OECD Observer
Transport innovations

“The Red Arrow”, a poem by Paul Durcan, an Irish poet, opens with the line “In the history of transport–is there any other?” Anyone looking at innovation in transport would do well to consider this line. Is history really the history of transport, more than, say, the history of wars and kings, as some would have it? It is a tempting proposition.

The wheel, domestication of horses and sailing ships allowed our ancestors to move beyond their immediate localities. In the 19th century, steam ships and railways dramatically extended the range and speed of human travel. The 20th century belonged to the car, and the number grew from virtually none to over 500 million today. The internal combustion engine has been around for just over a hundred years, and has improved dramatically. Indeed, the modern Mercedes 500 has a smaller engine and is ten times more powerful than its 1901 counterpart, the Mercedes 35. And there were more than 600 significant innovations in cars in the 20th century and more keep unfolding.

There have been dramatic technological improvements. High-speed trains, first in Japan in 1964 and then in France, have given a new elan to rail travel. And the record is impressive. For example, the Tokaido line between Tokyo and Osaka carries 130 million people a year with peak headways of three minutes and an average delay of 24 seconds. The jet engine has transformed air travel into an everyday option for millions of people.

Now, GPS-based route guidance systems are making motorists’ trips easier. In public transport, passenger information systems, providing waiting times for buses and trains, and integrated ticketing have made public transport a much more pleasant experience in many cities. Innovative software has allowed the logistics business to emerge and flourish and, among many other benefits, provides for the transparent tracking of goods along the entire delivery chain.

In fact, simple ideas are often among the most transformative. A container is just a metal box, but it allows goods to be transported and stored in standard ways and on ever larger vessels, vehicles and trains. Entrepreneurs exploited the potential, and this led to massive changes and productivity improvements in ship loading and unloading, to safety and security advances, and to huge transport cost reductions.

Another enormous 20th century innovation is the safety belt, designed by Nils Ivar Bohlin of Volvo in 1959. A simple idea, it has saved millions of lives at very little cost.

And innovations have not just been in technology. Policy innovations, including deregulation in trucking, aviation, and some rail systems, have brought large benefits to economies and consumers. New business models, such as hub-and-spoke networks and low-cost aviation, revolutionised the industry.

But while innovation emerges through normal market mechanisms, it also needs to be steered. Take road safety. Vehicles can now be slowed or braked automatically.

Some cars are already equipped with technologies which intervene directly on the engine. Adaptive Cruise Control, for example, slows the car when it is too close to the vehicle in front and then accelerates to maintain the preselected headway. An Electronic Stability Programme applies automatic braking to bring the vehicle back under the driver’s control. Anti-lock Braking System (ABS) manages the braking as humans cannot react quickly enough to the changing adhesive relationship between tyres and roads. And cars can now park by themselves.

The arguments to use technology to improve safety are overwhelming. Over 1.3 million people are killed in road crashes each year and several million severely injured. We can reduce this enormously by using existing policies and technologies. This in itself would be miraculous. But it would still mean that over half a million people would die on the roads annually. And we cannot reduce this without new instruments and especially technology.

Moreover, while the number of deaths has come down, the number of collisions remains more or less the same. We have reduced the consequences, but not yet made our system safe.

Other modes like air and rail are also much safer thanks to technology, both in precision instruments and IT, as well as construction materials.

Naturally there are obstacles. Technical reliability is not yet assured. Legal barriers are another. These are complicated but will need to be solved if we are to make roads safe.

A second good example of innovation at work in transport is congestion charging. The history of congestion charging illustrates that turning a good idea into good practice is not straightforward. The idea that a charge is needed to close the gap between the private and social costs of using a congested road network in order to make sure the net benefits from network use are as large as possible, is old. Scarcely a less controversial idea exists in economics. However, to decision-makers and to the public, it is not so clear why it would be good to levy a charge on traffic when there is congestion, as this sounds like making a bad thing even worse.

Implementing congestion charging leads to real or perceived gains for some and to losses for others, with the precise distribution dependent on the details of the scheme. Since voters seek to avoid losses and may be unsure how they will fare under drastic policy changes, proposing to introduce congestion charges is a risky political venture. Clearly, public policy leadership is required to turn this good idea into good practice. We can learn from places where some form of congestion charging has been successfully implemented– London, Singapore and Stockholm are examples, and there are value pricing projects on the go in the US.

First, offering alternatives improves acceptance: just like there is usually little resistance to new products as long as no one is forced to buy them, congestion charges are more easily accepted when alternative travel options are offered. Providing a choice between a free road and a tolled road, as is common in France and as is done in many value-pricing experiments in the US, emphasises the idea of offering variety. Improving public transport is another piece of the puzzle.

