Restructuring Sweden's railways: the unintentional deregulation
In: VTI särtryck 356A
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In: VTI särtryck 356A
In: Journal of benefit-cost analysis: JBCA, Band 13, Heft 2, S. 224-246
ISSN: 2152-2812
AbstractThis article describes the process from first proposals in the early 1990s to project completion many years later for seven large Swedish road and railway projects. The purpose is to find reasons for the massive cost overruns as well as explanations for why projects are brought to completion despite much higher costs than when the decision to build was made. Cost overruns are set in an institutional context to highlight the interplay among national, regional, and local policymakers. National investment programs are seen as promises by other parts of society, irrespective of whether project costs increase during the process toward procurement and implementation. Another aspect is that the infrastructure manager's administrative framework currently makes it impossible to compare costs in contracts with final cost, meaning that there is no institutionalized learning process in place. Design preparations and the estimation of costs for new projects must therefore be done without an understanding of what has been working well in the implementation of previous projects. While Benefit-Cost Analysis (BCA) played no role in the planning of the seven projects, the article sends a stark warning that early cost estimates provide poor input for assessing project rate of return.
Since 1988, Sweden's railways have been vertically separated with (private or public) train operators paying for the use of government-owned railway infrastructure. The present paper scrutinizes today's charging regime. The revenue from these charges generates insufficient revenue to recover the total spending on infrastructure. The charges may, never the less, be in line with an efficiency-enhancing pricing policy. To answer whether or not this is so, the paper seeks to compare state-of-the-art knowledge about marginal costs for using infrastructure with current charges. It is found that there may be reason to increase charging on at least two counts: Current tariffs fail to mirror marginal reinvestment cost and scarcity is not priced.
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In 1988, Sweden made a vertical cut in its nationalised railway monopoly; since then, infrastructure is handled by a public-sector agency while trains initially were run by a government-owned monopolist. This paper seeks to describe this reorganisation, the subsequent process towards free entry and competition in parts of the sector and the consequences of these changes. It is argued that the policies have not focussed (ticket) prices and competition issues and rather been directed towards the sector's inability to recover costs, which seems to be a Europe-wide phenomenon. Some recommendations for further changes of the industry are suggested. ; Reprint from Swedish economic policy review, vol. 9, no 2, Fall 2002
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In 1988, Sweden made a vertical cut in its nationalised railway monopoly; since then, infrastructure is handled by a public-sector agency while trains were initially run by a government-owned monopolist. This paper seeks to describe this reorganisation, the subsequent process towards free entry and competition in parts of the sector and the consequences of these changes. It is argued that the policies have not focussed on (ticket) prices and competition issues and have rather been directed towards the sector's inability to recover costs, which seems to be a Europe-wide phenomenon. Some recommendations for further changes of the industry are suggested.
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The choice of transport infrastructure projects to include in the National Transport Infrastructure Plans in Sweden is often said to be motivated by the weighing of cost against social benefits. Examining the projects that are included in the Plans, it is clear, however, that not all projects have positive net present values, and are therefore more costly to build than the benefits they create. This paper studies alternative models that might explain the choice of projects. Two political economy models, the district demand and the swing voter with lobbying, are tested, and a model that accounts for the spatial distribution of the projects, as well as the possibility that priorities are based on welfare concerns, is estimated. No support is found for the political economy models. What explains investment volume is the existence of CBA results for a project, which may indicate that welfare benefits have an impact, as do the spatial spillovers from a project's benefits and lobbying, especially by the municipalities concerned.
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Riksdag och regering förfogar över en rad styrmedel för att uppnå de mål som ställts upp för trafikpolitiken. Det finns också politisk enighet om att den så kallade fyrstegsprincipen ska användas för att analysera och identifiera de styrmedel som bör användas för att på det minst kostsamma sättet uppnå de politiskt satta målen. I denna rapport har användningen av fyrstegsprincipen i praktiken diskuterats. En central observation är att det ännu återstår mycket arbete för att omsätta tankarna bakom principen i praktisk handling. I synnerhet saknas information om, och analyser av möjligheten att på ett systematiskt sätt använda ekonomiska styrmedel liksom resurser för drift och underhåll för att genomföra politiken. Mycket talar för att man på detta sätt skulle kunna närma sig målen till väsentligt lägre kostnader än vad som är fallet med de styrmedel som för närvarande står i fokus för uppmärksamheten. Till sin hjälp för att genomföra politiken har regeringen ett antal myndigheter. Vi föreslår att regeringen ger någon av dessa, exempelvis Trafikanalys, i uppdrag att självständigt genomföra de två första stegen av fyrstegsprincipen. Trafikverket genomför på samma sätt som idag en åtgärdsanalys av de styrmedel som inryms inom steg tre och fyra. Skillnaden jämfört med idag är att detta kan ske på grundval av de överväganden som redovisats inom ramen för analyserna av steg ett- och steg tvååtgärder. Det är emellertid ett rimligt krav att i moderna demokratier säkerställa att svåra frågor ges en genomlysning även om de rekommendationer som kommer fram upplevs som politiskt utmanande. ; Sweden's parliament and its government have access to a number of means for implementing overarching policies, inter alia in the transport sector. There is a broad consensus that the four step principle should provide the basic logic for choice of appropriate means for implementation of a policy which is supposed to achieve political objectives at lowest costs to society at large.
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In: Journal of benefit-cost analysis: JBCA, Band 9, Heft 1, S. 120-146
ISSN: 2152-2812
Beginning as a planning tool within Sweden's national road administration some 50 years ago, benefit-cost analysis (BCA) has come to be a pillar of the national transport policy because of subsequent strategic choices made by the national parliament. These choices made it necessary to widen the analysis of costs to include also externalities and a foregone conclusion was that efficient investment priorities should be made based on BCA. But no one asked whether the political decision makers or the BCA models were up to that task. This paper reviews the institutional framework and practice of BCA in Sweden for transport infrastructure investment, and considers design issues that have been and still are debated, such as whether the discount rate should include a risk term and how to account for the marginal cost of public funds. A main concern with BCA results is the underestimation of construction costs, making transport sector projects look better than they are. Several ex post analyses have established that a higher NPV ratio increases the probability of being included in the investment program proposal prepared by the agency. The requirement to let projects undergo BCA seems to make planners "trim" project proposals by trying to reduce investment costs without significantly reducing benefits. This relationship is weaker among profitable projects. Moreover, there is no correlation between rate of return and the probability of being included in the final program, which is established on political grounds.
The purpose of this paper is to describe Sweden's recent reforms to open the railway passenger markets to entry, and to addresses four critical issues for the success of the reforms; the allocation of infrastructure capacity, the provision of maintenance and terminal facilities, the access to rolling stock and the provision of information and ticketing to travelers. The analysis shows that the legislation and regulatory tools that are needed to handle these challenges to a large extent remain to be developed.
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Under some circumstances, the marginal cost approach to infrastructure pricing leads to problems with cost recovery; a pricing policy which ensures that existing assets are efficiently used may not deliver revenue to pay for the costs for maintenance of existing, nor indeed for construction of new infrastructure. For different reasons governments may find this inappropriate and rather want to complement the marginal-cost-pricing principle with a requirement for a sector of the economy to break even. Efficiency would then be jeopardised. The idea behind work package 2 is to establish the micro-aspects of requirements to recover costs over and above marginal costs. This is done for all modes of transport. More precisely, the objective of this report is to establish some core features of how each mode of transport is organised, to describe the implications of cost recovery requirements for each mode and to analyse different mechanisms which would ascertain that each mode covers a larger share of its own costs. ; CATRIN - Cost allocation of transport infrastructure cost
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