The World Bank Office, Bangkok Siam Tower,30th Floor, 989 Rama 1 Road, Pathumwan, Bangkok 10330

Tel.: +66 (0) 26868300 Fax: +66 (0) 26868301www.worldbank.or.th

Office of The National Economic and Social Development Board962 Krung Kasem Rd., Pomprab, Bangkok 10100

Tel.: +66 (0) 22804085 Fax: +66 (0) 22813938www.nesdb.go.th

THAILAND : MAKING TRANSPORTMORE ENERGY EFFICIENTThailand-World Bank Country Development Partnership for Infrastructure

March 2009March 2009

Thailand-World Bank Country Development Partnership for Infrastructure Thailand-World Bank Country Development Partnership for Infrastructure

March 2009 THAILAND : MAKING TRANSPORT MORE ENERGY EFFICIENT

THAILAN

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Executive Summary

ThisstudyaddressesthequestionofhowThailand’stransportsectorcanbecomemoreenergy-efficient.Itassessestheperformanceofthetransportsector inenergyutilization,analyzeswhereinefficiencieslie,andproposesoptionsinordertoimprovetransportenergyefficiency.

Improvedenergyutilization is imperative for Thailand’s national energy security andcontinued economic prosperity. Historically, Thailand has not performedwell in terms ofenergyefficiency.Totalenergyintensity,definedastotalfinalenergyconsumptionperunitofGrossDomesticProduct(GDP),ishighcomparedtoothercountriesandatleasttwicethatofGermany,JapanandtheUSA.Moreover,Thailand’stotalenergyintensityhasremainedmoreorlessthesameoverthepastthreedecadesdespitetheavailabilityofmoreenergyefficienttechnologies.Thisisinsharpcontrasttomanyothercountriesthathavereducedtheirenergyintensityoverthesameperiod.ThisimpliesthatThailandhashighpotentialtoachievelowerenergyintensity.

Atpresent,twosectors,‘manufacturingandmining’and‘transport’,accountfor70percentoftotalenergyuseinThailand,witheachhavingapproximatelyanequalshare.PetroleumproductsaccountforhalfofthetotalfinalenergyconsumptioninThailand.Almostallenergyusedbythetransportsectorcomesfrompetroleumproductswhichrepresent72percentofthetotalconsumptionofpetroleumproductsinThailand.Seventy-sixpercentoftransportenergyisconsumedintheroadsector.Withlittlefueldiversification,andwithonlyasmallamountofenergycomingfromrenewableenergysources,thesecurityofThailand’senergysuppliesishighlyvulnerabletopossiblefuturesupplyconstraintsorrapidpriceincreases.

Thailand’stransportenergyintensity,definedastransportenergyconsumptionperunitofGDP, ismuchhigherthanfoundinChina,Germany,Japan,SouthKoreaandtheUSA.Morestrikingly,ithasremainedatahighlevelbetween1995and2006,whilethecomparatorcountrieshavebeenabletoreducetheirtransportsectorenergyintensity.Clearly,Thailand’stransportsectorhassignificantpotentialtoimproveitsenergyefficiency.

ThestudyfoundthattheeconomicstructureandspatialdistributionofeconomicactivitiesinThailanddonot imposeextraordinary requirementson transport. Other factors—mainlythehighlevelofmotorization,heavydependenceonroadtransportandlackoffueleconomystandards—contributetothehighleveloftransportenergyintensity.Roadtransportoverwhelminglydominatesfreightandpassengertransportmarkets,whilerailplaysaverysmallanddecliningrole.ThemajorityofThailand’svehiclesusediesel,andfueleconomystandardsarenotappliedtogasolineordieselpoweredvehicles.Thetruckfleetisonaveragequiteoldandfuel-inefficient.Dueto lowtaxes, fuelpricesare relatively lowcomparedtoJapanandWesternEuropean countries. The estimated fuel efficiency of Thailand’s passenger vehicle fleettodayisapproximately25to30percentlowerthanthelevelsfoundinJapanandWesternEurope.TrafficcongestionintheBangkokMetropolitanRegion(BMR)wouldalsocontributesignificantlytoThailand’shightransportenergyintensity.