Second, a pricing system based on rules, such as adapting tolls to different speeds and times, can be easier to accept than systems where prices are decided on less transparent policy processes.

Third, highlighting other benefits, such as less pollution and better quality of life with less traffic, can help. Experience suggests that public support for congestion charging declines as the implementation date approaches, and rises again after implementation. But to what extent is it legitimate to push through a reform on the grounds that experts are convinced it is a good idea, even if public support is weak? Fortunately, congestion charges are not irreversible, so it seems reasonable to take the risk of implementation and then withdraw it, rather than, say, calling a referendum. True, a major communication effort is needed to win enough public support to go ahead. But the real risk is not of bad ideas prevailing, but rather lack of experimentation with good ones.

Decarbonising transport is one of the most compelling motives for innovation in transport today. Emissions from road passenger transport need to decline significantly. Such decarbonisation could be attained by drastically reducing the amount of driving or by strongly reducing the carbon content of road passenger transport fuels. Populations are growing and people will move more, not less. So clearly, the transport sector must reduce the carbon intensity of travel. Technological change is therefore crucial. Improving the fuel efficiency of conventional engines will not be enough. Instead, road transport will have to switch to a different energy base.

This is largely uncharted terrain. Subsidising R&D for alternative energy and putting the right price on carbon may not be enough to guarantee major market shares for low-carbon road transport fuels. The reason is that knowledge of alternative energy sources is not enough to make them marketable as long as the new technology is at even a small cost disadvantage. This situation is likely to persist, given relatively small production volumes for new technologies, such as electric cars, and the strong competitive position of conventional engines.

Instead of just creating good framework conditions, governments may need to get more directly involved, not by muscling in on private initiatives, but by co-operating more closely with private investors, innovators and other actors. There are risks associated with this, because private and public interests are not entirely the same. Governments will make mistakes when deciding on the strategies to pursue, but so will the private sector. Governments may end up paying too much to pursue appropriate strategies, but private companies will lose from some ventures too. The bottom line is that the cost incurred may turn out to be higher if governments and business do not work harder together on what is, after all, an issue of crucial importance for society.

Concretely, then, what could government do to steer innovation towards lowcarbon vehicle technology? In addition to subsidising R&D and charging the right price for CO2 emissions, governments can lead by example, for instance, in their own fleet-purchasing policies, as the French government is doing.

More generally, they can set stringent fuel-economy standards. Standards provide more certainty to manufacturers on what levels of fuel economy to provide than fuel taxes or emission charges. Ideally, long-term time paths are set according to standards, so it is important to commit to these standards, just as it is important to commit to carbon-abatement targets in general. Uncertainty is the biggest enemy of innovation and investment, and only under strong policy can the market reward low-carbon innovation consistently and strongly enough to trigger efforts towards the decarbonisation of transport.

Public support for new technologies may also be justified to stimulate market penetration, to overcome cost disadvantages associated with low production volumes. This poses challenges, including the risk of being forced to pick winners and being locked into providing subsidies. But deciding when to start and end subsidies, and figuring out just how high they should be, is fraught with problems and certainly will not be entirely technology neutral. Phasing out subsidies once they have started is notoriously difficult and extreme care should be taken. Making conventional options more expensive than cleaner alternatives may be a better approach. At any rate, subsidies are useless when political commitment, carbon pricing, standards and other key policy elements are lacking.

In short, governments have a crucial role in helping to steer innovation in the direction wanted. Transport has a rich tradition of both technical and policy innovation. It is a history that is likely to continue.

Poet Paul Durcan was right: transport has indeed played an intrinsic role in human history. It has made the world smaller and more interconnected too. We have also become highly dependent on fast, reliable transport, as the widespread flight disruptions caused by the eruption of the Icelandic volcano Eyjafjallajokul starkly reminded us. The lessons from this are not just technical, but concern the ways in which the sector manages risk and communicates to an increasingly demanding public. That is why transport needs to innovate–not just in terms of technology but also of how the overall sector is managed–if it is to continue to support prosperity and quality of life throughout the world.


Greene, David (2010), “Why the market for new passenger cars generally undervalues fuel economy”, ITF/ JTRC Discussion Paper, 2010-6, January.

 ITF (2010), Greenhouse Gas Reduction Strategies in the Transport Sector, forthcoming. For preliminary version, see www.internationaltransportforum.org/Pub

 Van Dender, Kurt (2009), “Energy policy in transport and transport policy”, in Energy Policy, Vol 37, Issue 10.

For an analysis of congestion charging and how to get them right, see www.internationaltransportforum.org/jtrc

©OECD Observer No 279 May 2010