Why reform transport prices An overview of European transport infrastructure charging policy and res

1
Why reform transport prices? An overview of
European transport infrastructure charging policy
and research

• Chris Nash, Bryan Matthews and Batool Menaz
• Institute for Transport Studies,
• University of Leeds

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Outline

• Introduction
• Development of the Commissions policy
• Research into the principles of transport pricing
• Criticisms of the approach
• Studies of existing pricing practice
• The implications of implementing the recommended
  policy
• Problems in implementation

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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

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price
marginal social cost
                                       
p
demand
volume
q
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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 EC 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 existing situation I

• 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.
• Generally long distance public passenger
  transport, freight transport by all modes, ports
  and airports operated on a commercial basis.

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The existing situation II

• Switzerland distance based HGV charge in 2001
• Germany proposes to introduce a distance based
  HGV toll for the use of Germany motorways in
  November 2003
• Britain proposes to implement a distance based
  toll for the use of the entire UK road network in
  2006.

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Implications of marginal cost pricing

• Urban areas
• Oslo the car traffic reduction is estimated as
  8-10
• Singapore 15 reduction in overall traffic
  levels
• London average reduction of traffic of 17 in
  the first 8 weeks of the scheme

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PETS modelsChanges in passenger prices(ECU/100
passenger km)(change compared to 2010 base
situation)
Source PETS project results
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PETS modelsChanges in passenger demand( change
compared to 2010 base situation)
Source PETS project results
12
PETS modelsChanges in Freight Prices(ECU/100
tonne km)(change compared to 2010 base situation)
Source PETS project results
13
PETS modelsChanges in Freight Demand( change
compared to 2010 base situation)
Source PETS project results
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Implementation issues- roads

• Need to consider policy packages
• Need to give consideration to how revenues are
  spent
• Need to adopt a phased approach to implementation
• Road pricing in congested areas
• Reform charges for commercial vehicles, and
  particularly heavy goods vehicles

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Implementation issues- rail

• For rail, implementation is easier
• Problem of measuring congestion and scarcity
  costs
• Marginal social cost well below average cost
• Second best
• Dynamic incentives

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Conclusion (1)

• Adoption by the Commission of the simple rule of
  marginal cost pricing is remarkable
• In reality, complexities inevitably crowd in
• Institutional issues
• Budgetary issues
• The problems of equity
• The trade off between accuracy and complexity
• Phasing

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Conclusions (2)

• In practice
• the rail Directive takes marginal social cost as
  its base but allows for many exceptions
• The proposed Road Directive takes average
  infrastructure and external accident costs as its
  base but allows differentiation according to
  environmental and congestion costs
• No framework Directive covering all modes has yet
  been published.