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European Commission: 2014 Handbook on External Costs of Transport

Transport activities give rise to environmental impacts and accidents. In contrast to the benefits, the costs of these effects of transport are generally not borne by the transport users. The internalisation of external costs means making such effects part of the decision-making process of transport users. This handbook outlines a model for the internalisation of external costs which will serve as a basis for future calculations of Infrastructure charges.

Update of the Handbook on external costs of transport (January 2014)

This new 2014 Handbook on external costs of transport continues to present the state of the art and best practice on external cost estimation. In comparison to the 2008 Handbook, it takes into account new developments and progress in the following fields:

  • Large new databases on noise, accidents and emission factors,
  • New and updated models,
  • Updated estimates of important input parameters,
  • Research identifying additional health effects
  • Case studies and marginal cost calculations.

The 2014 Handbook also integrates infrastructure costs – previously tackled in a separate report –and provides updated and more detailed country and area specific estimates of marginal external cost estimates.”

Updated unit values for congestion costs – rail

The study of the existing literature did not reveal many new sources (as compared to the 2008 Handbook) of marginal congestion or scarcity cost estimates for rail, air, or water transport that could be recommended as a best practice methodology. However, it is obvious that some national methodologies for pricing infrastructure access do take account of the variation of traffic flow e.g. according to time of the day and type of path (e.g. for rail), which suggests that the scarcity of slots at peak hours has an impact on the level of charges.

For rail transport, recent overviews of national practices in charging for infrastructure access have been carried out by the International Transport Forum (2008) and in the DICE Database (2012). Annex G includes an overview of access charges presented in these two sources. The introduction of the ERMTS (standardised signalling developed to be used within Europe, but used elsewhere as well) has had a major impact on the reduction of delays in rail transport, both freight and passenger. The minimum headway between trains on some heavily used lines could be reduced to 2-3 minutes using the ERMTS level 2 (UNIFE, 2012). If true marginal congestion costs for rail transport
were to be calculated, these facts must also be taken into account.

The marginal cost estimate for freight rail congestion as contained in the most recent version of the Marco Polo calculator (Brons and Christidis, 2013) is €0.2 per 1000 tkm (average for EU27, in 2011 prices). This number is derived from the studies reviewed in the 2008 Handbook. The average is calculated by assuming equal freight rail congestion costs in most EU countries at the level of €0.1 per 1000 tkm. For Italy, the estimated unit cost is €0.25, for Germany and France €0.4, and for Belgium and the Netherlands €0.5.
Jansson and Lang (2013) have developed a new methodology to evaluate the external delay costs in rail transport. In the application for passenger transport in Sweden, the authors estimate, how the marginal cost-based charges (initially limited to external costs for wear and tear, maintenance, emissions etc.) would change if delays due to additional departures were also taken into account.

For example, if an additional departure of a commuter train leads to a delay of two minutes in the network shared with high speed trains, the authors estimate the marginal external cost effect of this delay to correspond to a 25% increase in the commuter train fare for this additional journey, and a 5% increase in the fares for high speed trains. Overall, Jansson and Lang (2013) suggest that charging for delay costs should be introduced for the operators in the market that cause large negative external effects and whose customers have low valuation of wait and delay time (operators of commuter trains, in the example above). However, introducing such pricing schemes in practice may be difficult.

Updated unit values for air pollution costs

The air emissions from diesel-driven rail transport are in general evaluated in the same way as emissions from road transport. A special treatment must however be given for electrically powered trains, for which emissions must be inferred indirectly based on the fuel mix of the power plants in the given country. These indirect emissions are covered later on in Chapter 7 on the costs of up- and downstream processes.
The major pollutants from diesel fuel combustion and the corresponding damage costs (area-specific for PM) are the same as described in the sections on road transport above. The damage costs are provided in Table 15. The most recent and consistent overview of exhaust emission factors (per kg of fuel input) from diesel-driven trains is contained in the dedicated Railways Guidebook of EMEP/EEA (2009a). In order to calculate unit costs for the EU, these emission factors are combined with the data on traffic flow and fuel use stemming from the TREMOVE v.3.3.2 database. It allows differentiation between passenger and freight trains as well as differentiation between urban and non-urban passenger trains. In addition, TREMOVE differentiates between locomotive-driven passenger trains and railcars (i.e. multiple units – meaning modern trains without an explicit locomotive unit, but where each railcar has its own engine). Types of trains in TREMOVE are differentiated by load factors (freight) and occupancy rates (passenger).
transport costsIn contrast to road transport, there is lack of a methodology for calculating non-exhaust emissions from rail transport (Abbasi et al., 2013). The recent EMEP/EEA Guidebook 2013 also lacks information on this topic. One source that provides non-exhaust PM emission factors from freight rail transport is CE  Delft (2011, p.28). They provide an estimate of 15 grams of PM10 per train-km, which is 2-3 times more  than the amount of exhaust PM emissions. This evidence suggests that wear and tear PM emissions  are a more important source of external costs for rail transport, than the exhaust PM emissions. The  unit costs summing up the exhaust and non-exhaust emissions are given in  Table 21. For lighter passenger trains the non-exhaust emissions are assumed to be 10 grams of  PM10 per train-km for high-speed trains and 6 grams for other trains (these assumed rates are  proportional to average TREMOVE energy use figures, as a proxy for weight). For electric trains, only  costs of wear and tear PM emissions are reported in  Table 21.

