Incentive Scheme for Sustainable Urban Transport in Norway



Incentive Scheme for Sustainable Urban Transport in Norway

Authors

Bard Norheim, Urbanet Research, NO

Description

In 2004 the Ministry of Transport and Communication introduced a new incentive scheme for urban areas in Norway. This paper will describe the existing incentive scheme and discuss possibilities for improvements towards more output-based incentives.

Abstract

In 2004 the Ministry of Transport and Communication (MoT) introduced a new incentive scheme for urban areas in Norway. The objective was to enhance public transport developments and reduce car traffic in the main urban areas. The intention of this scheme was presented in the white paper ?Better Public Transport? (2002) and one idea was to develop output-based incentives for more sustainable transport. The implemented scheme was a more pragmatic version based on a combination of ?before and after?-funding (Econ 2003).
The conditions for receiving grants from this incentive scheme are:
1. Implementation of measures to reduce car traffic or documentation of political commitments for such plan
2. Documentation of stronger public transport growth than for car use
3. Implementation of measures to increase the competitiveness for public transport versus car

After the first three years 42,5 mill euro have been allocated to the five largest cities for this purpose, with a doubling from 9,4 to 18,8 mill euro in annual grants (table 1).

Table 1: Allocation of grants and passenger growth rate for the cities involved in the incentive scheme
Grants Grants Passenger growth rate 2005
2004-2006 2006 Public transport Car use
Mill Euro % of annual cost Per cent Per cent
Oslo 15.6 3.3 3 1.25
Bergen 8.4 6.1 1.2 0.6
Trondheim 3.8 4.1 4.4 1.8
Stavanger 7.9 11.4 11 2.6
Kristiansand 6.3 17.2 8.5 3.6
Tromsø 0.6 3.8 (*) (*)
Sum 42.5 5.1 5.6 2.0
Average growth rate 2000-2005 1.2 2
(*) Included in the scheme from 2006

This paper will describe the existing incentive scheme and discuss possibilities for improvements towards more output-based incentives in the existing scheme based on two different reports for the Ministry. The first one investigating alternative urban public transport funding schemes in the four largest cities (Norheim 2005) and the second is a study of welfare implications of different output-based subsidies in the six largest cities (Bekken and Norheim 2006).

The annual budget for the incentive scheme is 150 mill NOK, similar to approximately 16 per cent increase in the subsidies for the six largest cities. We have estimated a net welfare benefit of this increase to be 211 mill NOK and 35-80 percent increase in frequency (Bekken and Norheim 2006). This is used as a benchmark for alternative funding schemes. This report proposed a combination of passenger incentives and revenue km incentives for the output based subsidies, and different incentives for different types of cities.

The level of freedom for the operators regarding the service level and financial constraints will influence the welfare optimisation. This paper will present the welfare optimised service level under different constraints, i.e. ?second best? optimisation. For instance; the optimised fare level will depend on the level of subsidy and acceptance for fare differentiation. The fist best optimisation, without financial constraints indicate about 10 percent lower fares and 70 percent increased frequency and 1 billion in increased subsidies. A second best solution with today?s subsidy will indicate a fare financed service improvements, with up to 20 percent fare increase. An optimisation without subsidies would indicate 70 percent fare increase and reduced frequency.

Changes in the urban environment, like housing density, parking conditions and car user costs will change the financial framework. For instance; 20 percent decrease in parking space in the city centre will decrease the need for subsidies in the four largest cities by 50 mill NOK. If the savings are kept for public transport improvements, the long term passenger effect might be around 15 percent. Similar calculations are done for 20 percent increase in housing density and car user cost, with a long-term effect of around 20 percent passenger increase. The long-term effect of 20 percent increased PT speed would be able to finance around 5 percent more passengers by bus and 15 percent more rail passengers. The urban environment will therefore be an important element of the funding scheme, and the authorities responsibility for different elements in this environment.

These studies revealed a clear potential for output-based funding of urban transport, but the potential was strongly dependent of the organisational and financial framework for the authorities and operators, and the urban environment in each city. The paper will present the welfare implications of different incentive schemes and the conflict between tailor made incentives for each city and common standardised and simplified incentives for all cities.

Publisher

Association for European Transport