Canada's railways: Part of the climate change solution
(This president's message was originally published in the Winter 2017 issue of Interchange magazine)
The federal government recently announced that it was introducing a price on carbon, which will either be imposed directly by the federal government or by provinces. This policy will have a significant impact on trade-exposed industries: manufacturers and producers of all kinds that sell into global markets against competitors from countries where there is no carbon tax.
An adjustment to a lower carbon world will be difficult, with impacts on every part of the economy. Canada is a trading nation that produces a lot of energy and commodities, and in doing so, produces greenhouse gases. Very few industries can grow while, at the same time, reducing emissions.
From the standpoint of the transportation network, it is important to remember that competitive supply chains, based on healthy transportation networks, are necessary to ensure the global competitiveness of transportation customers. Canada has a lot of geography and, as a result, its transportation system must be second to none. In fact, physical supply chains are in competition with each other. For example, a shipment from Shanghai can travel by ship for 14.7 days to the port of Long Beach, Calif., for transportation by rail to markets across the United States with the rail portion taking 5.1 days to reach Chicago. Alternatively, that same shipment could move from Shanghai to B.C. ports in 15.3 days, with the trip to Chicago by rail in 6.1 days. Shipping rates, port dwell times, customs procedures, insurance costs, turnaround times and many other factors will influence the decision made by the customer as to which supply chain is used. Competitive supply chains can help domestic customers win new business by offering low prices. For example, a ton of wheat can be moved by rail from Regina to the Port of Vancouver for about $35 a tonne. This incredibly low rate allows grain shippers to compete globally.
One way that governments can help trade-exposed industries is by making investments in the transportation network and working to make them more efficient. If you look at our Class 1 railway infrastructure, it is a model of what the rest of the network should be. It is highly efficient, which is reflected in 24/7 operations, low rates, increased velocity and reduced dwell times. It is well capitalized, with about 20 per cent of revenues dedicated to infrastructure each year. Well-managed, profitable companies attract investor confidence, which allows them to continue the virtuous circle of investment, service improvement and competitive pricing.
But this is not the case for all parts of the transportation network. In the past few years, we have seen bottlenecks occur because of the lack of ice-breaking capacity in the Great Lakes, the lack of 24/7 operations at many ports, a lack of investment in roads and bridges and so on.
As well, transportation infrastructure itself is impacted by climate change. Flooding in the Prairies is more frequent now than it was fifty years ago. In 2013-2014, we saw the biggest grain crop in history, due in part to a longer growing season and crops that can be planted further north. That same year, we felt the coldest winter in 75 years in Canada while the US struggled with a “polar vortex” that saw record snowfalls hamper operations of all kinds across the country.
Trade-enabling infrastructure is of paramount importance to Canada as a trading nation. Our Class 1 railways have demonstrated that, as long as they can operate in a for-profit, commercial context, they will make the investments required to meet a growing economy. However, shortline railways - who largely compete with a subsidized trucking sector, which operates on publicly funded infrastructure (roads and highways) - don’t have the same ability to keep up with infrastructure requirements. Shortlines are key to our ability to offer a sustainable transportation service in support of global trade. They emit fewer greenhouse gas emissions than trucks, and they don’t congest or wear out our roads. For these reasons alone, Canada should set a goal of moving a significant amount of truck traffic to rail. Shifting just 15 per cent of freight traffic to rail from truck would reduce GHG emissions by close to 5.6 megatonnes of C02 equivalent – comparable to removing more than one million cars for a year from the road.
As we move to a lower carbon future, rail is one of the few industries that can help the economy grow while reducing emissions. Investments in our trade-enabling transportation infrastructure can help reduce carbon while increasing our global competitiveness.
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President & CEO
Railway Association of Canada