Ricci, 20 November 2003 Pricing relevance of external costs calculation: recent results Andrea Ricci - ISIS Istituto di Studi per l’Integrazione dei Sistemi

Ricci, 20 November 2003

Pricing relevance of external costs calculation: recent results

Andrea Ricci - ISISIstituto di Studi per l’Integrazione dei Sistemi

[email protected]

www.isis-it.com

International Symposium on Road PricingKey Biscayne - November 19-22, 2003


This presentation

• Why external costs are relevant to pricing

• Some recent results from EU studies

• Sensitivity of costs (and charges) to situational factors

• Deriving charges at country/network level

• Implications of the recent EU directive (proposal) on HGV charging


Definitions

Externalities are changes of welfare caused by economic activities without being reflected in market prices

External costs are those borne by individuals other than those who have induced them (e.g. society as a whole). They remain such until they are incorporated in prices (internalisation)


Pricing relevance of external costs

• Price levels are critical to CBA– revenues– acceptance/success– macro economic implications– etc.

• The EU perspective (research and policy orientation): getting prices right– cost based prices: the users pay principle– MSC-based => knowledge of real (social) costs, including externalities– priority to HGV

• Evidence from EU projects– RECORDIT (HGV)– UNITE


Results from RECORDIT

• External costs calculated over more than 9000 km of road network (segments of variable length)

• Air pollution, Noise, Accidents, Congestion, GHG, LCA

• …and Infrastructure Costs (wear and tear)

• Mostly bottom-up (IPA), EU-wide reduction target for GHG

• Current payments (taxes and charges)

• Charge derivation at corridor/segment level

• Generalisation at country level


Infrastructure charges

Marginal infrastructur

e costs

Taxes

Marginal external

costs

Social charge

Existing situation MSC

pricing

Social charge = Marginal external costs - Taxes - Net infrastructure payments

Derivation of charge


Preston

Trafford Park

Felixstowe

Rotterdam

Basel

Chiasso

Genova Voltri

Short sea shipping

Inland waterway shipping

IER-University of Stuttgart

Genova - Manchester

€cents/v.kmExt.costs

Taxes+charges

Extracharge

Italy 27.6 26.7 0.9

Switzerland 42.8 22.6 20.2

Germany 24.4 13.8 10.5

Netherlands 26.7 13.4 13.3

UK 29.8 25.6 4.2


Barcelona - Warsaw

€cents/v.kmExt.costs

Taxes+charges

Extracharge

Spain 94.1 16.3 77.8

France 25.4 34.4 -9.1

Italy 27.7 45.6 -17.8

Hungary 30.7 15.5 15.2

Slovakia 33.1 10.9 22.1

Poland 31.3 9.8 21.6

Barcelona

Lyon

Milano

TorinoTrieste

Budapest

Warsaw

Lijubliana

IER-University of Stuttgart


Air pollution costs (€cents/v.km)

0 6.5 13.0 19.5 26.0 32.5 39.0 45.5 52.0

Urban Road

Car PetrolEURO 2

Car DieselEURO 2

HGVEuro 2

Inter urban

Car PetrolEURO 2

HGVEuro 2

UNITE CASE STUDIESOTHER STUDIES


Noise costs (€cents/v.km) 0 7.0 14.0 21.0 28..0 35.0 42.0 55.0 80.0

Urban

Cars -day

Cars -night

HGV –day

HGV –night

Inter urban

Cars -day

Cars -night

HGV –day

HGV –night



Congestion costs (€cents/v.km)

0 4.3 8.5 17.0 34.0 67.5 135.0 270.0 540.0

Urban

Urban areas

Interurban

Passengers cars

Freight



Sensitivity to situational factorsAmsterdam - Bilbao

NLAmsterdam-Roosendaal

BRoosendall-Lille

FRLille-hendaye

ESHendaye-Bilbao

22,2

16,0

26,6

26,8

22,6

15,3

-1,7

40,9

44,9

31,3

25,0

67,6

Taxes & charges

Ext. costs

Extra charge


Sensitivity to situational factorsAmsterdam - Bilbao

NLAmsterdam-Roosendaal

BRoosendall-Lille

FRLille-hendaye

ESHendaye-Bilbao

22,2

16,0

26,6

26,8

22,6

15,3

-1,7

40,9

44,9

31,3

25,0

67,6

Taxes & charges

Ext. costs

Extra charge

However, on the “Paris” section (ca. 80 km):

FRParissection

13 39,352,3


Cou

ntry

Tax

es

Austria 0.14Croatia 0.12Denmark 0.09France 0.14Germany 0.13Greece 0.17Hungary 0.11Italy 0.09Netherlands 0.15Poland 0.14Slovakia 0.12Slovenia 0.12Spain 0.12Sweden 0.09Switzerland 0.16UK 0.34Average 0.15

Ext

erna

l cos

ts

0.360.260.330.310.300.400.350.300.290.280.390.540.330.240.360.360.32

Ext

ra c

har

ge

0.350.190.330.170.220.300.290.220.220.200.330.470.210.190.350.200.21

Infr

astr

uct

ure

net

pay

men

t

-0.13-0.06-0.090.00-0.05-0.07-0.06-0.01-0.08-0.06-0.06-0.050.00-0.04-0.15-0.18-0.05

Charge derivation at country level(MSC based)


HGV charge derivation: 3 scenarios

• Scenario 1:– Full internalisation of all (MSC) externalities (air pollution, noise, accidents, global warming, congestion)– Only wear and tear of infrastructure (no investment recovery)

• Scenario 2:– Only accident costs are internalised

– All infrastructure costs are passed on to the users: wear and tear + costs of provision of infrastructure (flat rate: 15 €cents/v.km)

• Scenario 3:– as Scenario 2, but– flat rate of 10 €cents/v.km)


Charge simulation: S1 Vs S2

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

Full internalisation EU dir(15)


Charge simulation: the 3 scenarios

-10,00,0

10,020,030,040,0

Full internalisation EU dir(15) Eu dir(10)


Conclusions

• External costs matter, and they can be calculated

• High variability reflects sensitivity to situational factors

• Need to capture all important cost drivers in price setting mechanism

• Simplified approach (EU directive) may provide an acceptable approximation

• Current pricing practice is largely distorting


For more information

UNITE (www.its.leeds.ac.uk/projects/unite)

RECORDIT (www.recordit.org)

www.isis-it.com

or ask:

Andrea Ricci: [email protected]

Documents

Ricci, 20 November 2003 Pricing relevance of external costs calculation: recent results Andrea Ricci - ISIS Istituto di Studi per l’Integrazione dei Sistemi