Workshop with EU Member States: Work
Package B
Session 2 – Summary of findings from case studies
3 February 2011
Content
● Results
□
Ex ante evaluation
□
Ex post evaluation
□
Ex ante vs. Ex post
● Observations for future discussion
● Annexe – detailed results
2
Frontier Economics
● Review of ex ante CBA
● Ex post evaluation
● Ex ante vs. ex post
● Discussion points
● Annexe - detailed results
3
Frontier Economics
Ex ante CBA – quality of the analysis
Good quality of core analysis for areas
covered by guidelines
Review of
Limited analysis of alternative options
ex ante
Cost Benefit
Analysis
Limited use of sensitivity analysis
Documentation available often not
sufficiently comprehensive
4
Frontier Economics
Ex ante CBA – its role in decision making
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)
Projects
5
2
4
6
8
10
Frontier Economics
Ex ante stated objectives
Improve safety (8)
Reduce travel time (6)
Increase capacity/reduce
congestion (4)
Reduce
operating
costs (2)
Improve
connectivity
(2)
Projects
2
6
4
6
8
10
Frontier Economics
Ex ante impacts taken into account in CBA
Impacts on users (Time Savings, VOCs) (10)
Impacts on safety (10)
Impacts on the environment
(4)
Impacts on transport
operators (3)
Other
impacts (2)
Projects
2
7
4
6
8
10
Frontier Economics
● Review of ex ante CBA
● Ex post evaluation
● Ex ante vs. ex post
● Discussion points
● Annexe - detailed results
8
Frontier Economics
Ex post economic evaluation – benefit/cost ratio
9
Frontier Economics
Ex post financial analysis
For non-revenue generating projects the financial NPV is
generally negative and there is no difference between
Low and High case
Ex post
financial
Negative financial IRRs however are to be expected, as
these projects are not meant to be self-financing.
analysis
EC financial contributions are required to ‘unlock’ the
economic benefits identified in the CBA.
10
Frontier Economics
Benefit distribution
140%
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
Railway Spain
Road Poland
Railway Portugal
Travel time
Transport operators
Air pollution
11
Road Spain
Road Greece
VOCs
Safety
Noise
Road Ireland
Railway - Road - Railway Greece Lithuania Slovakia
Road Hungary
Fares
Carbon
Other
Frontier Economics
Wider economic effects
Land Use
Supply
Chain
GDP /
output
Employment
Population
Social
Inclusion
Railway - Spain
✓
✓
?
✓
?
✓
Road - Poland
✓
✓
Railway - Portugal
✓
✓
✓
?
✓
Road - Greece
Road - Ireland
✓
Railway - Greece
✓
Other
✓
?
Road - Spain
✓
✓
✓
✓
✓
✓
Road - Lithuania
Railway - Slovakia
Road - Hungary
Environment
?
✓
✓
?
✓
✓
?
Note: ✓ (Observed effect) ?(Difficult to establish a direct causality)
12
●
It is complicated to establish a causality link between the infrastructure and the observed effects
●
The majority of the effects are related with Land Use, Supply Chain and Environment
Frontier Economics
● Review of ex ante CBA
● Ex post evaluation
● Ex ante vs. ex post
● Discussion points
● Annexe - detailed results
13
Frontier Economics
Ex ante vs. Ex post – reasons for differences
Outturn
investment
costs
Railway - Spain
Railway - Portugal
Population
growth
✓✓
✓
Road - Poland
Economic
growth
Travel demand
✓✓
✓
✓
✓✓
Road - Spain
Opening year
(delay)
Other
✓
✓✓
✓✓
✓✓
✓✓
✓
✓✓
✓✓
✓
✓✓
✓✓
✓✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓✓
✓✓
✓
✓
✓
✓✓
✓✓
✓
✓✓
Road - Ireland
✓
✓✓
✓✓
✓✓
Railway - Greece
✓
✓
Road - Lithuania
✓✓
Road - Hungary
Discount
rate
✓✓
Road - Greece
Railway - Slovakia
Marginal
values
✓
✓
✓✓
✓✓
✓✓
✓✓
✓✓
✓✓
✓✓
✓✓
Note: ✓✓ (Primary reason) ✓(Secondary reason)
14
●
The ex ante evaluation and the ex post evaluation exhibit differences.