Asapolicyoption,pricingfuelsonthebasisoftheirlong-runmarginalcostsisexpectedtohaveasignificantandsustainedeffectontheimprovementintransportenergyefficiencyinThailand.However,recognizingthepoliticaldifficultiesinimplementingacomprehensivefuelpricingpolicyintheshorttomediumterm,thestudyalsoexamined16otherpolicyandtechnologyoptions.Thesearegroupedintothefollowingfivecategories:

• Fuel efficiency and fuel switching:upgradeenginetechnologiesforbusesandtrucks, andusenaturalgasselectivelyinvehiclefleets,especiallycommercialvehicles.

• Better vehicle standards:establishand(progressively)tightenfueleconomystandardsof passengervehiclestomatchEuropeanstandards,andimprovelogisticspracticesinthe road-basedfreighttransportsectortobettermatchtrucksizestothetaskandoperating environment.

• Rail investment and reform:reformandmodernizetherailsector,expandtheroleofrail infreighttransportandlong-distancepassengerservices;andintheBMR,expandMass RailTransit(MRT)andimproveitsintegrationwithbusservices,andimproveaccessibility andwalkabilitytobusstopsandmassrapidtransitstations.

• Better urban bus services:increasethespeedandqualityofbusservicesthroughexpansion ofBusRapidTransit(BRT)andinvestmentinnewfleetwhichwillbringimproved passengercomfort,betterfuelefficiencyandloweremissions.

• Policy and pricing measures:upgradethevehicleregistrationsystemandassociated chargesthatreflectactualvehicleuse;improvetrafficmanagement;andpromotemore efficientbusservicesthroughreformsthatencouragecompetitionandnewinvestment.

Theseoptionsareessentialelementsinanyefficienttransportsectorstrategy.Mostofthemarewin/winoptionsintermsofbothtransportperformanceandenergyefficiency.Asimplequantitativeassessmentoftheseoptionsindicatesthatifalloptionsaresuccessfullyimplemented inThailand,aboutone-thirdof the totalannual transportenergyusecanbereducedin2025comparedtothe“businessasusual”scenario.Thesavingswouldbemoresubstantialifacomprehensivefuelpricingpolicyisalsoimplemented.

Toimplementtheaboveoptionsrequiresstrongcommitmentandseriouseffortbythegovernmentespecially inovercomingpolitical and institutional impediments thatprefer thestatusquo.Fuelpricingoffersgreatpotentialtoinducefavorablebehavioralchangeinfuelusageandmodalshift.Appropriatefuelpricing,andvehicletaxesandchargeswillunderpinthetechnologyandpolicyoptionsbycreatingtherightincentivesfortransportfirms,logisticsproviders,andhouseholdstocarefullyconsiderthelifecycleenergyconsumptionassociatedwiththeirchoicesoflocation,activitypatterns,modesandvehicles.Toimplementthemajorityofoptionsrequiresstronginstitutionalcapacitytoleadandcoordinatetheconcertedeffort.Thismaybeamajorchallengeforthegovernment.Thailand’sownsuccessinphasingoutleadedgasolineandimprovingBangkok’sairqualityinthe1990sprovidesmanyrelevantlessonsforapplicationtotheimplementationofthetransportenergyefficiencyagenda.

The World Bank Office, Bangkok Siam Tower,30th Floor, 989 Rama 1 Road, Pathumwan, Bangkok 10330

Tel.: +66 (0) 26868300 Fax: +66 (0) 26868301www.worldbank.or.th

Office of The National Economic and Social Development Board962 Krung Kasem Rd., Pomprab, Bangkok 10100

Tel.: +66 (0) 22804085 Fax: +66 (0) 22813938www.nesdb.go.th

THAILAND : MAKING TRANSPORTMORE ENERGY EFFICIENTThailand-World Bank Country Development Partnership for Infrastructure

March 2009March 2009

Thailand-World Bank Country Development Partnership for Infrastructure Thailand-World Bank Country Development Partnership for Infrastructure

March 2009 THAILAND : MAKING TRANSPORT MORE ENERGY EFFICIENT

THAILAN

D : M

AKIN

G TRAN

SPORT M

ORE EN

ERGY EFFIC

IENT