"FUNDING": FUNDING Infrastructure: Guidelines for Europe

Richtlinien für einen europäischen Verkehrsinfrastrukturfonds


Applicant: DG TREN, Directorate General for Energy and Transport (European Commission) 

Time Schedule: July 2005 - December 2007

Final Report

Homepage of FUNDING

Project Management

The FUNDING Project consists of 12 partners, which are mainly based in the EU. The project work is divided into 9 work packages. The project co-ordination is carried out by the Catholic University of Leuven.

The Consortium

Participant name

Country

Katholieke Universiteit Leuven

Belgium

Institute for Transport Studies, University of Leeds

UK

Institute for Regional Research (IfR), University of Kiel

Germany

Free University of Amsterdam

The Netherlands

Workgroup for Infrastructure Policy, Berlin University of Technology

Germany

Hebrew University of Jerusalem

Israel

Tampere University of Technology

Finland

Transport & Mobility Leuven

Belgium

adpC

Belgium

Institute for Transport Planning and Traffic Engineering, University of Vienna

Austria

Aristotle University of Thessaloniki

Greece

Büro für Raumforschung, Raumplanung und Geoinformation

Germany

 

General project objectives

The main objective of the FUNDING project is to develop a scientifically sound approach to determine optimal charging and investment in the EU member states and the Accession countries. This implies the following aims:

  • The use of state-of-the art research to assess revenues from pricing and to identify the financing gap per mode, per region and per period of time for the EU15 and the Accession countries.

  • To contribute to the development of a methodology for mark-ups to marginal cost pricing that is applicable to all modes as well as links and nodes. The analysis includes a more detailed analysis of network aspects, the division of power between several governments and operators, quality aspects as well as uncertainty issues.

  • To develop and test a methodology for a European multi-modal infrastructure fund, taking into account the equity and efficiency effects. The possible structures of such a fund, the decision criteria, acceptability, efficiency and spatial equity effects will be studied in the project. A spatial computable general equilibrium model will be used to compare a selection of pricing and revenue use strategies, including different infrastructure fund structures. It allows calculating the economic impacts of these measures as well as the distribution of these impacts for a large number of regions for the EU15 and the Accession countries.

  • To demonstrate the methodology for selected scenarios and geographical coverage. The analysis by the spatial computable general equilibrium will be complemented by more detailed network models for the different modes (road, rail and air). These include models with a European-wide and a more regional coverage.

 

Background:

The 1995 Green Paper on Fair and Efficient Pricing has led to substantial research on transport pricing, much of it financed by EC Framework programmes. The first set of projects (including particularly PETS, QUITS and TRENEN) focused mainly on developing pricing principles, on measuring the various marginal social cost components and on case studies to model the effects of different pricing rules.

Over time more emphasis was laid on implementation issues rather than basic principles. PROGRESS, CUPID and DESIRE concern themselves with the practical issues of implementing road pricing in urban and inter-urban areas, respectively. The UNITE project aimed to provide better information for the transport decision makers in order to help them in their pricing decisions. Two types of information were considered in the project: detailed case studies of marginal social costs for specific circumstances, and estimates of the overall social costs and revenues for national or regional transport systems as a whole. In addition, the project analysed ways of using these two sorts of information in an integrated way to derive appropriate policy conclusions regarding pricing systems that are both efficient and equitable.

Two other projects, AFFORD and MC-ICAM identified the need for policy packages, both to ensure acceptability and to make the most efficient use of revenue. MC-ICAM also adopted the idea of a phased approach, as set out in the 1998 White paper, and studied the reasons why such a phasing might be necessary, in the light of the constraints imposed by implementation barriers and the way in which these might change over time, and to come up with the most efficient and equitable feasible implementation paths.

The work of the past projects was summarised and presented to policy makers through a thematic network named IMPRINT-EUROPE.

Over time it has also clearly emerged that the impact of pricing policies will heavily depend on the use that is made of the revenues generated by transport pricing schemes. This specific issue is addressed in the ongoing REVENUE project which analyses the basic theoretical questions and which will test the theoretical prescriptions on revenue use in a number of case studies. The case studies cover individual projects rather than the whole of the EU.

This proposal aims to examine these revenue use issues further. For this it will build upon the ongoing research of the REVENUE consortium. However, in order to achieve the objectives of the call on optimal investment and charging, the analysis of the REVENUE consortium needs to be extended. For each of the issues put forward in the scope of the call, the following paragraphs identify the complementary analyses that are required and that are integrated in the current proposal.

 

  • Identification of the financing gap per mode, per region and per period of time for the EU15 and the Accession countries: This financing gap is not studied in a systematic way in REVENUE as only isolated case studies are used. We propose a first aggregated analysis of the revenue streams and financing gaps for the EU25.

  • Development of a methodology for mark-ups to marginal cost pricing: This methodology will be developed to a large extent in REVENUE. However, there are a few important elements missing that will be elaborated in this proposal. First of all, we take into account the network externalities that arise when one region or country uses price and investment strategies without taking into consideration the effects on revenues and costs in neighbouring regions and countries. Secondly, we consider the division of power over several governments or operators. Thirdly, we pay attention to the quality of the infrastructure provision and to uncertainty issues.

  • To develop and test the methodology for a European multi-modal infrastructure fund and assess the equity and efficiency effects: This task is not covered on a European scale in REVENUE. The possible structures of such a fund, the decision criteria, acceptability, efficiency and spatial equity effects will be studied in this project. A spatial computable general equilibrium model will be used to compare a selection of pricing and revenue use strategies, including different infrastructure fund structures. It allows calculating the economic impacts of these measures as well as the distribution of these impacts for a large number of regions in the EU25.

  • To demonstrate the methodology for selected scenarios and geographical coverage. The analysis by the spatial computable general equilibrium will be complemented by means of more detailed network models for the different modes. These include models with a European-wide and a more regional coverage.

 

Contribution of the Institute for Regional Research (IfR), University of Kiel (CAU)

Project leader: Prof. Dr. Johannes Bröcker

Project staff: Nils Schneekloth, Artem Korzhenevych (project research)

The Institute for Regional Research as partner of the FUNDING consortium is work package leader for the work package 4: “Testing the European-wide equity and efficiency effetcs of alternative pricing and revenue use strategies”. The CGEurope model, a spatial general equilibrium model for Europe, which was applied in IASON and ESPON 2.1.1, will be used to calculate the economic impacts of alternative pricing regimes and alternative ways of using the revenues generated by these pricing regimes. As regards the revenue use, the reearchers will analyse case in which the revenue is allocated to the transport sector to finance a European infrastructure fund, and the case in which it is used outside of the transport sector, e.g. for a reduction in general taxation. For the first option, several possible structures of the infrastructure fund will be compared. These involve, inter alia, different scopes of the infrastructure fund, whether the revenues should be used for the regions and modes in which they are generated.  The welfare effects of the different policy options will be calculated with the CGEurope model for over 1300 regions within the European Union on NUTS-3 level and on a comparable level for the accession countries as well as a number of external regions.

 

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