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Asia-Pacific Environmental Innovation Strategies (APEIS)

Research on Innovative and Strategic Policy Options (RISPO)
Str ategic Policy Options


I. Title of sub-theme:
Development of envir onmentally sustainable tr anspor t systems in ur ban ar eas

II. Title of str ategy:
Incr easing the shar e of public tr anspor tation

III. Title of str ategic policy option:
Pr omoting r ail-based mass r apid tr ansit (R-MRT) thr ough innovative mechanisms to
addr ess high initial costs

IV. Br ief descr iption of the policy option

R-MRT comprises a wide spectrum of urban public transport modes (including metros, suburban
railways, and light rail transit) that use either specific fixed tracks or have exclusive and
segregated use of potentially common-user roadways (World Bank, 2002). R-MRT usually has
superior operating capacity and performance compared with unsegregated road-based public
transport (such as buses, taxis, and para-transit). Metro is the most common international term
for subway and heavy rail transit, though it is also commonly applied to elevated heavy rail
systems. It is the most expensive form of mass rapid transport per kilometre, but has the highest
theoretical capacity (Wright and Fjellstrom, 2003). Underground metros are the most
environmentally beneficial because they are considered less intrusive in the urban fabric.
Suburban railways differ from metros and LRT in that the passenger cars generally are heavier,
the average trip lengths are usually longer, and the operations are carried out over tracks that are
part of the railroad system in the area (Wright and Fjellstrom, 2003). An LRT system is a
metropolitan electric railway characterised by its ability to operate single cars or short trains along
exclusive right-of-ways at ground level, aerial structures, in subways, or occasionally in streets,
and to board and discharge passengers at track or car floor level. Please refer to Analytical
Background Paper II-1 for more details on R-MRT options.

- Objectives (what):
To reduce congestion and improve transport efficiency
To permit the continued development of city-centre activity while allowing total
movement volumes on the main radial links to increase to levels that would have
produced intolerable inner-city congestion in the absence of MRT (structural
impact) (World Bank, 2002)
To provide basic accessibility for the poor without alternative means of transport,
and to attract middle-class passengers shift from automobile to public transport
To reduce energy consumption and environmental emissions

- Envir onmental ar eas: Climate change, Air pollution, Urban environment

- Applicable geogr aphic ar ea and socio-economic conditions (wher e):
Geographic conditions:

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Large cities with huge population, high density, and intensive land use planning
An R-MRT system is best introduced where existing demand exceeds 10,000 or
20,000 passengers per house per direction (pphpd). Especially for metros, it is better
that demand exceeds 35,000 pphpd (Wright and Fjellstrom, 2003).
Socio-economic conditions
Strong political will is needed.
Large and growing cities.
It is better to introduce R-MRT in relatively developed and wealthier cities.
Flexible financing approaches are necessary.
Compact city planning is preferable.

- Stakeholder s (by whom, for whom):
by whom: Local government, public transport management companies, planning
institutes
for whom: Passengers in the city.

- Time span (by when): From project planning to completion, it usually requires eight to
ten years for a metro project and four to six years for an LRT project (Liu, 2005).

- Expected impacts: Diversion of passengers from private automobile use to public
transport is expected, which would reduce air pollution, and environmental emissions
including both GHGs and local pollutants. Hence, less congestion, and transport
efficiency would be achieved because of less automobile mileage. Road safety would
be improved as well.

V. Backgr ound (Rationale)

Faced with environmental problems caused by transport due to rapid motorisation, the need for
public transport as important alternative modes to automobile use is well recognised. R-MRT
usually has superior operating capacity and performance compared with unsegregated road-based
public transport. Rail-based metro systems in developing countries make about 11 billion
journeys a year, surface rail systems make about 5 billion, and light rail systems make about 2.5
billion (World Bank, 2002).

R-MRT provides passengers with fast, safe, and reliable transport service, and most important, it
can attract riders from their automobiles, and therefore reduce problems such as congestion,
parking cost, and accidents. Rail transit is particularly important in large, growing cities. Large
cities that lack well-established rail systems are clearly disadvantaged compared with those that
do in terms of congestion costs, consumer costs, and accident risk. Rail transit can be a cost
effective investment in growing cites, provided it is supported with appropriate transport and land
use policies (Litman, 2004).

