Promotion of Low Carbon Urban Transport Systems in the Philippines

Thomas M. Orbos
Policy and Regulatory Specialist

V. Cost Benefit Analysis

Transport is one of the major contributors of air pollution and energy-related GHG that accounts to 34% of the total GHG emission. Accordingly, road transport is the largest contributor (with over 80%).

The PUVMP aims to transform this sector through the introduction of safer and climate-friendly vehicles, improved regulation, and industry consolidation. Moreover, it is expected to improve urban quality of life, reduce economic losses due to tie lost in travel, reduce health costs and premature deaths, reduce GHG emission and improve the economic situation of the operators and industry by improving service quality levels.

1. Cost Benefit Study of PUJs

With its large share in the possibility of contributing low carbon transport, a Cost Benefit Study on alternative technologies for the Philippine Utility Jeepney, conducted on January 2017 by the Blacksmith Institute and Clean Air Asia, was referred. The study has proposed reasonable conclusions around the feasibility and/or advisability over the project.

The study found that the use of electric jeepneys will provide the most return on investment over time, with the assumption that the cost of battery and electric components will eventually go down in the future. On a “per vehicle-technology” comparison, the adoption of Euro 4 (or higher) buses/mini-buses on wide avenues in Metro Manila tends to yield the greatest benefits (particularly in terms of health) as these vehicles improve the emission per-passenger-kilometer performance as they can carry more passengers per vehicle trip.

The study also assessed the cost benefits of the direct importation and local assembly of vehicles. The monetized value of employment, and the income taxes resulting from the local assembly of vehicles, and local sourcing of parts, was found to be slightly lower compared to the lost revenue from importation tariffs should the vehicles be imported directly.

The said study recommended for the following:
▪ Adopt electric jeepneys initially in short and flat routes in central business districts.
▪ Adopt Euro 4 diesel jeepneys in routes where electric jeepneys could not initially be adopted.
▪ Adopt Euro 4 minibuses and buses in financially viable and operationally feasible situations.

The study did not only look into the operational side of public transport modernization, but also the financing mechanisms that can be considered to be in place. It was recommended that the government should provide long-term amortization periods for acquiring replacement vehicles in order to make the monthly amortization levels feasible for owners and drivers. Equity payment support should also be provided to guarantee their participation to the endeavor. In addition to this, the study also recommended for the integration of a vehicle scrapping scheme to the financing scheme to ensure that the old vehicles will not re-circulate back into public transport systems elsewhere in the country. Accordingly, the issuance of a vehicle age limit for the sector is a challenge, but the provision of such – together with appropriate social safeguards – will increase the chances of success as it will initiate the transformational change that the sector needs.

2. PUVMP Cost Benefit Analysis
From the inputs of the above-mentioned cost benefit study and the results presented in this deliverable, it is deemed necessary to present a cost-benefit analysis of the ongoing PUVMP. This a mixture of simple ex ante and ex post cost benefit analysis wherein we will attempt to compute the profitability of the project while deciding whether to fully implement the project as planned or modify its design along the way.
As stated, public mass transportation is the lifeblood of most economies, and it includes the Philippines. Approximately, more than 250,000 PUJs are providing mass transportation in the country. Jeepneys account for around 74 million passenger kilometers travelled in Metro Manila annually and carry about one-half of all peak-period passenger trips in the metro . Despite the significant number it contributes in the mobility of Filipinos, about 10% of the road accidents recorder in Metro Manila involved PUVs, wherein 10,841 (4.97% of the total 218,291accidents) were accounted from buses and 10,296 (4.72% of the total) involved PUJs in 2019 . These numbers represent road accident externalities, and by way of addressing the cost effects of road accidents is the implementation of Passenger Personal Accident Insurance Program in which the accident-death benefit amounts to P150,000 and P75,000 in the event of dismemberment or loss of two or more limbs . As stated in different references, the transport sector are among the major contributors of GHG emissions in the country, and it comes with several health risks and costs that are borne by the drivers, passengers, and other people nearby.

