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Enhancing the Cost Benefit Analysis of High Speed Rail

Enhancing the Cost Benefit Analysis of High Speed Rail. Chris Nash Research Professor C.A.Nash@its.leeds.ac.uk. Outline. History and Objectives Costs and benefits Examples Conclusions. Origins and objectives of HSR. (HSR = speeds of 250 km per hour or more)

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Enhancing the Cost Benefit Analysis of High Speed Rail

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  1. Enhancing the Cost Benefit Analysis of High Speed Rail Chris Nash Research Professor C.A.Nash@its.leeds.ac.uk

  2. Outline • History and Objectives • Costs and benefits • Examples • Conclusions

  3. Origins and objectives of HSR • (HSR = speeds of 250 km per hour or more) • 1964 Tokaido Line Speed and Capacity • 1981 Paris-Lyon Speed and capacity • 1981 Rome-Florence (1st section) Speed • 1988 Fulda-Wurzberg Relief of bottlenecks • 1992 Madrid-Seville Speed • 2008 European total 5558km • World 10034 Source: UIC

  4. Motivation for HSR • Speed • Capacity • Reliability • Economic Development • Environment • Supply industries • Prestige • Political integration

  5. Costs and Benefits COSTS • Capital costs • Net Operating costs • Net External costs (environment, safety) BENEFITS • Time savings • Additional capacity • Diversion from other modes • Generated traffic • Wider economic benefits

  6. Typical costs of HSR in Europe (m2004 euros) Capital costs Infrastructure Construction (per km) 12-40 HS1 – 70 per km HS2 - 95 per km Operating costs – note very high utilisation

  7. Value of Time Savings for rail Passengers in the UK Source: DfT: WEBTAG Unit 3.5.6 (www.webtag.org)

  8. Value of time - issues • Should we have different values of leisure time by mode? • How should time spent waiting and interchanging at airports be valued ? • Is the business value of time lower if time spent travelling can be usefully employed? • What if journeys start and finish out of normal working hours? • Does marginal productivity theory work at this level of detail? • Do savings in labour cost lead to equivalent increases in GDP?

  9. Capacity benefits • Increased traffic on hsr route • Increased traffic on other routes • Reduced overcrowding • Improved reliability NB For HS2 Estimated underlying growth in rail traffic 3.6% per annum WCML long distance trips per day: 2008 45000 HS2 in 2033 145000

  10. Benefits of diversion from car or air • Reduced congestion • Environmental pollution • Accidents • Release of airport capacity for long distance flights

  11. Before and After High Speed Market Shares Source: COST318 (1996).

  12. Energy consumption by mode (MJ per pass km) • Inter city train at 44% load 0.5 • High speed train at 49% load 1.08 • High speed train at 70% load 0.76 • Air (500km flight) at 70% load 2.57 • Diesel car on motorway at 36% load 0.94 Source CE Delft (2003)

  13. External Costs (eurocents per km) Benefits come largely from reduced congestion

  14. Generated traffic(valued at half the benefits to existing traffic) • Leisure • Commuting • Business Does this reflect relocation of business or net expansion?

  15. Wider economic benefitsfrom generated traffic Causes? labour supply agglomeration externalities Imperfect competition Within HS2, no labour supply impact assumed Agglomeration benefits solely from commuter journeys up to 75km on conventional rail and road Longer journeys have little impact because of distance decay and small rail market share

  16. Figure 1.1 High Speed Rail in Britain

  17. HS2 Costs and Benefits (b£2009PV)

  18. Ex post appraisal of French high speed line construction Source: Conseil Général des Pont et Chaussées (2006) Annex 1

  19. CBA of Madrid-Seville high-speed train in Spain (millions of 1987 pesetas) * Project life (30 years), GDP growth (2.5%), social discount rate (6%)

  20. First year demand required for breakeven(α = 0.2 θ = 3%) High Low Low High

  21. Research needs Case for HS2 looks strong but research needed: • Cost benchmarking – why are British costs so high and can they be reduced? • Demand forecasting – what are the long run prospects for demand? • Treatment of Risk and Uncertainty in Appraisal • Impact of yield management systems • Value of time – Mode specific values? Business travel time? Time spent at airports? • Environmental costs and benefits? • Wider economic benefits

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