However, there are various criticisms of R-MRT, most of which focus on cost effectiveness,
because high initial and operation costs are commonly incurred by rail systems. Asian developing
cities with different objectives, pricing, and financing mechanisms, will need to choose their own
strategic alternative instead of a single one size fits all solution. In many cases, the problem is
not simply that of an exclusive choice between technologies, but more that of selecting the
optimum mix of technologies and the optimum phasing of MRT capacity expansion. An
appropriate strategic stance is thus not to be for or against MRT, or any particular variant of it,
but to properly appreciate the critical factors affecting choice of technologies and operating,
financing, and ownership arrangements, and to ensure that the choices made are consistent with

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city characteristics, objectives, and economic capability (World Bank 2002 as cited in Matsumoto,
2004a).

VI. Cr itical instr uments

Economic instr uments: Public financing for constr uction and oper ation of R-MRT
High initial cost, long payoff period, and expensive operation cost are the major barriers to the
wider adoption of R-MRT. Revenue collected from fares is usually insufficient because of less
heavy utilisation or policies to keep fares low for political or social objectives. Hence, alternative
public financial approaches are critical to R-MRT, including direct capital investment by central
or local governments, low-rate loans, subsidies from tax revenues, value capture, and business
revenues (PADECO, 2000). Tax revenues used as subsidies for R-MRT can be from several
sources: general taxes, earmarked taxes, or government property tax. For example, in Seoul,
10~20 per cent of subway construction costs were financed by central government subsidies from
general tax revenue. And also in Seoul, the municipal government levies a traffic tax on the
owners of commercial buildings that generate excessive traffic and it is a kind of property tax
(PADECO, 2000). As for earmarked tax, in French cities, a transport contribution for the
purpose of financing the investment and operation of urban public transport systems in cities has
been introduced. This tax, the so-called Versement de Transport, has to be paid to the local
transport company by all employers with more than nine employees. The tax is fixed at 1.75 per
cent of the wage (European Academy of the Urban Environment 2001b). For more details on
public finance for R-MRT, please refer to Analytic Background Paper II-2.

Cities could benefit by funding R-MRTs development costs and a major portion of operating
costs from land value capture, that is, by taxing a portion of the additional value of adjacent
properties that results from transit accessibility (Smith and Gihring, 2004). This approach has
been successfully utilised in Hong Kong, please also see details in Analytic Background Paper
II-2.

Economic Instr uments: Pr ivate sector involvement in R-MRT
Public-private partnership (PPP) in R-MRT projects can be pursued to reduce the financial burden
on the public sector and to introduce sufficient management skills to ensure operation in a safe,
cost effective, and customer friendly way (PADECO, 2000, Department of Public Enterprises,
2000). The most common format of PPP is BOT, that is R-MRT is built and operated by private
sectors, and is then transferred to government after a certain period of time. Both in the
Philippines and Thailand, the BOT mechanism is used to attract private involvement. Please see
details in Analytic Background Paper II-3.

Economic instr uments: Far e incentives to pr omote r ider ship
Environmental commuting passes (monthly or yearly) allow holders to use all public transport
(bus, tram, and train) and to travel an unlimited number of trips within an urban network. The first
example is the city-wide environmental card issued in Freiburg, Germany in 1983 for the public
transport system. This card also introduced some additional bonuses, like transferability, and
weekend and holiday travel for groups of up to two adults and four children (European Academy
of the Urban Environment, 2001a). Please refer to Analytic Background Paper II- 4 for more
details. Hanoi also introduced a low-priced commuting pass which can be used for the entire
network
2
of public transport in 2001. The fare was 30,000 dong for commuters and 15,000 dong
for students.
3
By introducing pilot routes and fare policy, the ridership increased by 500 per cent

2
Not exclusive rail network but the majority is bus services.
3
In 2003, one US dollar was equivalent to 13,000 dong.

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from 2001 to 2002 (World Conference on Transport Research Society and Institute for Transport
Policy Studies, (eds), 2004).

Design, planning and management: Choice of MRT technologies
The selection of technology has long been the most controversial element in discussions of MRT.
Both costs and performance vary from location to location according to stop spacing, and vehicle
and system design. It is recommended by the World Bank (2002) that alternative technologies
should be evaluated both in operational and fiscal terms. R-MRT systems, more expensive than
bus rapid transit (BRT), should only be adopted within an integrated planning and financing
structure ensuring system sustainability, effective coordination of modes, and affordable
provision for the poor (Word Bank, 2001). Please refer to SPO for BRT for detailed information
on that option.

