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The Social Marginal Cost (SMC)
pricing principle has been a pivotal issue in the consolidation of the
European Transport Policy in the last decade. It is also a key topic in the
programmes for R&D in transport co-funded by the Commission to complement
Substantial amount of research
devoted to explore scientific, social and practical requirements/implications
of SMC has substantially increased the ability of assessing costs and
benefits of schemes in which transport prices are determined to reflect the
costs generated by transport activities. While confirming that such schemes
are very complex to implement, European R&D has delivered important
results in three areas: Determination of costs
that vary as a result of transport activities, opening the way to new, more
accurate, accounting methods; Understanding of the
complex bundle of acceptance and acceptability issues inevitably associated
with a pricing regime with deep implications on user behavior (not to mention
based on discrimination among users almost by definition); Advance on IT applied to
transport (such as systems to support vehicle identification and electronic
fee collection) allowing to differentiate prices in accordance to vehicle and
trip characteristics (including over space and time). Despite these progresses,
application of SMC-based transport pricing regimes remains limited, if any,
in the European Union. The most obvious reason behind delay in/resistance to
move towards SMC in real world has to do with the fact that it could further
exacerbate difficulties in funding transport investment. By assuming the
point of view of potential private parties in potential partnerships with the
states in the provision of transport services and/or infrastructure, namely
in the ability to transfer to the private sector some responsibilities in the
operation and building of transport assets, this consortium’s interpretation
of the tender specifications for the Task Design Appropriate Contractual
Relationships is that what is being asked is a in-depth investigation on the workings
of Public-Private Partnerships ( Understanding this impact
and the feasibility of the participation of the private sector entails
understanding not only the behaviour of the (rational) agents involved, but
also how those agents, formally or informally, relate to each other. This
means understanding how information is (unevenly) spread, how risk is priced
at the individual level and by the relevant markets. These information
asymmetries and the incentives necessary to actively engage parties with
mostly conflicting objectives will be approached through the use of Incentive
and Contract Theory. The ENACT project has
several objectives: To understand and describe
the incentive framework and associated risks within which the involved
parties, as rational economic agents, play their roles in To understand and describe
the role of financing, financial markets and associated risks in the
development of PPPs in the transport sector; To devise ways to
incorporate the principles of Social Marginal Cost Pricing into
public-private partnership schemes, taking into consideration the players’
incentives and the risks involved; To establish a Common European Policy and Regulatory Framework for the
application of public-private partnership to Transport.
This project addresses directly part of
Objective 4 of Priority 6.2 – Sustainable Surface Transport: Increasing Road,
Rail and Waterborne Safety and Avoiding Traffic Congestion. The ENACT project aims to devise
effective ways to implement optimal pricing schemes in transport, without
significantly hindering the increasing usage of Public-Private Partnerships ( A long line of research has proved that,
theoretically, socially optimal pricing schemes in transport lead to optimal
usage of transport, by internalizing negative (and positive) externalities
into the price of transport and, consequently, leading to socially efficient
(and optimal) individual decisions on transport use. Nevertheless, transport
undertakings, be they infrastructure or service related, are characterized by
heavy initial investments and significant fixed costs, which render marginal
cost pricing ineffective in addressing budgetary considerations and, as a
whole, provoking naturally chronic deficits in transport service providers or
transport infrastructure managers. It has been up to the states to ‘pick up
the tab’ of those deficits, in a vision framed by the notion that it is the
state’s obligation to provide a minimum level of transport availability to
all citizens. However, the last decades have also
witnessed three distinct ‘heavy’ trends that led to a substantial change in
how society as a whole faces the issue of transport and mobility provision: 1. Exploding usage of road and air
transport, which are increasingly leading to serious problems of congestion
with the consequential impacts in the quality of environmental conditions
and, generally, in the competitiveness of the European economy, due to the
increase of time losses imposed by congestioned road and air infrastructure; 2. Increasing awareness of the negative
externalities imposed by the unbalanced use of some modal alternatives
to the detriment of others; 3. Budget constraints faced by European
States, which hinder the immediate implementation of measures to eliminate
major transport bottlenecks. The European Commission’s White Paper:
“European Transport Policy 2010: Time to Decide” summons these heavy trends
and points the way for a change in how transport provision is faced by
European governments and societies. Among the objectives set in this
document, the most relevant to the ENACT project are: 1. The introduction of market forces in
the provision of transport services and/or infrastructure, with the state
increasingly assuming one or both of two distinct roles: (i) purchaser of transport services
(including infrastructure services and/or; (ii) regulator, as regulated competition
is introduced increasingly in the transport sector; 2. A wider introduction in the
user-payer principle, with particular emphasis in equalizing the playing
field between competing modes; 3. Pricing transport taking into
consideration the external effects of transport usage in order to achieve (or
at least, approximate) individual choices to socially optimal outcomes,
bearing in mind political and budgetary restraints (second-best alternatives
to optimal pricing schemes). In a somewhat parallel process, the full
development of Public-Private Partnerships, in the provision of public
services and/or assets, has evolved in a general context of optimization of
public resources, general budgetary constraints and the development of very
sophisticated financial markets. This also holds for the transport sector.
However, the participation of the private sector in the provision of public
assets and services assumes that, whatever the contractual arrangement
between the public sector and the private party, adequate returns on
investment, on a strictly financial perspective, must be allowed to occur. Particularly for the transport sector,
given the innate characteristics of most of the projects concerned, this
means that Social Marginal Cost Pricing will hardly ever be possible. And so
there seems to be a trade-off between the ability to attract private
financing, expertise and efficiency, and the attainment of social objectives,
such as the efficient and optimal use of transport from a societal point of
view. This trade-off assumes an increasing
importance to the extent that there seems to be a growing trend in the usage
of The recent mid-term review of the
Commission’s 2001 White Paper, containing an evaluation of the current
political and transport situation, its impacts on transport policy and
recommendations for future action, reinforces the importance and role of A major orientation principle
remains that project risks should be identified (on a life cycle basis) and
attributed to the party best able to carry them. Member States report
large infrastructure deficits including lack of maintenance and Cohesion and
Structural Funds can represent an important value if used with smart
procurement to stimulate all forms of The ENACT project aims to find a balance
and devise ways to, the extent possible, conciliate the principles of application
of Social Marginal Cost pricing within Public-Private Partnerships in the
provision of transport infrastructure/services in order to approximate
pricing for transport to the socially optimal levels (at least, to
second-best solutions) and enhance a more efficient, rational and balanced
use of resources available, avoiding congestion through the correct pricing
of those resources. |
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Project no. TREN / 07 / FP6TR / S07.68526 / 038558 Instrument: SPECIFIC TARGETED RESEARCH OR INNOVATION PROJECT Thematic Priority: 6.2 - SUSTAINABLE SURFACE TRANSPORTS |
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