The Implications and Pitfalls of the European Union New 2007 ? 2013 Cost?benefit Analysis Methodology for Developing and Carrying out Rail Infrastructure Projects



The Implications and Pitfalls of the European Union New 2007 ? 2013 Cost?benefit Analysis Methodology for Developing and Carrying out Rail Infrastructure Projects

Authors

A Prokopowicz, University of New Orleans, US; A M. D┬╣browska, Center for Analysis in Transport and Infrastructure (CATI), PL

Description

The methodology for cost-benefit analysis of EU-funded infrastructure projects in 2007-13 created many challenges for grant receiving countries. The article critically addresses major implications of these regulations for rail infrastructure projects

Abstract

The new methodology for carrying out cost-benefit analysis for EU-funded infrastructure projects in the programming period 2007-2013, was laid out in the European Commission Directorate General Regional Policy Working Document no. 4. A plethora of experience and conclusions were accumulated during the recent years with regard to this methodology. This policy created many challenges and difficulties for grant receiving countries. The article critically addresses major implications of these regulations for rail infrastructure projects. Major methodological assumptions and concerns for new regulations are identified and assessed. The authors evaluate appropriateness and effectiveness of the new methodology and its role in practical supporting rail system modernization in the New Member States, as a part of the EU continental convergence policy. An assessment is conducted primarily based on Poland?s railway case as this country is the largest recipient of EU funding in the 2007-2013 period.

The policy was designed to simplify and realign the so called ?funding gap method? for determining the rate of assistance from the European Funds for revenue-generating projects. In practice however, many important issues have not been sufficiently addressed in the New Guidelines. For example, costs estimates for rail infrastructure investments. They are very difficult to assess when state subsidies for rail infrastructure are historically insufficient, which reduces track technical specifications. This makes appropriate definition and evaluation of project scenario and an alternative scenario without the project very complicated. In many cases as a result of this shortcomings of The Guidelines, project assessment becomes to a large extent judgmental instead of analytical. .

Significant changes to assumptions for financial and economic assessment of rail infrastructure projects were made. The European Commission recommended new financial and social discount rates for conducting these analyses. The justification for these assumptions and appropriateness of the new rules for rail infrastructure endeavours are evaluated.

The authors also attempt to identify reasons and explain why the New Member States do not use their own benchmarks for the conversion factors and social discount rates to be used in the economic analysis. In addition major difficulties that he New Member States have in correct application of the new regulations are provided and explained.

A number of conclusions on the size of EU support to rail infrastructure projects in 2007-2013, compared with the previous EU budget periods, were derived. The analysts evaluate how the cost-benefit methodology supports the overall objectives of the European Union in assuring the development of sustainable rail transport system in Europe.

Finally, the article contains recommendations on possible cost-benefit methodology improvement for the next EU budget cycle 2014-2020.

Publisher

Association for European Transport