▪ The modernization program shall consolidate existing routes and operations, as well as new configuration of modern jeepneys to carry up to 40% more passengers (maximum of 23 passengers VS 17 passengers of traditional jeepneys); approximately 200,000 PUJs (@P2.4M/unit ) or 80% of the present fleet shall survive the migration to new jeepneys upon the end of program term. In addition, modern jeepneys have ceiling height that will allow an average Filipino to stand in the middle.9
▪ The PUVM includes the replacement of 600,000 traditional tricycles to e-trikes @ P470,000/unit. It also includes 2-3 wheeler vehicles. EVs are available commercially both local and imported. The market offers a variety of EVs such as e-trikes powered with lead acid batteries cost between P200,000-P480,000 and e-jeeps cost up to P2.4M. Other types of EV in the market are the e-shuttles, e-quads, golf carts, e-bikes, e-scooters, e-cars, and e-buses. Some EVs are classified as pure electric (battery powered), Plug-in Hybrid and Hybrid (DOE).
▪ Projected lifetime average repair, maintenance and operating cost of EVs are 40% of the EV’s price for 10 years . Social mitigation cost in the form of subsidy amounting to P160,00010 to cover equity payment for every subscription to modern jeepneys from identified traditional jeepneys.
▪ 22,000 PUV-related road accidents per year @ P150,000 disability/death benefit. Assuming that the PUV-related road accident will be reduced by 10% in 10 years, the 10-year projected cost of risk is @ P2.97B for 198,000 PUV-related road accidents.
▪ P330,000 projected annual salary of driver per unit and P320,000 projected annual profit of owners per unit on boundary system of modern PUJs . Assuming that the return of investment is at 10 years, the projected 10-year salary of drivers will be equivalent to P3.3M while the projected 10-year profit of owners will be P3.2M.
▪ P260,000 projected annual salary of driver per unit and P95,000 projected annual profit or owners per unit on a boundary system of e-trikes10. The 10-year projection will be P2.6M and P950,000, respectively.
▪ Up to 12.33M barrels (158.987 liters) of diesel per year will be saved with the migration to EVs9, equivalent to P73.61B/year (P37.55/liter of diesel). Assuming that the price of diesel will have an average cost of P37.55 for 10 years, the total savings will be equivalent to P736.1B. The projected amount covers the replacement of 200,000 PUJs and 600,000 e-trikes.
▪ Cost of traffic in Metro Manila has risen to P3.5B/day . If computed annually, it costs P1.3T. With the implementation of PUVMP, it is assumed that traffic congestion will be reduced by 20%, equivalent to the number of PUJs that will be removed in the roads. Savings for this is projected to reach P26B, annually.
▪ Applied 10% discount

Table 6: Cost-Benefit Analysis of PUVMP

Item Description Particular Unit Cost Discount Total Cost
Direct Cost Replacement cost of modern jeepneys @ P1.2 million/unit 200,000 PUJs P2.4M 10% P432B
Replacement cost of e-trikes @ P470,000/unit 600,000 trikes P400,000 10% P216B
Maintenance and other operating cost of modern jeepneys @ P480,000/unit 200,000 PUJs P480,000 10% P86.4B
Maintenance and other operating cost of e-trikes @P240,000/unit 600,000 trikes P240,000 10% P129.6B
Indirect Cost Social mitigation cost to cover equity payment @ P160,000/unit 200,000 PUJs P160,000 10% P28.8B
Risk Road accident cost @ P150,000/ victim 22,000 accidents P150,000 10% P2.97B
Total Projected Cost P895.77B
Revenue and Sales Salary of drivers @P3.3M for 10 years 200,000 PUJs P3.3M 10% P44.55B
Owner’s profit @3.2M for 10 years 150,000 PUJs P3.2M 10% P43.2B
Intangible Benefits Improved safety and satisfaction of passengers (10% of road accident cost) 2,000 accidents P150,000 10% P270M
Time savings from reduced traffic congestion @ P26B/year 10 years P26B 10% P234B
Energy savings for 10 years @P736.1B from unconsumed diesel 150,000 PUJs and 600,000 e-trikes 10% 736.1B
Total Projected Benefits 1.056T
Total Projected Benefits: P1.056T
Total Projected Cost: P895.77B
Projected Variance: P160.23B

The project benefits for the implementation of PUVMP in the next 10 years amount to P1.056T, while the total projected cost will reach P895.77B. The projected variance is P160.23B. Based on the projections, a positive result is expected; thus, recommending for the completion of PUVMP in the next 10 years.

Other relevant benefits are the following:

a. The PUVMP require higher injection of capital since the EVs are way expensive than that of traditional PUJs (P2.4M for modern jeepney10 VS P800,000 for traditional jeepneys ) and trikes (P100,000 for traditional trikes VS P200,000-P470,000 for e-trikes ), but the return of investment is higher in terms of driver’s salary and profit of owners.
b. The cost of road accidents is also projected to reduce, the same as the traffic congestion because 20% of the current PUV fleet will be removed.
c. The reduction in traffic will result in time savings which is deemed important in the mobility of goods and services.
d. Energy savings in 10 years is projected to have the greatest benefit. The unconsumed diesel will reduce the emission of GHG and shall positively affect the implementation of low carbon transport system project.

5 Transport NAMA Monitor 2016, Jeepney+ NAMA of the Philippine Government, Transforming Public Transport in the Philippines
6 Department of Transportation and Communication, 1999, Metro Manila Urban Transportation Integration Study, Public Transport, Technical Report No. 9.
7 Metro Manila Accident Reporting and Analysis System Annual Report for 2019
8 Passenger personal accident insurance for public-utility vehicles, Business Mirror-Atty. Dennis B. Funa, November 25, 2014
9 DOTr press release: A More Affordable Modern PUV Unit Alternative for Transport Stakeholders
10 Department of Transportation Department Order No. 2020-006, “An Order Amending Department Order Number 2018-016 to Increase the Equity Subsidy”, June 5, 2020
11 Electric Vehicle Ownership Costs: Chapter 2 – Maintenance, Consumer Reports, C. Harto, September 2020
12 Socio-Economic and Environmental Analyses of Sustainable Public Transport in the Philippines, MDPI, June 5, 2020
13 Press Release: JICA to help Philippines ease traffic congestion in Metro Manila
14 News Article: End of Road for Philippines’ Jeepneys, The Straits Times, Raul Raul Dancel, January 27, 2018
15 News Article: Philippines ‘jeepyneys’ and tricycles: Home Over?, World Asia, Jay Hilotin, February 12, 2019