●
Most of the discrepancies are related with differences in travel demand, cost overruns
and discount rate used in the analysis
Frontier Economics
Ex ante vs. Ex post - NPV
Overall NPV of the majority of the projects was overestimated in the ex ante
evaluation (except for M1 Northern Motorway in Ireland)
15
Frontier Economics
● Review of ex ante CBA
● Ex post evaluation
● Ex ante vs. ex post
● Discussion points
● Annexe - detailed results
16
Frontier Economics
Discussion points
Satisfactory ex
post BCR
●
With a couple of exceptions, projects have so far delivered positive ex post
NPVs and benefit-cost ratios higher than 1
●
Generally, road projects tend to yield a higher BCR – but:
Road projects
vs. rail projects
Short elapsed
time since
opening
Identification of
wider impacts
Source of
wider impacts
17
●
□
rail projects tend to have higher capital costs by definition
□
core CBA is a partial assessment of impact – does not include all factors that may
make a rail investment preferable to road investment
This raises two issues for ex post evaluation
□
need to make assumptions about future demand (almost like in ex ante CBA)
□
in most cases, wider impacts take a long time to emerge
●
Lack of monitoring since opening makes the identification of wider impacts
particularly challenging (especially for projects implemented as part of a wider
investment strategy, against a backdrop of rapid economic change)
●
Wider impacts mainly come from new infrastructures because of a step change
in accessibility. Socio-economic impacts are more easily identifiable, even
anecdotally. In the case of upgrades, most of the key benefits are already
captured in the core CBA analysis, and wider impacts are harder to identify
against a background of economic and social change
Frontier Economics
● Review of ex ante CBA
● Ex post evaluation
● Ex ante vs ex post
● Discussion points
● Annexe - detailed results
18
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
19
Frontier Economics
Project description
● The LAV (Línea de Alta Velocidad ) Madrid –
Barcelona – French border is a high speed
railway line connecting Madrid to the French
border via Barcelona.
● The LAV between Madrid and Barcelona
covers 621 kilometres, and it was developed
in three stages:
□
Section Madrid – Lleida (442 km): opened in
October 2003
□
Section Lleida – Tarragona (78 km): in
operation since December 2006
□
Section Tarragona – Barcelona (100 km):
operational since February 2008.
● Section Barcelona – Figueres (132 Km) is
still under construction. Expected to be
completed in 2012.
● Project includes 12 subprojects. Total
Cohesion Fund contribution was equivalent
to 72.25% of eligible costs (€1,042m)
20
● Construction of 72 km of rail bed and the
installation of 610 km of railway tracks
● Part of the TEN-T Priority Project 3 (highspeed railway axis of south-west Europe),
whose main objective is to provide highspeed rail connections between the
Iberian Peninsula and the rest of Europe.
Frontier Economics
Results of ex ante and ex post CBA
NPV
(€ million, 2008)
Economic IRR
Benefit / Cost ratio
Low case
-2,736
2.6%
0.6
High case
-1,948
3.7%
0.7
Ex ante
Economic CBA
1,091
6.3%
1.07
Ex ante
Social CBA
4,125
8.9%
1.26
Ex post
Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2009 onwards. High (low)
case assumes 5% (2.5%), 2.5% (1.25%) and 1.3% (0.6%) for short, medium and long run respectively.
Ex ante CBA (May 2001 by INECO) covers the 1997 – 2025 period. It is a single cost-benefit analysis of the
whole LAV (including the Barcelona – French border section, which is not completed at the moment)
Key sources of
discrepancy
between ex ante
and ex post
assessments
Infrastructure
Traffic / Capital
costs
Additional
effect
21
Ex ante CBA analyses the whole line for the 1997-2005 period.
Ex post analyses only the Madrid – Barcelona section for the
1997-2033 period
Ex ante CBA assumes higher number of passengers. Ex post
capital costs are substantially higher
Ex ante CBA includes employment generation in the social
analysis
Frontier Economics
Wider impacts and use of CBA in decision making
Wider
economic
impact
Mobility
Significant increase in the number of passengers. Change in the average
traveller profile. A new type of traveller: the commuter
Tourism
Effects especially in Zaragoza and Lleida. Number of visitors grow, increase the
number of congressional and business meetings and increase of overnight stays.
