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Rail Infrastructure Charging in the European Union

Berlin University of Technology W orkgroup for I nfrastructure P olicy. W I P. Rail Infrastructure Charging in the European Union. Benedikt Peter bp@wip.tu-berlin.de, http://wip.tu-berlin.de. Objectives of this Presentation. Is the EC legislation in line with economic theory?

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Rail Infrastructure Charging in the European Union

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  1. Berlin University of Technology Workgroup for Infrastructure Policy WIP • Rail Infrastructure Charging in the European Union • Benedikt Peter • bp@wip.tu-berlin.de, http://wip.tu-berlin.de

  2. Objectives of this Presentation • Is the EC legislation in line with economic theory? • Structure of EU15-tariff systems • Recommendations for rail infrastructure tariff systems

  3. EC Policy on Track Charges • Directive 2001/14/EC • Charges are to be set at the cost directly incurred as a result of operating the train service • Mark-ups can be applied to recover the total costs, if the market can bear this • External costs can be charged for • Further exemptions for investment projects •  Marginal costs with mark-ups

  4. Objectives of Pricing • Efficient resource allocation • Static perspective: welfare maximization • Dynamic perspective: incentives for dis(investment) • Cost recovery • Cost Components of Rail Infrastructure • C(z,q,v) = F1(z) + F2(z,v) +c(z,v,q) • q: traffic volume • z: characteristics of the infrastructure • v: characteristics of the vehicles • F1: common fixed costs • F2: blockwise variable costs • c: variable costs

  5. Pricing Principles I • 1. Short Run Marginal Cost Pricing • Allocative efficiency (static) • Welfare maximisation, minimal exclusion • Allocative efficiency (dynamic) • Only little information about z and v in price • Cost recovery • Deficit • 2. Ramsey Pricing • Allocative efficiency (static) & cost recovery • Maximization social welfare under the constraint of deficit coverage • Allocative efficiency (dynamic) • Only little information about z and v in price

  6. Pricing Principle II • 3. Fully distributed costs (FDC)-pricing • Allocative efficiency (static) • Less than MC- and Ramsey-pricing • Allocative efficiency (dynamic) • Only little information about z and v in price • Cost recovery • full deficit coverage • 4. Non-linear tariffs • Allocative efficiency (static) and cost recovery • Maximize social welfare under the constraint of deficit coverage • Pareto superior to linear tariffs, if cost-coverage ratio is defined • Allocative efficiency (dynamic) • Fixed parts, blockwise fixed parts and variable part: information on z, v, q • Problem • Price Distortions on downstream market  welfare loss

  7. Result 1 • No dominant pricing principle • FDC can be ruled out • A pricing system has to be adapted to the specific situation of the infrastructure manager • Directive 2001/14/EC: SRMC with mark-ups • EC legislation in line with economic theory • non-linear pricing only as an exception?

  8. Marginal Cost Pricing in the EU I • Examples Sweden and Finland • A circulation fee is charged in both countries: • for freight transport in Finland € 0.001223 per gross tkm, in Sweden € 0.0003 per gross tkm (Finland: additionally € 0.19 per ton transported) • for passenger transport in Finland € 0.001189 per gross tkm, in Sweden € 0.00093 per gross tkm (cf Austria: 0.001 per gross tkm for both freight and passengers) • Finland: charge for environmental and accidental costs • € 0.000182 per gross tkm for electric freight transport • € 0.000584 per gross tkm for diesel freight transport • € 0.000098 per gross tkm for passenger transport • Sweden • Diesel charge of € 0.036 per litre for old passenger and freight vehicles and € 0.018 per litre for newer vehicles • Accident charge of € 0.118 per train-km for passenger transport and € 0.059 per train-km for freight transport

  9. Marginal Cost Pricing in the EU II • Evaluation • No differences of MC according to infrastructure characteristics • Only rough differentiation according to vehicle characteristics • Differences in the height of the mc per gtkm between Finland and Sweden • Freight Train (690 gt, 342 km) • Sweden: approx €100 • Finland: €204

  10. steam traction  1,20 out-of-gauge-load  1,50 regional factors  1,05- 2,45 Fplus  8,30 €/train-km F1  3,38 €/train-km F2  2,24 €/train-km F3  2,17 €/train-km F4  2,07 €/train-km F5  2,05 €/train-km F6  1,92 €/train-km Linear Tariffs in the EU I Germany Source: DB Netz

  11. Linear Tariffs in the EU II • Evaluation • Regional passenger trains: around € 2 – 10+ per train-km • Freight trains (less than 1200 t and less than 160 km/h): approx. € 1 - 4.5 per train-km • max price for a long-distance passenger train path (not from Koeln-Frankfurt) € 7.3 per train-km • Freight Train (690 gt, 342 km): € 657 - 1469 • Cross-subsidization or demand-based pricing?

  12. Non-Linear Tariffs in the EU I Example France Source: RFF • Variation of the access fee (on some line categories: modulation factor reaches from 0.03 (for ten paths per months or less) to 1.5 (for more than 1000 path per month) • Freight trains (train-run >= 300 km or average speed < 70 km/h) 60 % access fee reduction • Reduction of access fee for long-term contracts

  13. Non-Linear Tariffs in the EU II • Evaluation • Freight Train (690 gt, 342 km): variable part € 80, reservation fee € 0-28, access fee (major intercity line) € 0-638 per month (incl. 60% reduction) • No variation according to train weight • Access fee per section, not for the network as a whole ( Spain) • Access fee neutral according to the operator’s choice of route ( Italy)

  14. Tariffs in the EU I • Pricing Principles • SRMC-pricing: Finland, Sweden, Netherlands • FDC-pricing: Portugal, partly in the UK • Non-linear tariffs: UK, France, Italy, Spain, Luxembourg, partly in Denmark • Ramsey-elements: in many countries for freight, German regions, … • Structure of tariff system stretches from … • One linear price in the Netherlands (passenger and freight) • … to • Self-selecting tariff with peak-load pricing and network segmentation in France (approx 200 different tariffs) • Height of charges (Freight train, 690 gt, 342 km) stretches from … • Approx €100 in Sweden (€0.28/km) • …to • €1980 in Switzerland (€5.80/km)

  15. Tariffs in the EU II

  16. Tariffs in the EU III

  17. Tariffs in the EU IV

  18. Recommendations • A tariff system should consider the costs of use and the demand • Costs of use • Short run marginal costs as base price, including renewal • Considering different infrastructure and vehicle characteristics • Demand-based mark-ups • According to origin and destination • Considering intermodal competition • Time-based variation: time of day, week, season • according to train-types and respective capacities • Further research necessary for the charging of scarcity

  19. Elements of Variable Costs • Internal Costs • Operating costs, that can be traced to a particular train movement, e.g. for personnel and signalling, • Wear and tear costs for maintenance and renewal of the infrastructure • Costs for energy consumption (electricity or diesel) • Additional timetable planning and administration costs • External Costs • Accidents • Pollution • Global warming • “Capacity costs” • Congestion? • Scarcity

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