Scientific research on the funding possibilities for large transport infrastructure investments in the EU
The trans-European transport network (TEN-T) includes 30 priority projects, which are predicted to cost €225 billion. The White Paper "European Transport Policy for 2010: Time to Decide" raised the difficulty of mobilising capital as one of the main obstacles to carrying out infrastructure projects. Recent EU research projects have covered optimal pricing of existing infrastructure and good use of transport revenue in the presence of social marginal cost pricing. In this project the emphasis was placed on optimal charging and investment to fund new infrastructure.
The principal aim of the FUNDING research project was to develop a scientifically sound approach to the funding of large transport infrastructure investments in the EU. Two different avenues were explored for the funding of these investments. The first was the creation of an EU transport infrastructure fund financed by mark-ups on transport activities. The second was the use of mark-ups on the users’ costs charged by the infrastructure suppliers that make the investment.
The economics of infrastructure funds and the mark up method were first explored conceptually. The conceptual phase led to the formulation of a limited number of alternative scenarios for a European infrastructure fund and for the use of mark-ups. These scenarios were adjusted as a function of the financing gaps that were calculated for the horizon 2020 by mode and country given the accepted TEN investments. The financing gap was computed using the SCENES - TREMOVE baseline 1995-2020.
Two models were used to test the performance of the alternative infrastructure fund and mark-up scenarios: a multi-modal spatial general equilibrium model of the EU; and a multi-modal pricing and investment assessment model (MOLINO II), which was applied to five important "TEN" infrastructure projects. This case study approach will enable the effect of infrastructure fund scenarios on each of the investment projects to be examined in terms of financial structure, advancing or delaying the investment decisions, the pricing decisions and on welfare.
The final report of FUNDING gives answers on why and when transport infrastructure aid is needed, from an economic point of view, from an equity point of view. The report focuses on the 30 TEN-T priority projects.
The D7 final report can be downloaded here (pdf).
Transport & Mobility Leuven cooperated in Deliverable 3.
In this report (D3) we study the possibilities of financing an infrastructure fund through additional levies on the transport sector. Firstly, revenues from pricing and taxation are computed per mode and per country over the period 2005-2020 for the EU transport baseline scenario. This first objective allows us to assess the current situation as regards revenue raised from taxation on the transport sector and how this compares both with existing costs and with the expected investment costs of the priority TEN-T axes. Next, we calculate how much money we need to raise in the transport sector in each case. A detailed comparison of taxes and marginal external costs is then carried out in order to gain some insights into the most efficient reform of taxes in the transport sector.
The overall conclusion is that more tax revenues can be raised in the transport sector at a limited welfare cost. This welfare cost ratio needs to be compared to the welfare cost of the alternatives (raising general tax revenues outside the transport sector, for which, in the case of labour taxes, the cost could be 1.2 or more) or raising users’ pricing through tariffs or tolls.
The D3 report can be downloaded here (pdf).
2005 - 2007
European Commission, 6th Framework Programme
Olga Ivanova, Griet De Ceuster
KU Leuven (coordinator), ITS Leeds (UK), CAU Kiel (Germany), Free University of Amsterdam (The Netherlands), TUB (Germany), Hebrew University of Jerusalem (Israel), Tampere University of Technology (Finland), AdpC, Technische Universitšt Wien (Austria), Aristotle University of Thessaloniki (Greece), RRG (Germany)
Griet De Ceuster
+32 16 31.77.30
This project has received funding from the European Union’s Sixth Framework Programme for research, technological development and demonstration under grant agreement no 513499