Case Study Switzerland: Railway Investment Fund
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Transcript of Case Study Switzerland: Railway Investment Fund
1ECOPLAN
Case Study Switzerland: Railway Investment Fund
Stefan Suter
ECOPLAN, Economic Research and Policy Consultancy
REVENUE Final Conference
Brussels, 29 and 30 November 2005
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Overview
1. Introduction (Background, questions)
2. Model implementation: MOLINOinGAMS
3. Scenarios
4. Main results
5. Conclusions
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Transalpine freight transport1 Introduction
Key figures for the Swiss corridors:
31.5 mill. tons in 2003
(France: 33 mill.t. Austria: 39.4 mill.t.)
Share of transit transport: 77.8%
(France: 31.5%. Austria: 88.1%)
Modal split: 66% railway
(France: 20.2%. Austria: 25.1%)
HGV Mt-Cenis - Brenner (in 1'000)
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1’200
1’600
2’000
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FranceSwitzerland Austria
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Swiss Policy for Transalpine Transport1 Introduction
Initiative for the Alps 1994: Shift from road to rail
(from more than 1.2 mill. trucks / year down to 650’000!)
Consequence: High political support for rail transport
Instruments
Subsidies for Combined Transport
Distance-dependent Heavy Vehicle Fee (HVF) since 2001 on all
roads
New Alpine Railway Tunnels
Railway investment fund
Alpine crossing exchange (concept, first discussions)
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The new railway tunnels through the Swiss Alps 1 Introduction
Two transalpine base tunnels (approx. EUR 10 billion):
Lötschberg: 34 km, opening 2007
Gotthard: 57 km, opening 2015+
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The railway investment fund (“FinöV” fund)1 Introduction
Federal government• determines
level of revenues• oversees fund
management Debt limit:EUR 2.8 billionFederal Parliament
• approves creditsfor specific projects
HVF (2/3)
Fuel tax(< 25%)
VAT (1‰)
PPP
High speed connections
New Alpine
rail tunnels Noise
reduction
Loans
FinöV
Fund
Improvements of railway network
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Questions1 Introduction
What are the welfare implications of earmarking and cross-financing from the road to the railway sector in the case of given investments (tunnels)?
Would it be welfare increasing to extend railway and road capacity in the Swiss transalpine corridors?
Does welfare increase if transport pricing is adjusted taking into account congestion and environmental costs?
Should these charges be levied in addition to or instead of existing taxes and charges? What is the effect of “over-charging”?
What actors are the winners and losers of different RS?
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Model overview2 Model implementation: MOLINOinGAMS
MOLINOinGAMS: – Partial equilibrium model based on MOLINO
– Implemented in GAMS
2 Modes: Railway and road
4 Users– Passengers low income
– Passengers high income
– Freight domestic (local, import, export)
– Freight transit
Time horizon: 40 years
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Geographical scope
Investment: Extension of
Gotthard tunnel from 2 to 4 lanes
Road link: Gotthard (2015) (80 / 80 km):
Peak vs. off-peak traffic
Erstfeld Biasca
Railway link: Lötschberg-Simplon (2007)
vs. Gotthard (2015) (88 / 68 km)
Thun Brig
Erstfeld Biasca
Investment: Railway base tunnels
2 Model implementation: MOLINOinGAMS
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Pricing
Existing pricing– Railway: Track charges
– Road: Vehicle taxes (regional gov.), Fuel tax, HVF (fed. gov.)