New
activities
Zaragoza: logistics, international events and business land. (2008 International
Exhibition about Water and PLAZA, a logistics platform). Lleida: the LAV and the
technology park (Parque Científico y Tecnológico Agroalimentario de Lleida –
PCiTAL)
Additional
effects
New industrial park, PLHUS, located near the city of Huesca. It covers an
area of around 1.150.000 m2
CBA in the
decision making
process
22
TO BE UPDATED
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
23
Frontier Economics
Project description
● Construction of approximately
100 km of ‘non-toll’ A2
motorway between Konin and
Strykow
● Total cost: €406m
● Two subsections:
□
Konin to Emilia (€348m)
□
Emilia to Strykow (€58m)
● Total Cohesion Fund
contribution was EUR 325m
(82% Konin - Emilia, 75%
Emilia - Strykow)
● EIB also contributed financing
up to the overall maximum
allowed (90%)
Source: Openstreetmap.org
● Dual two-lane motorway – substitute for a wide single
lane road (the R2), subject to varying speed limits and
route quality
● The R72 (former route between Konin and Lodz) is
similar to R2 and passes through a number of towns
and villages
24
Frontier Economics
Results of ex ante and ex post CBA
Ex post
NPV
Economic IRR
Benefit / Cost ratio
(€ million, 2003 ex post,
2003 ex ante)
(discount rate = 5.5%
ex post, 8% ex ante)
(discount rate = 5.5%
ex post, 8% ex ante)
Low case
523
18%
3.0
High case
900
23%
4.4
1,867
20.2%
3.1
Ex ante
Two cases (Low / High) considered in ex post CBA, based on different assumptions on traffic flows and
speed
Key sources
of
discrepancy
between ex
ante and ex
post
assessments
Value of
parameters
Additional
impacts
Discount rate
Ex post CBA uses updated values for parameters such as value of time,
reduction in VOC, accident costs
Ex post CBA considers some induced traffic and foregone government
revenues, which ex ante CBA does not consider
Ex post CBA uses a 5.5% discount rate. Ex ante uses 8%
Large amount of (gross) benefits generated, in excess of €11billion - reasons for this result have been
investigated
Review of ex
ante CBA
CBA documents not always provide enough clarification regarding key assumptions used in
the analysis (e.g. journey times, split between light and heavy vehicles)
Formal risk assessment not undertaken, even though key risks were identified and some results from
various sensitivity test are available
25
Frontier Economics
Wider impacts and use of CBA in decision making
●
Wider impacts as a direct result of the
scheme are difficult to determine in
quantitative terms
●
A2 regarded as a key enabler of economic
regeneration and development (Lodz Special
Economic Zone)
●
Faster and more reliable connectivity within
Poland and to bordering countries has helped
increase Foreign Direct Investment;
●
Assisted in the growth of Logistics sectors
and has facilitated the emergence of a
broadened industrial base
●
Greater business efficiency and productivity
brought about by improved journey times
●
Quality of life benefits through removing
traffic from built up areas along the parallel
routes (R14 and R72);
●
Increased land values in the vicinity of the A2
and proposed A1 alignment (Strykow)
Lessons
on use of
CBA
26
Source: LODZ SEZ Flexicurity –
Our Key to Success (Lodz Special Economic Zone, 2008)
●
Benefits of scheme partially offset by poor reliability on the R14
between Lowicz and Warsaw;
●
Increased traffic on the R14 has contributed to worsening road
safety, air quality and noise;
●
Increased access to tourist and cultural opportunities; and
●
Some disturbance to agricultural patterns (severance) and animal
movements.
CBA played no role in the choice of the route alignment
As a result of EU guidance, the establishment of CUPT and greater experience of CBA
analysis for EU projects, it is generally felt that the reliability and application of CBA at the
national level is improving.
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
27
Frontier Economics
Project description
● Modernisation of railway link (more than
300Km) between Lisboa (south) and Faro
● The project was subdivided in four
subsections, involving:
□
duplication of the rail track
□
construction (3) and renewal (12) of
stations
□
installation of a new control system to
increase maximum speed
● Total cost: €490m (NPV, 2008 prices)
□
Pinhal Novo to Ermidas + Linha de Sines
(€137m)
□
Coina to Pinhal Novo (€114m)
□
Pinheiro to Km 94 (€12m)
□
Ermidas to Faro (€227m)
● Total Cohesion Fund contribution was
€323m, equivalent to 80% of eligible
costs (€405m)
28
● Modernisation of the railway line, Lisboa
to Algarve (Faro)
● The project is part of the TEN-T Priority
Project 8 (Multimodal axis Portugal/
Spain-rest of Europe – Railway)
Frontier Economics
Results of ex ante and ex post CBA
NPV
(€ million, 2008)
Ex post
Economic IRR
Benefit / Cost ratio
Low case
48.2
6.7%
1.15
High case
79.2
7.4%
1.24
156.7
9.1%
1.6
Ex ante
Two cases (High / Low) considered in ex post CBA, based on different evolution in future passenger volumes
and freight volumes and their impact on operating costs
Ex ante CBA barely complete (insufficient information on key assumptions and no Sensitivity and risk
assessment). Section Coina to Pinhal Novo excluded in this ex ante CBA. Overestimation of time savings
Key sources of
discrepancy
between ex ante
and ex post
assessments
29
Traffic volumes
Forecast traffic in ex ante CBA does not match with actual
traffic outturn in the first ten years of the project
Costs
Differences in the period when capital costs were incurred.
