30 January 2020
Advice to all political parties formulating their election policies on the economy, infrastructure, transport and...ships
The context of transport
Transport policy is often described in a vacuum, as though it can somehow sit separately from the way people lead their lives and the economy.It is painted as dry and even dull.The reality is different.Transport policy is central to everyone’s life effecting every decision they make about how they want to live their lives.Transport policy affects access to work and play.Transport policy affects what you consume and even how you consume it.
Transport policy is complex.Picking winners is fraught because it is notoriously difficult to reliably model the downstream effects of the numerous decision-makers and the varieties of options.
Transport is always about networks and termination points.Consideration of any transport mode has to also take in interconnectivity with other modes.It has to consider the way in which the journeys or part journeys terminate.It has to consider the incentives around different modes and the flow-on effects of switching.
Decisions need to be made looking at the total network.Picking winners or winner-projects can have important unanticipated positive and negative impacts.This is especially possible when the transport system, the network created by many decisions and decision makers, is treated as a series of silos with decisions being make about different silos without regards for the wider impact.
Maritime transport is both an essential and critical part of New Zealand’s economy. Imports, exports and the internal repositioning of cargo and containers are all reliant on ships.
The geography of New Zealand plays into a reliance on coastal shipping.We are two main islands with mountain ranges running down the spine of each.We have a history of serious road and rail disruption due to geological events, including both earthquakes, floods and volcanic eruptions.As a nation, we are dependent on ships for the provision of State Highway 1 connecting the North Island to the South Island.
Maritime is accepted world-wide as the cheaper and more environmentally friendly option, this means it carries more cargo per carbon unit consumed and hence fewer emissions. That said, it is also the least appreciated in New Zealand, largely because it is generally less visible to the government and to consumers.
The environmental case for maritime as a preferred mode to any other is very strong.This is usually described in terms of the clear case that there are lower carbon emissions from ships as compared to any other mode of transport for the equivalent load carried, measured in tonnes carried or lane metres.It should also be considered in terms of taking the burden off the roads and thus reducing the demand for greater usage of land as roads.
The efficiencies on ships do not happen by accident.World-wide standards developed by the International Maritime Organisation ensure that each ship is operated according to its Ship Energy Efficiency Management Plan (SEEMP).New ships are specifically designed to have better Energy Efficiency Design Index (EEDI) numbers than their predecessors. As the government regulator, Maritime New Zealand monitors these issues in this country.
From tourism to building, from cars to agriculture, maritime transport is a significant contributor to the economy and transport infrastructure.The value of maritime in New Zealand has not been specifically calculated but is obviously significant given the vital transport services that are provided with no alternatives.The maritime sector extends beyond ships toland based support activities as well as specialist education, engineering and professional services.Significant roles are undertaken
Dry docks are a vital part of maritime infrastructure for providing a facility to maintain ships.New Zealand has a number of dry docks but they are all too small to take most of the ships operating on the New Zealand coast.The missing link is a dry dock that can meet the needs of the current coastal fleet with modern ships that exceed the maximum capacity of the existing dry docks in New Zealand.
A 250 metre dry dock needs to be established in New Zealand as a matter of urgency.
Because there is no suitable sized dry dock in New Zealand, coastal ships are required to travel offshore, to Singapore, or if they are lucky, Sydney, to access a dry dock for their mandatory and other out-of-water inspections, maintenance, cleaning and repairs.This imposes a cost on the vessel operators which in turn becomes a cost on the New Zealand economy by higher charges and lower taxes.It is costly and wasteful of fuel which drives an environmental cost because of the emissions caused in taking the long journey to Singapore or Sydney.
There are two known feasible locations for a dry dock in New Zealand, Shakespeare Bay (Picton) and NorthPort near Whangarei.This is not the place to get into the technical details but we are happy to brief you on this urgent need.
Costs imposed by central government
The operation of the emissions trading scheme penalises coastal shipping while at the same time giving an advantage to international ships that trade on our coast transiting between our ports.Such international ships are exempt from the Emissions Trading Scheme (ETS).Any review of the scheme needs to consider whether imposing ETS requirements on coastal bunkers makes any sense.The cost of ETS credits is approximately $75 per tonne of fuel used which means that the cost per ship can be over a million dollars per year.
There are also a range of levies imposed on shipping such as the Maritime Levy, to fund the regulator Maritime NZ, and the Oil Pollution Levy to fund recovery operations after oil spills.Coastal ship operators are prepared to pay their share but we are concerned that the sector is subsidising public benefits especially the activities of the regulator.
The Federation notes the comments about the “aging pipes and roads” (page 5) and we also have concerns about aging ports.
Strategic oversight of ports is missing.Just as central government has had to step into the supply of water, we believe that there is a role for central government in respect of monitoring ports, both as to pricing and quality assurance.Consideration should be given to a role for the Commerce Commission, as to pricing, and the Infrastructure Commission, as to whether the ports are fit for purpose.
To be clear, we are not suggesting the nationalisation of ports.Nor are we recommending that the government picks losers and winners.The Federation is suggesting that the monopolist behaviours of ports needs oversight.
Ports are a network, at times interdependent, at times directly competing.We are deeply concerned about any approach that focuses on individual ports without looking at the total network.
Central government is largely excluded from decisions about and by ports.By contrast, local and regional government are heavily involved in the maritime sector due to a history of port ownership.There are many parallels between the history of port ownership and the ownership of the water supply system in New Zealand.In both cases considerable reliance was placed on the commitment of local government to the supply of a public good to their residents.
Ports are regulated as though they are a public service operating in the interests of the hinterland but in reality they are set up as cash cows to benefit their owners, often Regional Councils.Quality control of physical and human infrastructure is lacking.Problems include port capacity (such as undersized wharves, insufficient berthing areas), outdated interfaces with other transport modes, poor maintenance, outdated design.
Focus on Freight
The Discussion document notes that “Making it easier for freight to travel by road, rail, air and sea is an important focus for National.” (page 22).It is not clear to us what this means in practice.
The maritime sector is not asking for subsidies.The government is responsible for a number of factors that skew the choice of transport mode, largely by driving costs onto ships and subsidies onto alternative modes.The Federation believes that the government should review the equity between modes.
We understand that the Government has commissioned an externalities study into the hypothetical effects of all maritime coastal cargoes being moved by road.The purpose of the study is to generate a calculation of the benefit of having coastal shipping, covering financial, environmental and social.The Federation welcomes this study but we believe that it is just a starting point for understanding the impacts of moving coastal freight by sea.
Maritime works with all the other modes of transport.In particular, maritime needs road transport.
In the context of road safety, the social benefits of cargo being shifted off roads and onto ships needs to be considered as part of any benefit analysis, alongside the financial and environmental benefits of using ships.