................................................155 9. Tax and Price Reform ............................................................................................161 155 9.1 Tax equalization on gasoline and diesel fuel...........................................................161 155 10. Regulatory Options ................................................................................................191 10.1 Ban two-stroke motorcycles ................................................................................191 15515610.2..............................................................................................LPG Conversion 200 11. Investment Options ...............................................................................................207 11.1 Colombo-Katunayake Expressway.......................................................................207 12. Vehicle Emission and Fuel Quality Standards .......................................................245 12.1 Sulphur content of diesel fuel...............................................................................245 Annex 12.1: Details of Refinery Optimization ..............................................................259 Reference.......................................................................................................................261 156157157158158158 iv Acknowledgement This study was carried out in 1999-2000, with assistance from the Danish Trust Fund (Global Overlays Program) and the ESMAP Energy-Environmental Review Program, by a team consisting of Mohan Munasinghe (ENVDR, Team Leader), Peter Meier (Consultant), and Sri Lankan counterparts including: D. Chandrasekere (CPC), S. Chandrasiri (Univ. of Colombo), A. Kumarage (Univ. of Moratuwa), and D.S. Jayaweera (Transport Policy Centre). Valuable comments provided by the staff of the South Asia region, and editorial assistance from Kate Sullivan and Nishanthi De Silva are gratefully acknowledged. The document was prepared at the Munasinghe Institute for Development (MIND), Colombo -- a founding partner of the World Bank Global Village Energy Partnership (GVEP). v vi Abbreviations and Acronyms 2S 2-stoke motorcycle 4S 4-stroke motorcycle BoI Board of Investment CCPI Colombo consumer price index . CEB Ceylon Electricity Board CGPI Greater Colombo price index CKE Colombo-Katunayake Expressway CPC Ceylon Petroleum Corporation DMU diesel multiple unit DSD District Secretariat Divisions EER economic rate of return EMU electric multiple unit GDP gross domestic product GDPD implicit gross domestic price deflator GHG greenhouse gas GP general practitioner GVW gross vehicle weight HC hydrocarbons I/M inspection and maintenance IMF International Monetary Fund kPa kilopascals (a measure of pressure) LPG liquid petroleum gas MC motorcycle MEC maximum effective capacity (of a