Treatment of foregone fuel tax revenues
Benefit
calculation
Differences in the value of parameters, application of the
“rule of half” and treatment of revenues (REFER and CP)
Discount rate
Ex post CBA uses a 5.5% discount rate. Ex ante uses 5%
Frontier Economics
Wider impacts and use of CBA in decision making
Effects largely captured by the core CBA
Counties (concelhos) that have a direct relation with the Lisbon – Algarve railway
have increased their IPC (Indicador per Capita) with the exception of Setúbal
Wider economic
impact
Additional environmental action: implementation of a noise barrier in Funcheira,
according to legal requirements.
REFER: journey times to Setúbal, Évora, Beja and Faro are normally higher than
for road transport due to limited capacity on the “25 de April” bridge.
Future projects: Lisbon – Porto; Porto – Vigo (Spain); and Lisbon – Madrid (will use
part of the Lisbon – Algarve railway track, specifically the Lisbon – Évora section)
CBA in the
decision making
process
30
Limited role of ex ante CBA in the decision-making process
From discussions with project stakeholders in Portugal it seems that the quality of
CBA has increased, playing now a central role in the project appraisal
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
31
Frontier Economics
Project description
● Construction of approximately 75 km of
‘non-toll’ A23 motorway
● The project was subdivided in four
subsections:
□
Huesca – Nueno (11.5 Km)
□
Monreal del Campo – Calamocha (14.8 Km)
□
Santa Eulalia – Monreal del Campo (21.9 Km)
□
Teruel – Santa Eulalia (26.8 Km)
● Total cost: €247m (NPV, 2010 prices)
□
Huesca – Nueno: €29m
□
Monreal del Campo – Calamocha: €78m
□
Santa Eulalia – Monreal del Campo: €98m
□
Teruel – Santa Eulalia: €43m
● Total Cohesion Fund contribution was
equivalent to 85% of eligible costs (€205m,
NPV, 2010 prices)
32
● Construction of 75 km of ‘non-toll’ A23
motorway in Spain
● Although the A23 is not part of any TEN-T
corridor, it belongs to the European route
E07 connecting Pau in France to
Zaragoza in Spain
Frontier Economics
Results of ex ante and ex post CBA
NPV
(€ million, 2010)
Ex post
Economic IRR
Benefit / Cost ratio
Low case
-27.7
4.6%
0.9
High case
27.6
6.3%
1.1
120.3
9.1%
1.6
Ex ante
Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. We used
5% (i.e. the average annual growth rate for the A23 between 1998 and 2008) for the High case and 2.5% for
de Low case.
Not a unique ex ante CBA for all the 4 subprojects. New segments were not generate induced traffic. Time
saving is the main driver of economic benefit. It more than compensates increase in VOC and fuel
consumptions due to higher speed.
Key sources of
discrepancy
between ex ante
and ex post
assessments
33
Parameters
Ex post: Fuel costs is more that 100% higher while value of
time is approx. 50% higher than in the ex ante CBA
Time saving
Ex post: significant lower minutes saved. Ex ante assumes
27 and 33 mins. and ex post used 13 and 9.3 mins for
cars/LGV and HGV respectively.
Traffic growth
Ex ante CBA assumes around 3% annual traffic growth rate
on the new A23
Frontier Economics
Wider impacts and use of CBA in decision making
New logistic and industrial park, PLATEA, developed by the Government of
Aragón and managed by Platea Gestión S.A.