Existing taxation plus internalisation– Existing pricing plus exogenous charges (congestion, environmental costs)
Congestion charging– Marginal infrastructure and marginal external costs: Exogenous cost rates,
implemented as tolls on the link
– Congestion charges: Endogenous, only road (rail: large capacity reserves)
– No full optimisation => not social marginal cost pricing
2 Model implementation: MOLINOinGAMS
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Price changes over time: Example of road freight2 Model implementation: MOLINOinGAMS
0
20
40
60
80
100
120
140
160
180
200
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39
Years
Roa
d fr
eigh
t tol
l (E
UR
/ ve
hicl
e-tr
ip) Existing pricing
Taxation with internalisation
Congestion charging, railway investment
Congestion charging, railway & road investment
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Accounting module
Rail infrastructure operator (public)
Rail infrastructure manager (public)
Road infrastructure operator (public)
Road infrastructure manager (public)
Federal government Local government
Railway investment fund(Lifetime-balanced
budget)
Road investment fund (budget not balanced)
Vehicle tax, fuel tax, labour tax
HVF (1/3)
HVF (2/3)
Subsidyinvestment
Subsidyoperation
2 Model implementation: MOLINOinGAMS
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Pricing of transalpine transport 3 Scenarios: Regulation schemes
- Existing pricing (exogenous)
- Existing taxation plus internalisation (exogenous)
- Congestion charging (endogenous congestion charge)
Road fund
Pricing / taxation
Investments
Railway
Fuel tax HVF
Public Treasury
Track charges
Railway fund
Local/national taxes
Use of revenues
2 new trans-alpine tunnels
Extension of existing tunnel to 4 lanes
Road
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Use of HVF/toll revenues and investment
• No cross-financing (2/3 road investment fund, 1/3 local government)
• Equal distribution (1/3 rail and 1/3 road investment fund, 1/3 local gov.)
• Status quo (2/3 rail investment fund, 1/3 local government)
• Green lobby solution (3/3 rail investment fund)
Road fund
Pricing / taxation
Investments
Railway
Fuel tax
Public treasuryTrack charges
Railway fund
Local/national taxes
Use of revenues
2 new trans-alpine tunnels (2007 and 2015+ = benchmark)
Extension of existing tunnel to 4 lanes (2015)
HVFRP
3 Scenarios = Regulation schemes
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24 scenarios 3 Scenarios = Regulation schemes
Scheme Scenario Pricing Revenue use Investment
A A1 P1: Existing transport pricing
RU1: No cross-financing I1: Two new railway tunnels.
A2 P1: Existing transport pricing
RU2: Equal distribution I1: Two new railway tunnels.
A3 P1: Existing transport pricing
RU3: Partial cross-financing
I1: Two new railway tunnels.
A4 P1: Existing transport pricing
RU4: Full cross-financing
I1: Two new railway tunnels.
A5 P1: Existing transport pricing
RU1: No cross-financing I2: New railway and road tunnels.
A6 P1: Existing transport pricing
RU2: Equal distribution I2: New railway and road tunnels.
A7 P1: Existing transport pricing
RU3: Partial cross-financing
I2: New railway and road tunnels.
A8 P1: Existing transport pricing
RU4: Full cross-financing
I2: New railway and road tunnels.
B B1 P2: Existing taxation and internalisation
RU1: No cross-financing I1: Two new railway tunnels.
B2 P2: Existing taxation with internalisation
RU2: Equal distribution I1: Two new railway tunnels.
B3 P2: Existing taxation with internalisation
RU3: Partial cross-financing
I1: Two new railway tunnels.
B4 P2: Existing taxation with internalisation
RU4: Full cross-financing
I1: Two new railway tunnels.
B5 P2: Existing taxation with internalisation
RU1: No cross-financing I2: New railway and road tunnels.
B6 P2: Existing taxation with internalisation
RU2: Equal distribution I2: New railway and road tunnels.
B7 P2: Existing taxation with internalisation
RU3: Partial cross-financing
I2: New railway and road tunnels.
B8 P2: Existing taxation with internalisation
RU4: Full cross-financing
I2: New railway and road tunnels.
C C1 P3: Congestion charging RU1: No cross-financing I1: Two new railway tunnels.
C2 P3: Congestion charging RU2: Equal distribution I1: Two new railway tunnels.
C3 P3: Congestion charging RU3: Partial cross-financing
I1: Two new railway tunnels.
C4 P3: Congestion charging RU4: Full cross-financing
I1: Two new railway tunnels.
C5 P3: Congestion charging RU1: No cross-financing I2: New railway and road tunnels.
C6 P3: Congestion charging RU2: Equal distribution I2: New railway and road tunnels.
C7 P3: Congestion charging RU3: Partial cross-financing
I2: New railway and road tunnels.
C8 P3: Congestion charging RU4: Full cross-financing
I2: New railway and road tunnels.