Design, planning and management: Effective networ king among public tr anspor t modes
A well-developed network is the precondition of high transport efficiency for R-MRT. A network
that reaches every corner of the downtown area could reduce congestion effectively. Although
door to door service cannot be supplied by R-MRT, a network complemented by other transport
modes could do so if transfers line-to-line and line-to-bus are arranged well, in addition to taxi
services. Parking facilities outside the R-MRT stations can allow people to reach stations by car
and bicycle. A key to effective modal integration is the existence of a strong regional coordination
authority backed by the different levels of government (World Bank, 2002).

Regulator y instr uments: Legislation for R-MRT
The smooth construction and operation of an R-MRT system and reduction of business risk
should be facilitated through enactment of legislation. In Japan in 1989, a law (Special Measures
for promotion of Housing and Railway Development in Urban Areas) was enacted to promote the
efficient integration of housing development and railway construction. Bangkoks Mass Rapid
Transit Authority (MRTA) Establishment ACT of 1992 stipulates the possibility for private
sector involvement. The BOT law was passed by the Philippine Congress in 1990, please see
details in Analytic Background Paper II-4.

VII. Impacts of instr uments selected

a. Impacts on the dr iving for ces for envir onmental degr adation
Reduction of automobile use has been observed. Comparing Tokyo and Beijing, two cities
that are similar in scale, the average utilisation of automobiles in the former city is only 10
thousand km per year and it is double in Beijing (Zhu, 2004). One of the main reasons is,
undoubtedly, the developed R-MRT network in Tokyo. In Singapore, 63 per cent of all
motorised trips (5 million) are made by public transport, of which 20 per cent are made by
R-MRT (Lim, 2004). Recent research also found that an increase in a citys rail transit
service reduces 40 annual vehicle miles of travel per capita in American cities by 10 per cent,
compared with just a one mile reduction from a 10 per cent increase in bus service (Litman,
2004).
Reduction of automobile ownership has been observed. Research shows in large rail cities
1

in the U.S. residents own 0.68 vehicles per capita, as opposed to 0.77 in small rail cities,
2
and
0.80 in bus only cities. This is particularly notable because large rail city residents have
higher average incomes than residents of other types of cities, which generally increase
vehicle ownership (Litman, 2004).

1
Rail transit is a major component of the transportation system.
2
Rail transit is a minor component of the transportation system.

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Energy saving has been observed. For instance, energy use per passenger kilometre (p-km)
of Beijings metro-system (occupancy 80 per cent) only accounts for 24 per cent of that of
bus (occupancy 70 per cent) (ERI, 2000). In Tokyo, the energy consumption unit (mega
joule/passenger kilometre) for R-MRTs are one tenth of the passenger vehicles and one third
of buses. In developing countries, energy consumption of R-MRT per capita tends to be
lower than developed countries, probably because the ridership per carriage is higher. So, it
can be said that if implemented well, R-MRTs in developing countries can achieve higher
energy efficiency compared to developed countries (World Conference on Transport
Research Society and Institute for Transport Policy Studies, (eds), 2004).

b. Impacts on the envir onment and socio-economic conditions
Environment_conditions
Most R-MRT systems are electrified, so no local emissions are produced. Life-cycle emissions
vary greatly depending on the power source used to generate electric traction (for rail).
Furthermore, from an environmental perspective, the main point to note is that virtually all MRT
systems offer environmental advantages to the extent that they replace trips by private motor
vehicles. Perhaps most important over time, in terms of reducing emissions, is the impact of an
MRT system on the modal split, or percentage of people traveling by public and private transport
modes (Wright and Fjellstrom, 2003). It is reported that each 1 per cent of mileage reduced
typically reduces air emission by 2-3 per cent (Litman, 2004).

Social-economic conditions
Rail transit cities have significantly lower per capita traffic death rates. Large rail cities in the U.S.
average 7.5 traffic fatalities per 100,000 population, small rail cities average 9.9, and bus only
cities average 11.7, a 40 per cent higher rate. If large rail cities had the same fatality rate as bus
only cities there would be 251 more annual traffic deaths, plus increased disabilities, injuries, and
property damages (Litman, 2004).