Marginal infrastructure costs

The topic of rail infrastructure costs was not included in the 2008 Handbook. The calculation of these  costs however has important policy implications. In the course of railway liberalisation in Europe, the  network operators were obliged to reveal information about the costs that form the basis for the  determination of network access charges (Directive 2001/14/EC). These charges must be based on a  transparent methodology, with the direct cost of operating the railway service (plus a reasonable rate  of return) forming a lower bound for such a charge.  The correct differentiation of the charge for different types of users is only possible if the marginal
costs are calculated, that account for the specific contribution of different users to the total costs of  infrastructure wear and tear. Most recent joint efforts in order to establish methodological  recommendations for the Member States in this respect were undertaken in the course of the CATRIN  project (Wheat et al., 2009). The starting point for the top-down calculations is the following  representation of the marginal cost:
Marginal cost = (Average cost) x (Cost elasticity)
First, the relevant cost must be identified. Most studies concentrate on the maintenance costs only.
This includes:
 permanent way costs,
 signalling and telecoms costs,
 electrification and plant costs.
More rarely, renewal costs are also considered. Network-wide overheads, however, are not relevant  for determining the optimal infrastructure use charges.  The cost elasticity can consist of several components, depending on the data availability and policy  needs. The components of elasticity could quantify the impact on the total cost of:
 total amount of traffic (track usage)
 type of track (electrified or not; dedicated freight or mixed line)
 type of train (passenger, freight; regional, intercity, etc.)
 speed regime

In CATRIN case studies for Great Britain, Austria, Sweden, Switzerland and France, the cost estimates are differentiated between passenger and freight and the cost elasticities are given only for three traffic density ranges (in tonne-km per annum). Cost elasticities are generally in the range of 0.1-0.35, meaning that marginal cost-based prices will require substantial mark-ups if the full cost of maintenance and renewals is to be covered, let alone a contribution made to investment costs (Sanches-Borras et al. (2010)).

Overall, the following findings from the literature are important to note before some results are presented:
 Impact of traffic density. Many studies refer to the U-shaped form of the traffic elasticity, meaning that the reported econometric estimates of this elasticity decrease with density at low density values, and then increase when density reaches some threshold value (often close to the mean). According to some recent findings (Gaudry and Quinet (2013)), this effect is not always present. What remains true is that the background traffic amount is a very important factor for the level of marginal costs.
 Ratio of passenger to freight marginal costs. Most studies find that the marginal costs for freight trains are substantially lower than for passenger trains (1.5 to 7.5 times, according to the estimates in Wheat et al. (2009)). Gaudry and Quinet (2013) name the following reasons for this phenomenon: repairs on passenger-only lines must happen much faster and are thus more expensive; segments with a large proportion of freight trains do not require a high level of quality; due to shortage of funds, freight lines are more likely to get cheaper preventative maintenance rather than more expensive curative maintenance.
 Type of econometric model. Modern econometric techniques allow the use of estimating models with nonlinear parameters. This may lead to a revision of older estimates using exclusively linear models.
 Power function for load damage. For road transport, the fourth-power law (see next section for an explanation) is applied to allocate damage costs to vehicles with different axle load. In rail transport, the dominant view is that the relation is simply linear. Gaudry and Quinet (2013) present some indication that non-linear relationships with the power factor greater than unity may be plausible, but there is no strict proof of this so far.

Link to 2014 Handbook on external costs of transport http://ec.europa.eu/transport/themes/sustainable/studies/doc/2014-handbook-external-costs-transport.pdf


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