Workshop with EU Member States: Work Package BSession 4a – Cost-benefit analysis for transport investments

3 February 2011

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Content

● 1A – The strengths and weaknesses of the ex ante CBA methodologies observed

● 1B – The effectiveness of ex ante CBA as a tool supporting decision-making

Part 1 EX ANTE CBA

Part 2EX POST CBA

● 2A – The utility of ex post CBA

● 2B – Ex post CBA as tool for impact evaluation

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● 1A – Strengths and weaknesses of the ex ante CBA

● 1B – Effectiveness of ex ante CBA as a tool supporting decision-making

EX ANTE CBA

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Scope of ex ante CBA

● Scope of ex ante studies focuses on the main impacts

● Environmental impacts, wider impacts and impacts on other modes are often excluded

Country & project Construction cost

Transport operator impacts

User benefits

Safety Climate change

Air pollution

Noise Wider impacts

Spain, Madrid-Barcelona High Speed Rail

Poland, A2 motorway

Portugal, Algarve rail

Spain, A23 motorway

Greece, Agiou Konstantinou bypass

Ireland, M1 motorway

Greece, Thrassio Kiato rail Single value

Lithuania, IX B road corridor

Slovakia, Bratislava-Raca rail

Hungary, M0 motorway

Key: included using monetary values in CBA not included using monetary values in CBA

1A

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Overview of ex ante analysis

EC Guidelines

Choice of marginal values

Unit costs

● Good compliance with EC guidelines

● In some instances significant divergence from HEATCO unit values (e.g. for time savings)

● Unit costs are not available except in the main at a Level 1

Adherence to guidelines, but are guidelines sufficient?

1A

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Demand forecasting

Demand forecasting is the foundation for a CBA

● Dominance of ‘sketch’ models

● Scope limited in terms of network, time periods, modes.

● No details available on model validation

● Significant journey time errors were present in one ex ante CBA

● Forecasting simplistic

● Based on external growth factors in the main

● Only 5 studies considered re-assigned traffic

● Only 4 studies included induced traffic

Demand forecasting

1A

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Sensitivity tests omittedSensitivity tests undertaken

Risk analysis

● Future economic growth

● Changing traffic growth

● Changing fuel prices

● Cost overruns/underspend

● Varying the discount rate

● Growth in marginal values over time

● Operating cost values changing over time

● Change in project scope (more or less interventions included)

● Project delays/early completion

● Length of the appraisal period

● Future population growth

● Additional development

● Impact of other transport infrastructure schemes

● Impact of pricing policies

Risk analysis has been undertaken, but not all risk bearers identified

1A

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● 1A – Strengths and weaknesses of the ex ante CBA

● 1B – Effectiveness of ex ante CBA as a tool supporting decision-making

EX ANTE CBA

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Pros and cons of using ex ante CBA

● Pros

□ Prioritisation

□ Efficient use of resources

□ Financial viability

□ Choice between alternatives/options

□ Optimise timing

● Pros

□ Ensures transparency

● Cons

□ Lack of alignment with policy objectives

□ Too much transparency

● Pros

□ Focuses on ‘easy’ to measure direct impacts

● Cons

□ A lack of understanding of CBA by officials and politicians

□ Partial analysis

□ Modal comparisons difficult

Technical Political Practical

1B

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Use of CBA in the 10 case studies

● Limited role of these 10 CBAs in Member States’ decision-making

● Why is this the case?

Compliance with EC CF application requirements (9)

Ensure value for money (6)

Choose alignment (2)

Choose design standards (2)

Prioritise elements of national transport strategy (1)

Allocate budget and optimise timing (0)

1B

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Part 1: Ex ante CBA - Questions

1A – Strengths and weaknesses of CBA

● Reasons for divergence of unit values used from HEATCO?

● Why doesn’t ex ante CBA play a more significant role in strategic decision-making?

1B – CBA as tool to support decision-making

● Obstacles to more developed demand modelling and risk analysis?

● Need for additional guidance / regulation (e.g. externalities)?

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2A – Utility of ex post CBA?

2B – Ex post CBA as tool for impact evaluation

EX POST CBA

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POPE – England’s Highways Agency ex post programme

The merits of an ex post programme

● Objective

● Have impacts of highway schemes materialised?

● What lessons can be learned?

● Method

● Before data collection

● 1 yr and 5 yr after opening studies

● Findings:

● Has improved transparency and accountability

● Improved practice and development of new techniques (includes bi-annual meta-analysis)

● Strengthened evidence base

Ex post CBA is seen as an asset by UK transport authorities

2A

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What is the utility of ex post CBA?

● Definition of counterfactual

● Background impacts can dominate transport impacts

● Simultaneity in the opening of transport investments

Definition of counterfactual

Institutional memory loss

Indirect effects take time to feed into land use and the economy

Majority of benefits still occur in the future (there is a need to forecast)

Needs a monitoring programme

2A

Challenges and requirements faced with ex post CBA

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2A – Utility of ex post CBA?

2B – Ex post CBA as tool for impact evaluation

EX POST CBA

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Is ex post CBA an appropriate tool for impact evaluation?

Pros

Cons

Alternatives

● Focuses on direct impacts and externalities

● Monitoring programme is more straight forward than alternative ex post methods

● Gives a single indicator of a project’s worth that avoids double counting

● CBA output may not align with policy objectives

● Suffer from the same challenges and requirements, and may be more difficult to undertake

2B

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Part 2: Ex post CBA - Questions

● Potential benefits and costs of an ex post evaluation framework in your country?

● Do you think that such a framework would be financially viable?

● Is ex post CBA a good methodology to capture relevant impacts?

● Should it be complemented or replaced by other methodologies?

● Timing of ex post evaluation?

2A – Utility of ex post CBA?

2B – Ex post CBA as tool for

impact evaluation

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