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Price changes (vs. benchmark)(average prices, 2000-2040)
4 Main results
Freight
PassengerRail
Freight
PassengerRoad
Congestion charging
Peak Off peak
Existing tax. plus
internalisation
Sub modeMode
Increase of price (toll, charge, tax) Decrease of price (toll, charge, tax)
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Earmarking of HVF/toll revenues(existing pricing, investment only in railway tunnels)
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0/3 1/3 2/3 3/3Cross-subsidy from road to railway fund (share of net HVF
revenues)
Cha
nge
of to
tal s
ocia
l wel
fare
(pr
esen
t val
ue,
in %
)
Benchmark
4 Main results
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Earmarking of HVF/toll revenues(existing pricing, investment only in railway tunnels)
Key messages:
Once investment is decided, use a tax with low marginal costs
of public funds (MCF) to finance the investment
Heavy vehicle fee: Low MCF, “Pigouvian-type of tax”
For given investment: Increasing earmarking improves
result (“transport money is cheaper than tax money”)
Neglected: Benefits of an alternative use of the transport
money
Political reasoning: NART and HVF = ONE package
4 Main results
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Investment in rail only or in rail and road?(earmarking: status quo. i.e. 2/3)
4 Main results
0.00
0.10
0.20
0.30
0.40
0.50
Cha
nge
of to
tal s
ocia
l wel
fare
(pr
esen
t val
ue, i
n %
)
New railway tunnels
New railway and road capacity
Existing pricing regime Congestion charging
Benchmark
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Investment in rail only or in rail and road? (earmarking: status quo case)
4 Main results
Key messages:
Investment in both modes (limited switch from road to rail, low
elasticity of substitution)
Important limitations:
- Alpine-specific and growth impacts: Neglected
- No analysis of alternative road investments
- Misinterpretation = “Gotthard road tunnel is most urgent”
Too low road transport prices increase pressure to invest:
Potential welfare gains under the existing pricing regime are
higher than with “Congestion charging”
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Pricing rules(earmarking: status quo case)
4 Main results
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Ch
ang
e o
f to
tal s
oci
al w
elfa
re
(pre
sent
val
ue, i
n %
)
Existing taxation plus internalisation
Congestion charging
New railway tunnels New railway and road capacity
Benchmark
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Pricing rules: Decomposition of effects(earmarking and investment: status quo case)
4 Main results
-2'500
-2'000
-1'500
-1'000
-500
-
500
1'000
1'500
2'000
2'500C
han
ge
of
tota
l dis
cou
nte
d w
elfa
re (
mill
. EU
R)
Welfare transport
Welfare federal gov.
Welfare local gov.
Total welfare change
Existing taxation plus internalisation Congestion charging
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Different pricing regimes (earmarking: status quo case)
4 Main results
Key messages:
A joint view of the welfare effects from pricing and revenue
use is needed
Distributional effects between government levels matter
Best case (full earmarking, existing pricing plus internalisation,
investment in both modes): Relevant welfare gain (EUR 215 /
capita)
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Equity: Domestic versus transit road freight trsp.4 Main results
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
Ch
ang
e o
f d
isco
un
ted
to
tal w
elfa
re (
%)
Domestic freight transport
Transit freight transport
Existing taxation
plus internalisation
New railway tunnels New railway and road capacity
Congestion
charging
Existing taxation
plus internalisation
Congestion
charging
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4 Main results
Key messages:
Freight transport benefits from increased pricing AND road
investment
High relevance of time gains through investment (could also
be through rail investment, e.g. rolling motorways)
Transit freight traffic benefits more than domestic freight
transport (smaller price increase for transit than for domestic,
assumption on truck weight is decisive = specific case)
Equity: Domestic versus transit road freight trsp.
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Policy recommendations5 Conclusions
Using revenues from road pricing to finance investments in
other modes can be welfare improving.
Transport pricing, investment, and revenue use must be
considered together to derive conclusions on efficiency.
Earmarking for transport or not: Benefits of alternatives?
An overall positive effect may still have winners and losers: A
sound analysis of the distributional effects is needed.
Limits: Basis is a partial equilibrium model, a general
equilibrium approach would yield additional insights
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Case Study Switzerland: Railway Investment Fund
Stefan Suter
ECOPLAN, Economic Research and Policy Consultancy
REVENUE Final Conference
Brussels, 29 and 30 November 2005