Teruel
Wider
economic
impact
Industrial aeronautical platform, PLATA, developed by the Government of Aragón
and the Teruel City Council. It is expected to be completed by late 2010
Spanish Government is considering two new road connections, providing
links to the A23 (Alcolea - Monreal del Campo and Cuenca - Teruel)
New industrial park, PLHUS, located near the city of Huesca. It covers an
area of around 1.150.000 m2
Huesca
The technology park, WALQA. It is situated in the outskirts of Huesca, on the
dual carriageway Autovía Mudéjar that directly links to Madrid
CBA in the
decision making
process
34
Ministerio de Fomento - Unidad de Carreteras de Aragon (stakeholder): the
decision to construct the A23 motorway was mainly political.
Economic analysis where carried out to decide on different alternatives on the exact
configuration of the new A23 by the “Demarcación de Carreteras del Estado en
Aragón”
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
35
Frontier Economics
Project description
● Construction of dual two lane
Agiou Konstantinou Bypass
(Motorway Standard)
● Complex structure including
the construction of 7 tunnels
through mountainous
landscape
● Total cost: €317.8m
● Total Cohesion Fund
contribution was €117m (37%
of total cost)
Objectives
•
To increase motorway speeds and
road connectivity between Greece
and other EU countries;
•
To improve safety record;
•
Reduce load/capacity ratio; and
•
Improve journey times
36
Source: Openstreetmap.org
Frontier Economics
Results of ex ante and ex post CBA
Ex post
NPV
Economic IRR
Benefit / Cost ratio
(€ million, 2000 ex post,
2000 ex ante)
(discount rate = 5.5%
ex post, 5% ex ante)
(discount rate = 5.5%
ex post, 5% ex ante)
Low case
233
12.6%
2.1
High case
283
13.4%
2.4
422.1
17.6%
3.1
Ex ante
Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and
therefore Do Something demand – these are shown for the 30 yr assessment (as per the ex ante)
Key sources
of
discrepancy
between ex
ante and ex
post
assessments
Re-assignment and
Traffic Growth
Assumptions
Additional
impacts
Discount rate
Ex post CBA showed that 84% of corridor traffic has switched to the new road
compared to a forecast of 64%. Furthermore post opening traffic volumes were
lower than forecast (recession effects)
Ex post CBA did not quantify the maintenance costs benefits that were
included in the ex-ante appraisals
Ex post CBA uses a 5.5% discount rate. Ex ante uses 5%
No assessment of the monetary impacts of externalities was made e.g. noise, CO2, Air Quality
impacts
Review of ex
ante CBA
There was absence of evidence regarding how the accident benefits were derived and monetised
The CBA was conducted on the assumption that revenues would contribute to the national treasury,
rather than the concessionaire that operates the scheme. No detailed risk assessment was
undertaken as part of the ex-ante appraisal
37
Frontier Economics
Wider impacts and use of CBA in decision making
●
Wider impacts as a direct result of the scheme are difficult to
determine in quantitative terms
●
Removal of traffic from bypassed settlements supports better
urban spatial planning (car parking; pedestrianisation; access to
cultural opportunities; provision of holiday accommodation –est.
2000 new homes) and growth of the tourist industry in particular.
●
Facilitate drainage works to address historical flooding
problems;
●
Anecdotal evidence of improved air and noise conditions;
●
Enhanced access to ferry port in Agios Konstantinos (shipping
route to Skiathos);
●
Creation of better conditions for local economic growth with
faster and more reliable links to Athens, Thessalloniki and
countries north of Greece; and
●
Landscape impacts have been mitigated through construction of
tunnel sections
Only one option considered and therefore CBA played no role in option choice. CBA good tool
for scoping out impacts prior to scheme construction
Lessons
on use of
CBA
CBA doesn’t necessarily fully capture measurable impacts on regional development which
may take time to materialise
EU Guidance on CBA regarded as useful tool for standardising CBA across the community
38
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
39
Frontier Economics
Project description
● Construction of approximately
16.5 km of motorway
between Dublin Airport and
Balbriggan Bypass
Balbriggan Bypass
● Total cost: €232m
● Two subsections:
□
Dublin Airport to Lissenhall
(€163m)
□
Lissenhall to Balbriggan
(€69m)
● Total Cohesion Fund
contribution was:
40
□
€152m
□
65% total costs, 88%
eligible costs
Lissenhall Interchange
Airport Interchange
Dublin
Source: Openstreetmap.org
● Dual two-lane motorway – substitute for a single
carriageway road (the N1), subject to varying speed
limits and route quality
Frontier Economics
Results of ex ante and ex post CBA
NPV
(€ million, 2002)
Ex post
Economic IRR
Benefit / Cost ratio
Low case
3,805
53
17.2
High case
3,905
53
17.6
534
16
5.5
Ex ante
Ex ante CBA was objective and consistent with standards of the day (1995). Used a ‘link based’ only
model.
