Optimal Infrastructure Charging in a Multi Country Railway Corridor



Optimal Infrastructure Charging in a Multi Country Railway Corridor

Authors

O Ivanova, B Van Zeebroeck, TM Leuven, BE

Description

This paper explains how to set the most welfare efficient railway infrastructure charges in different countries of an international transportcorridor.

Abstract

As a part of the European RE-ORIENT research project TML studied the influence of the national policy regimes, related to railways infrastructure provision, upon the optimal choice of the infrastructure charges in the countries along the international railways corridor and the overall welfare of the countries. The international corridor studied is a corridor crossing 14 countries from Northern Europe to South-East Europe. We analyze the problem where the infrastructure managers of the countries along the railway corridor are in charge of the pricing of an access to their railways networks. The railways infrastructure is used by the railway operators to provide domestic and international, passenger and freight services.
The railway operators originate from different EU countries and, hence, their operations are associated with different production costs and levels of the governmental subsidies. The railway operators produce national and international, passenger and freight services using the railways infrastructure in the countries along the corridor. It is assumed that passenger transport services are bought only by the domestic consumers, whereas the freight services are bought only by the international consumers. Each railway operator is able to provide transportation services on the whole infrastructure of the international railways corridor. These firms can operate either under the perfect competition or under the oligopoly. TML studies both cases. In case of oligopoly, the prices of final transportation services depend not only upon the marginal costs of production but also upon the number of operating firms in the market. The number of operating firms is determined in its turn by the level of market entry costs and the capacity of the market.
The railways infrastructure managers in each country are public agents. They treat all the railway companies in the same way. They set infrastructure access prices in order to maximize the welfare of their country. The costs of building and maintaining national railways infrastructures can be financed either by governmental subsidies or through the user infrastructure charges. The degree of use of the governmental subsidies for the financing of the railways infrastructure determines the infrastructure provision regime in a particular EU country. The specific combination of different national regimes in the EU countries along the international railways corridor results in a certain national and overall welfare related to the railways sector.
Information is complete for both the infrastructure manager and the railway operator firms in a given country and across the countries.
The national welfare consists of the following main elements: domestic consumer and producer surpluses, surplus of the domestic downstream providers of railways services, net subsidies for railways infrastructure provision, revenues from infrastructure charges minus the infrastructure costs and railways external costs. Based on the national welfare levels, it is possible to calculate the weighted total welfare of the countries along the railways transport corridor. Different weights can be attributed dependant on income inequalities, new or old member states.
By optimizing the overall weighted welfare of the countries it is possible to determine the most welfare-efficient infrastructure funding regime in each of the individual countries as well as to determine the most welfare-efficient unified international infrastructure funding regime. This information will help to improve the present national legislative frameworks on the infrastructure funding in the countries along the transport corridor and, hence, optimize the efficiency of the transport operations on this international railways corridor.
Main outputs of this exercise are country-specific welfare, weighted overall international welfare, national consumer and producer surpluses, changes in the demand for international and domestic railways services, changes in prices of railways services and infrastructure access prices, producer surpluses of the railways services providers, changes in the external costs associated with the railways operations, changes in the employment of the railways sectors in each of the countries, changes in the market structure of the railways service market, changes in the railways infrastructure subsidies etc.

Publisher

Association for European Transport