Open issues in the practice of cost benefit analysis of transport projects

Grimaldi, Raffaele and Beria, Paolo (2013): Open issues in the practice of cost benefit analysis of transport projects. Published in: General Proceedings of the 13th World Conference on Transport Reseach.

Abstract

Cost benefit analysis is the commonly used tool to evaluate transport investments. Despite its diffusion, both the technicalities and the purpose of the analysis differ among countries. This paper focuses on some common issues and lacks still present in the evaluation of transport projects, in the light of the most recent contributions in the literature. We try to clarify two open issues: the treatment of the mode shifting component of induced traffic, the treatment of lost fuel taxes due to mode shift and of generated fare revenues and the evaluation of impacts during construction and maintenance. Moreover the paper describes and discuss the use of some advanced techniques: the use of conversion factors to assess the shadow value for labour costs and public funds, the treatment of wider economic effects, the use of distributive analysis and the use of risk analysis.

• Item Type: MPRA Paper
• Language: English
• Keywords: cost benefit analysis, transport project, consumer surplus
• Subjects: D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R41 - Transportation: Demand, Supply, and Congestion ; Travel Time ; Safety and Accidents ; Transportation Noise

References

Abelson, P. and P. Hensher. 2001. “Induced travel and user benefits: clarifying definitions and measurement for urban road infrastructure,” in Hensher D. and K. Button (eds.): Handbook of transport systems traffic control, Handbooks in Transport 3. Elsevier, Pergamon;

Åkerman J. (2011), “The role of high-speed rail in mitigating climate change: The Swedish case Europabanan from a life cycle perspective”, Transportation Research Part D, 16, 208–217.

Berechman J., Paaswell R. E. (2005). Evaluation, prioritization and selection of transportation investment projects in New York City, Transportation, No. 32: 223-249.

Beria P., Giove M., Miele M. (2012), “A Comparative Analysis of Assessment Approaches. Six Cases from Europe”, International Journal of Transport Economics, 2, 179-306.

Bonnafous A. (1987), “The regional impact of the TGV”, Transportation, Vol. 14, No. 2, pp. 127-137

Campbell H. F., Brown R.P.C. (2005), “A multiple account framework for cost–benefit analysis”, Evaluation and Program Planning, No. 28, pag. 23–32.

CEDEX (2010), Economic evaluation of transport projects: guidelines, Centro de Estudios y Experimentación de Obras Públicas, Ministerio de Fomento, Spain.

Cohen J.P. (2010). The broader effects of transportation infrastructure: spatial econometrics and productivity approaches. Transportation Research Part E, No. 46 (2010): 317–326.

Copenhagen Economics and Prognos (2004), Economy-wide benefits. Dynamic and strategic effects of a Fehmarn Belt fixed link, Danish Ministry of Transport and German Federal Ministry of Transport Building and Housing.

Del Bo C., Fiorio C. and Florio M. (2012), “Shadow Wages for the EU Regions”, Fiscal Studies, 32 (1), 109–143.

DfT (2009), NATA Refresh: Appraisal for a Sustainable Transport System, Department for Transport, London (UK).

DfT (2012), Transport Analysis Guidance, Department for Transport, London (UK). Website: http://www.dft.gov.uk/webtag

DG Regio (2008), Guide to cost-benefit analysis of investment projects, Structural Funds, Cohesion Fund and Instrument for Pre-Accession, Directorate General Regional Policy, European Commission.

DoT (2009), Guidelines on a Common Appraisal Framework for Transport Projects and Programmes, Department of Transport – An Roinn Iompair, Ireland.

EC-EIB (2005), RailPAG: Railway Project Appraisal Guidance, European Commission and European Investment Bank.

Eugenio J.L. (2010). The impact of transport infrastructure projects on spatial and distributional equity. Working Paper. Project: Socio-economic and financial evaluation of transport projects: Centro de Estudios y Experimentación de Obras Públicas (CEDEX), Ministerio de Fomento, Madrid (ES).

Flyvbjerg B., Bruzelius N. and Rothengatter W. (2003), Megaprojects and risk: An anatomy of ambition, Cambridge University Press (UK)

Gilchrist, A. and Allouche E. N. (2005), “Quantification of social costs associated with construction projects: state-of-the-art review”, Tunnelling and Underground Space Technology, 20, 89–104

Graham, D. (2007). Agglomeration, productivity and transport investment. J. Transp. Econ. Policy, 41-3: 317–343.