Traffic flows
Key sources of
discrepancy
between ex ante
and ex post
assessments
Investment costs
Other
41
Current traffic volumes are between 177% and 218% of
those forecast for 2020. Traffic growth was significantly
underestimated due to higher than expected economic and
population growth between 2003 and 2007.
Outturn costs were 58% higher than anticipated in 1995.
Journey time modelling, maintenance costs, accident
predictions, valuation parameters and discount rate
Frontier Economics
Wider impacts and use of CBA in decision making
Difficult to establish causal link between the project and wider impacts:
- Project is small (16km) with respect to overall investment in Ireland’s transport
network
Wider impacts
- Occurred at a time of rapid economic and population growth in Ireland
Linked to expansion of Dublin Airport and growth in Swords (population increased
by 6,500 up 25%)
In Ireland CBA forms an integral part of:
- Public sector expenditure assessment
- Transport appraisal
Use of CBA in
decision-making
With respect to transport :
- Value for money indicators are part of the case made for transport budget to the
DoF
- CBA forms part of route selection, preliminary design and project close out;
- CBA elements form part of a Multi-Criteria Assessment
42
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
43
Frontier Economics
Project description
● Construction of a new grade
separated double track
standard gauge railway line
between Thriasio and Kiato.
Replaces an outdated single
track metric line
● In total the line included four
applications for cohesion
funding
● Total cost: €508.0m Total
Cohesion Fund contribution:
€238.4m (47% of total spend)
OBJECTIVES
● Reduce rail journey times
● Increase revenues and decrease operating costs
● Improve safety
● Improve connectivity to the wider rail network
● Promote mode shift from highway to rail
44
Source: Openstreetmap.org
Frontier Economics
Results of ex ante and ex post CBA
NPV
(€ million, 2000)
Ex post
Economic IRR
Benefit / Cost ratio
Low case
32
6.05%
1.10
High case
258
9.30%
1.79
396
7.3%
1.50
Ex ante
Two cases (Low / High) considered in ex post CBA, based on different assumptions regarding rail
demand originating from beyond Kiato
Key sources
of
discrepancy
between ex
ante and ex
post
assessments
Scope of the
assessment
Ex ante CBA considers the planned future extent of the line to Patra in
the West, rather than the current extent of the line to Kiato
Value of
parameters
Ex post CBA uses updated values for parameters such as value-oftime, value of externalities, accident costs and operating costs
Additional
impacts
Ex post CBA considers the safety benefits of removing level crossings
from the line, this was not considered in the ex ante CBA
Assumptions that future year operating costs would be comparable to costs per passenger
km on existing standard gauge railways in Greece are dependant on comparable utilisation
Review of ex
ante CBA
The CBA does not apply the rule of half to new rail passengers diverted from the highway
Formal risk assessments were not undertaken although the results of various sensitivity test
were presented
45
Frontier Economics
Wider impacts and use of CBA in decision making
●
The scheme has only been open in its entirty for just over three
years, it may take many years for significant social and
environmental impacts to materialise
●
Although new out of town station locations have received some
negative feedback they offer potential for new development sites
and are included in a number of local expansion plans
●
Removal of trains from built up areas has offered local congestion
benefits and associated benefits in terms of noise, air quality and
congestion caused by disruption at level crossings
●
The line has improved gateway access; the line accesses Piraeus
directly where ferries depart to Greek islands, and via interchange
at Piraeus to Athens International Airport.
●
The existing line will contribute to further wider economic benefits if
the line is extended to Patra port, as planned, providing a rail link to
EU markets
Old Metric Line (passing loop)
New Standard Gauge Line
CBA had played no role in the choice of the route alignment as there was little potential for an
alternative route.
Lessons
on use of
CBA
Stakeholders recognised CBA as being a necessary procedure to gain funding and a useful
tool for prioritising options where alternatives can be tested
The OSE Group reorganisation plan for 2010 includes the objective to manage the real
objectives of investments both in terms of feasibility and in terms of economic profitability
46
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
47
Frontier Economics
Project description
● Modernisation of one of the two main
motorway routes in Lithuania.