VIII. Evaluation of the policy option - Analysis A

a. Sustainability (whether the impacts can be sustained for a long per iod): compared
with BRTs (please refer to SPO of BRT for more details), R-MRTs have lower rates for
self-financing operations because of the high initial and operation costs. However, the
metro system in Hong Kong and private rail companies in Japan give us good examples
of sustainability by channelling positive externality (increase in value of lands due to
MRT) to the cost of construction and operation of MRT. On the other hand, the
existence of large external effects (about one-half of the benefits typically accrue to
remaining road users) means that economic rates of return may be positive and
acceptable even where the financial return is negative; the same factors that affect
financial viability also affect the conventional measures of economic viability.

b. Equity: social equity is expected to improve in cities where the main function of
R-MRT is to provide basic accessibility for the transportation disadvantaged without
alternative means of transport. Single fare prices implemented in some cities, such as
Beijing, are also a scheme for equity.

c. Efficiency: compared with bicycle lane and BRT network, R-MRT systems require a
much higher investment, as shown in Table 1. Nevertheless, metro has the highest
capacity and operation speed. The benefit of R-MRT includes vehicle-mile substitution,
congestion reduction, road and parking saving, consumer financial saving, energy and
emission reduction, improved transportation efficiency, agglomeration benefits,

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improved accessibility for transportation disadvantaged, and improved public health. It
is estimated that U.S. rail system services require about $12.5 billion annual public
subsidy, about an extra $90 per large rail city resident, whereas the benefits amount to
$67.7 billion, even excluding benefits that are unsuitable to monetisation (Litman,
2004). The ratio between benefit and cost is 5.4:1. Please refer to Analytical
Background Paper II-5 for more details.

Table 1: Comparison of mass transit options
Network Bicycle lane BRT LRT Metro
Initial cost
(million$/km)
0.016-0.0231 1.5-5.0 15-30 15-30 at grade
25-80 elevated
60-180
underground
Operational capacity
(pphpd)
15.02 10,000-20,000 10,000~12,000 up to 60,000
Speed (km/h) - 15-25 15-25 30-40
(Source: Karekezi et al., 2003)

d. Effectiveness: Diversion of passengers from private automobile use to public transport,
and improvement in air quality, has been observed in many cases in the world. However,
if the network has not been well-developed yet, effectiveness may be influenced.

e. Relevance:
The objective to reduce congestion or expected congestion is relevant to this sub-theme
(development of environmentally sustainable transport systems in urban areas).
The objective to reduce energy consumption and environmental emissions is relevant to
this sub-theme.
The objective to provide and attract passengers with high quality public transport service
is relevant to the strategy of promotion of public transport.

IX. Implementation Issues:

Required infrastructure includes an exclusive railway at ground-level, elevated or underground,
stations, terminals, fare collection and fare verification systems, lighting system, elevator system,
and ventilation system. Initial cost for LRT is usually 10-30 million dollars per kilometre, and
metro requires more, as shown in Table 1. Operational cost includes repayment of capital (vehicle
depreciation and cost of capital), fixed operating costs (salaries of booking
clerk/driver/mechanics/administrative personnel and supervisors, other administrative expenses)
and variable operating costs (fuel, fires, lubricants, and maintenance).

The capital cost of R-MRT is high and difficult to finance as most governments are under
increasing financial pressure. It is therefore important to secure financial resources and allocate
responsibilities effectively (PADECO, 2000). A number of fundamental issues need to be
considered, for example, the role of government investment and the involvement of private
sectors. If local financing options are not sufficient to cover the costs, possible international funds
include grants or loans by bi-lateral, multi-lateral, and international institutions.

X. Applicability and limitation (necessar y conditions and pr ecautions for successful
implication):

This system could be applicable in metropolises with dense population, limited land-use space,

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and where the local government has a strong political will. Having enough financial support from
different sources is pivotal. With a lack of financial support construction progress would be
negatively influenced. It is important to consider this in decision-making, whether or not financial
support would be sustainable. It is also recommended that this option be combined with other
public transport modes, such as a BRT system, to form an effective network.

The construction of R-MRTs should be combined and coordinated with wise land-use planning.
Compact city and smart growth planning will help to form an effective and efficient public
transport system. Please refer to the SPO for that option.

R-MRT development is best approached by a strategy that includes rigorous traffic demand
management measures as an integral part (PADECO, 2000), such as limited parking space
availability in the downtown area or high parking costs to restrict automobile use. In such a way,
R-MRT could make its full contribution toward sustainable urban transport.

XI. Related Good Pr actices

Integration of land use and bus system in Curitiba, Brazil
Development of public transport system in Beijing, China
Integrated urban air quality management in Bangkok, Thailand

XII. Related Analytical Backgr ound Paper (s) (- Analysis B -):

Analytical background paper on promotion of rail-based mass rapid transit (R-MRT) through
innovative mechanisms to address high initial cost

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