HEATCO (2003), “Deliverable 5: Proposal for Harmonised Guidelines”, HEATCO - Developing Harmonised European Approaches for Transport Costing and Project Assessment, Sixth Framework Programme 2002 – 2006, European Commission.

Holl A. (2004a), “Manufacturing location and impacts of road transport infrastructure: empirical evidence form Spain”, Regional Science and Urban Economics , Vol. 34, No. 3, 341–363.

Holl A. (2004b), “Transport infrastructure, agglomeration economies, and firm birth. Empirical evidence from Portugal”. Journal of Regional Science. Vol. 44, No. 4, 693–712.

HS2 (2011), Valuing the Benefits of HS2 (London – West Midlands), April 2011, High Speed Two Limited, London (UK).

Kidokoro Y. (2004). Cost benefit analysis for transport networks. Theory and application. Journal of transport Economics and Policy, vol. 38, part 2, 275-307.

Krutilla, K. (2005). Using the Kaldor-Hicks Tableau Format for the Teaching and Practice of Project Appraisal and Policy Analysis, Journal of Policy Analysis and Management, Volume 24, Issue 4: 864-875

Maffii S. (2012), “Nota critica sull’Acb della Nuova linea Torino-Lione” [in Italian], in: Baccelli O. and Pasquali F., Analisi Costi-Benefici: Analisi globale e ricadute sul territorio, Quaderno 08, Osservatorio collegamento ferroviario Torino-Lione, Turin (Italy).

Maffii S., Parolin R. and Scatamacchia R. (2012), Guida alla valutazione economica di progetti di investimento nel settore dei trasporti [in Italian], Franco Angeli, Milano (Italy).

Mohring H. (1993). Maximizing, measuring, and not double counting transportation-improvement benefits: a primer on closed- and open- economy cost-benefit analysis. Transportation Research part B, Vol. 27B, No. 6, 413-424.

Morisugi H. (2000). Evaluation methodologies of transportation projects in Japan. Transport Policy 7 (2000) 35-40.

Morisugi H., Ohno E. (1995), Proposal of a benefit incidence matrix for urban development projects, Regional science and urban economics, No. 25, 431-481, Elsevier

Network Rail (2009), Comparing environmental impact of conventional and high speed rail, London (UK).

OECD (2011), Improving the Practice of Transport Project Appraisal, ITF Round Tables, No. 149, OECD Publishing. Olsson N. O. E., Økland A. and Halvorsen S. B. (2012), “Consequences of differences in cost-benefit methodology in railway infrastructure appraisal: a comparison between selected countries”, Transport Policy, Volume 22, July 2012, Pages 29-35, ISSN 0967-070X, 10.1016/j.tranpol.2012.03.005.

Prud’Homme R. (2007), On the Economic Evaluation Methodology Proposed by RailPAG, working paper.

Steer Davies Gleave (2004), High speed rail: international comparisons. Final Report, Commission for Integrated Transport, London (GB).

Svobocla, M. (2008). History and troubles of consumer surplus. Prague Economic Papers. No. 3, 2008: 230-242.

TEC (2012), “Induced Travel: Evaluating Benefits”, Transportation Benefit-Cost Analysis, Transportation Economics Committee, Transportation Research Board (TRB), website: http://bca.transportationeconomics.org/

The World Bank (2005), Transport Note No. TRN-11: treatment of induced traffic, Notes on the Economic Evaluation of Transport Projects, Transport Notes, Transport Economics, Policy and Poverty Thematic Group, Washington, DC (USA).

Venables A. J. (2004), Evaluating urban transport improvements: Cost-Benefit Analysis in the presence of agglomeration and income taxation, CEP Discussion Paper No 651, Centre for Economic Performance, LSE, London (UK).

Vickerman R. (2007). Cost - benefit analysis and large-scale infrastructure projects

Westin, J., & Kågeson, P. (2012). Can high speed rail offset its embedded emissions?. Transportation Research Part D: Transport and Environment,17(1), 1-7.