● The project was subdivided in four
subprojects:
□
2000/LT/16/PT/001: widening and
strengthening of 32.7 km and the
strengthening of 135 km of motorway
□
2002/LT/16/PT/007: widening and
strengthening of 30.9 km and the
strengthening of 70.9 km of motorway
□
2004/LT/16/CPT/003:widening and
strengthening of 37.8 km and the
strengthening of 20.1 km of motorway
□
2004/LT/16/CPT/008:construction of the
Vilnius bypass, a new road 3.2 km long
● The total aggregate cost €154m. Total
amount eligible: €148,8m. Total ISPA /
Cohesion Fund contribution was €121,9m
(82% of the eligible costs)
48
● Modernisation of one of the two main
motorway routes in Lithuania. This is part
of the IX B transport corridor, 315km of
motorway linking the port city of Kleipeda
with the capital city of Vilnius, via Kaunas.
The route then links Lithuania with other
destinations in Eastern Europe.
● The project also involved the construction
of the Vilnius Southern bypass
Frontier Economics
Results of ex ante and ex post CBA
Upgrading of the IX B Corridor
NPV (€ million, 2009)
Economic IRR
Benefit / Cost ratio
Low case
200.3
55%
3.3
High case
212.2
56%
3.4
83.2
21%
2.5
NPV (€ million, 2009)
Economic IRR
Benefit / Cost ratio
Ex post
142.1
29.1%
n/a
Ex ante
111.9
22.8%
4.5
Ex post
Ex ante
Vilnius Southern bypass
Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. High
Case applies growth rates that the LRA assumed in the ex ante CBA. Low Case assumes no traffic growth
Ex ante CBA was carried out separately for the upgrading of the motorway and for the Vilnius bypass
Key sources of
discrepancy
between ex ante
and ex post
assessments
49
Upgrading of the
IX B Corridor
Higher NPV in the ex post CBA driven by higher – than forecast VOC.
Vilnius Southern
bypass
Higher NPV in the ex post CBA driven by higher – than expected traffic volumes
Frontier Economics
Wider impacts and use of CBA in decision making
Traffic flows had grown fasted than assumed in the ex ante analysis
Wider
economic
impact
Socio
economic
impact
3 public logistic centres were set up alongside the route of the IX corridor
Empty lots near the major cities have been developed and turned into
shopping centres as they became more accessible to the public.
Environment
Other
projects
CBA in the
decision making
process
50
Expansion of the Kleipeda Free Economic Zone and the set up of the
Kaunas Free Economic Zone.
Impact of the project on soil pollution, both during construction and
operation, has not been significant,
Vilnius Western bypass and a new outer bypass are being developed
In 1994, the Lithuania Road Administrator (LRA) developed its own CBA guidance
manual. In Lithuania, however, ex ante CBA is not used to choose between
alternative projects competing for limited funding.
LRA uses ex ante CBA as a way to identify the project specifications (such as the
design of a junction) and technologies (such as the asphalt type) that would yield
the best value for money
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
51
Frontier Economics
Project description
● Modernisation and upgrade of
37 km track between
Bratislava Rača and Cίfer,
supporting line speeds of up to
160km/hr. Station upgrades to
all stations between Rača and
Trnava.
● Total cost: €213m
● Two subsections:
□
Rača to Šenkvice track (€46m)
□
Šenkvice to Cífer track and
Rača to Trnava stations
(€167m)
● Total Cohesion Fund
contribution was €127m (75%
of Rača-Šenkvice and 50% of
Šenkvice-Cίfer eligible costs)
● Remaining costs paid for by
the state budget
52
Source: Openstreetmap.org
● TEN-T Corridor Va track upgraded to support line speed
between Rača and Cίfer up to 160km/hr , with station
improvements at all stations shown
● Later applications for funding submitted to improve
sections northbound of Trnava (under implementation)
to complete upgrade from Bratislava – Žilina – Košice
Frontier Economics
Results of ex ante and ex post CBA
Ex post
NPV
Economic IRR
Benefit / Cost ratio
(€ million, 2008 ex post,
2001 ex ante)
(discount rate = 5.5%
ex post, 10% ex ante)
(discount rate = 5.5%
ex post, 10% ex ante)
Low case
104
9.7%
2.1
High case
216
12.4%
3.2
-0.77
9.93%
0.99
Ex ante
Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and
therefore Do Something demand – these are shown for the 20yr assessment (as per the ex ante)
Key sources
of
discrepancy
between ex
ante and ex
post
assessments
Value of
parameters
Ex post CBA uses updated values for parameters such as value of time
and accounts for inflation of these values over the evaluation period
Additional
impacts
Ex post CBA considers externality benefits (noise, CO₂, air pollution) and
