Transport Days in Molde 2005 User Payment versus Public Funding

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Transport Days in Molde 2005User Payment versus
Public Funding

• Chris Nash
• cnash_at_its.leeds.ac.uk
• Institute for Transport Studies,
• University of Leeds

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Outline

• Introduction
• Development of the Commissions policy
• Research into marginal social cost pricing
• Studies of existing pricing practice
• The implications of implementing the recommended
  policy
• Problems in implementation
• Conclusions

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Development of EC Policy

• Green paper Towards fair and efficient pricing
  in transport (CEC, 1995)
• White paper Fair payment for infrastructure use
  (CEC, 1998)
• White paper on Transport Policy (CEC, 2001)
• Directive on Rail Infrastructure charges
  (2001/14)
• Proposal to amend Directive 1999/62/EC on the
  charging of heavy goods vehicles (CEC, 2003)

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Marginal Social cost of Transport Infrastructure
Use

• Cost imposed by additional use on the
  infrastructure provider (mainly maintenance and
  renewals).
• Marginal cost imposed on other infrastructure
  users, in terms of delays, congestion, accidents
  and opportunity costs.
• Cost imposed outside the transport system mainly
  environmental cost, but also some elements of
  other costs such as accidents.

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Criticisms of the MSC Approach

• Measurement is complex
• Equity is ignored
• Dynamic effects, including investment decisions
  and technology choice, are ignored
• Financing issues are ignored
• Institutional issues are ignored
• Price distortions elsewhere in the economy are
  ignored
• Administrative costs

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The Impact Pathway Approachfor the
quantification of external costs caused by air
pollution
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Valuation issues

• Damage to property, crops etc. at market prices
• Health and amenity effects at willingness to pay
• Binding constraints at opportunity cost
• (e.g. global warming?)

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Measurement of Willingness to Pay
Revealed preference E.g. choice of
airline Stated preference Hypothetical choice
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Example I
Value of a statistical life Range 0.75 2.5 m
euros Preferred value 1.5 m (but 3 m for
environmental effects 150,000 euros per life
year lost)
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Example II
Noise Use of house price studies to measure
the Noise Sensitivity Depreciation Index Value
chosen 0.9 (range 0.08 2.22)
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Example III
Global Warming Abatement cost to meet Kyoto
targets 20 euros per tonne (range 5 38)
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Costs of road transport for European countries
in 1998, as a percentage of GDP
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The existing situationI Road Transport

• Generally vehicle owners pay an annual fixed sum
  plus fuel tax.
• Otherwise urban roads remain unpriced, (exception
  three Norwegian cities, London)
• Some countries have supplementary tolls on
  motorways, or require purchase of a vignette
• Introduction of kilometre based hgv charges in
  Switzerland, Austria, Germany
• Proposals for revision of Eurovignette do not
  fully internalise externalities

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Marginal cost and revenue analysis by type of
vehicle and time of day (Great Britain, 1998)
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The Existing SituationII Rail Transport

• Charges must be based on costs directly incurred
  as a result of operating the train service
• They may include
• Scarcity
• Environmental costs
• Recovery of the costs of specific investments
• Discounts but only where justified by costs
• Reservation charges for scarce capacity
• Compensation for unpaid costs on other modes

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Track access charges per train km. (euros)
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Impact of efficient transport pricing - urban
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Impact of efficient transport pricing
inter-urban
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Conclusions

• there are serious distortions in current prices,
  especially in urban areas and for heavy goods
  vehicles
• reasonable estimates may be made of marginal
  social cost, and of the implications of its
  implementation although big uncertainties remain
• more sophisticated pricing systems need to be
  subjected to social cost-benefit analysis but
  potential gains appear substantial.
• See www.imprint-eu.org