foregone government revenues, not considered in the ex ante CBA
Discount rate
Ex post CBA uses a 5.5% discount rate. Ex ante uses 10%
Assumption that all new users would transfer from highway – no allowance for induced travel
Review of ex
ante CBA
Do Minimum assumes no growth of patronage on the line without the scheme, with Do
Something demand growing proportionally with GDP growth
CBA documents not always clear on price base used, and rounding of small numbers in the
document means precision is lost
53
Frontier Economics
Wider impacts and use of CBA in decision making
● Improvements upstream of the project cause
delays and disruption to this section of track;
● Overall decline of rail patronage across national
ŽSR network, with increasing car ownership;
80.0
% Modal Split
● Wider impacts as a direct result of the scheme
are difficult to determine;
60.0
40.0
20.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
% rate of employment increase
from 2000
Trains
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Buses
Cars
● Beneficial for linking people to jobs in
Bratislava and Trnava (where a number of
global firms are present);
● Draws tourists from Bratislava out to rural
provinces (Carpathian Mountains); and
2000
2001
2002
2003
2004
2005
2006
2007
Employment
Slovak Republic
Region of Bratislava
Region of Trnava
● Following completion of upstream projects,
improved links between the business cities of
Bratislava, Žilina and Košice will enhance
national development and trade links.
Only one option considered (upgrade) therefore CBA played no role in option choice
Lessons
on use of
CBA
Ex ante CBA seen as a thorough assessment process which is taken very seriously by the Slovak
authorities – demonstrated by the level of detail in the application
Use of CBA in Slovakia is improving, particularly with the development of local CBA guidelines
54
Frontier Economics
Projects
● LAV Madrid – Barcelona – French border (Spain)
● A2 Motorway (Poland)
● Algarve Railway (Portugal)
● A23 Motorway (Spain)
● Agiou Konstantinou Bypass (Greece)
● M1 Northern Motorway (Ireland)
● Thriassio – Kiato Railway (Greece)
● IX B Corridor (Lithuania)
● Bratislava Rača – Trnava Railway (Slovakia)
● M0 Budapest Ring Road (Hungary)
55
Frontier Economics
Project description
● Construction of approximately
39 km of motorway around
Budapest
M0 Eastern Sector
Lots 2, 3 and 4)
M31 not constructed
in 2008
● Total estimated cost: €371m
● Two subsections:
□
M0 Eastern Sector
□
M31 Gödöllö Connection
● Total Cohesion Fund
contribution is:
□
€285m
□
85% eligible costs
2008 truck flows in Hungary
Source: http://www.kti.hu
● New dual two-lane motorway – part of new orbital
route around Budapest
56
Frontier Economics
Results of ex ante and ex post CBA
NPV
(€ million, 2002)
Economic IRR
Benefit / Cost ratio
Central case
1,522
25.8%
6.8
Ex post
Zero growth
post 2010
317
13.6
2.2
Ex ante
Central case
1,178
16.1
3.2
Ex ante CBA was systematic, objective and consistent with standards of the day (2004). Traffic
modelling did not include induced traffic.
Traffic flows
Key sources of
discrepancy
between ex ante
and ex post
assessments
Investment costs
Other sources
57
Traffic growth in general from 2003 to 2010 has been lower
(24%) than was anticipated (approx 50%). This is due to
lower economic growth. Traffic flows on southern sections of
M0 project are higher than expected due to absence of
competing infrastructure
Outturn costs are 25% lower than anticipated.
Growth over time in valuation parameters, discount rate,
opening year
Frontier Economics
Wider impacts and use of CBA in decision making
Difficult to establish causal link between the project and wider impacts:
- Project is ‘youthful’.
- Definition of the counterfactual (economic recession and other transport projects)
Wider impacts
-- Local (to M0) visual, air and noise pollution issues
-- Improved accessibility between outer suburbs in north and east Budapest
-- Some new retail parks and logistic centres adjacent to M0.
CBA is an integral part of the decision-making process:
-- Route selection; alignment selection; prioritisation
Use of CBA in
decision-making
There exists a tension between CBA and environmental assessment:
- Environment permit needed for construction;
- Environment authorities look to minimise impact on environment. Reportedly they
pay little heed to CBA;
- There is a need to better integrate the environment and the CBA.
58
Frontier Economics
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companies in the network. All views expressed in this document are the views of Frontier Economics Limited.
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