Appraisal of Pubic Transport Investments Based on Overall External Transport Costs Reduction

Appraisal of Pubic Transport Investments Based on Overall External Transport Costs Reduction


Manos Vougioukas, EuroTrans Consulting, Simona Tondelli, University of Bologna


Guidelines for wider internalization practices of external costs of transport, linked to land use and environmental planning, are applied to the appraisal of Public Transport investments in the form of a proposed LRT/Tramway project in Greece.


The reduction and/or internalization of the environmental, spatial and social costs caused by the transport sector are policy objectives that have been promoted by the EU over the past two decades (e.g. Directive 1999/62/EC, Directive 2006/38/EC). Within a market approach and according to the “polluter pays” principle, internalization is a way towards a comprehensive payment actually born by the transport users; in this “classic” vision, this is obtained by means of some additional/side pricing imposed to citizens/businesses generating road traffic with private vehicles (e.g. road pricing: tolls, vignette, access fees; park pricing, vehicle/fuel taxation). However, incompleteness in the extent of the application of direct pricing and a missing or only partial link with modal policies, spatial planning and infrastructural decisions lead to apparent failures of the internalization policies in terms of their ability to reach improvements of the sustainability of the transport systems over the time.

External costs evaluation purposes are not only limited to interventions on the pricing system, but also form the basis of other possibilities of intervention such as optimization of the land use/transport planning solutions, provision of incentives to more sustainable modes or measures of administrative regulation.

Within this context, the ECOTALE project within the EU INTERREG IVC interregional cooperation programme, led by University of Bologna with nine partners in seven EU countries, aimed at integrating the traditional approach based on the “economic” (or market-based) internalization of external costs (i.e. pricing measures) by introducing criteria and policies for a wider internalization approach considering land use and environmental planning as well.

Fair and efficient transport pricing has also been advocated in a number of policy document issued by the UE, notably the 2006 mid-term review of the White paper on the European Transport Policy. Internalization of external costs by market-based instruments is generally regarded as an efficient way to limit the negative side effects of transport.

Techniques for estimating transport externalities have reached a good level of maturity and availability; the EC commissioned “Handbook on estimation of external cost in the transport sector” (first edition in 2008, released under the IMPACT study, updated and reviewed edition in 2014) gives a very useful review of such a state of the art.

However, also to foster a ‘planning and investment approach’ to internalization (i.e. reallocation of public resources in spatial planning, infrastructural decisions and modal policies) it has been felt necessary to provide Regions and Cities with guidelines, providing methodological and analytical advice, based on real experiences, giving guidance for the main spectrum of sustainable mobility measures, in the perspective of the reduction of the overall external costs of transport. Therefore, based on the identification of reference modal policies and best practices analysis, methodological proposals have been formulated for the internalization of environmental and social costs of transport. These guidelines reflect a spread and innovative perspective for transport costs internalization, with special focus on the relations between global transport costs and land use planning, with the aim of providing assistance to interested regional and local authorities to incorporate into their local/regional policies the lessons learned from research and best practices.

These Guidelines have been applied in the appraisal of Quality Public Transport investments, in the form of the proposed Tramway system for the Thessaloniki metropolitan area, Central Macedonia Region, in northern Greece, for the Thessaloniki Public Transport Authority (a partner in the ECOTALE project).

The appraisal shows how investments in sustainable mobility solutions of Light Rail Transit can be additionally justified on the basis of the reduction in overall external costs of transport through mode shifts and restraint of private car use in urban area. The contribution towards low-carbon mobility options and climate change action is also highlighted.

The co-funding possibilities of the Thessaloniki LRT/Tramway project are also examined in relation to the new European Structural and Investment Funds (ESIF), potential for a JESSICA Urban Development Fund, as well as inclusion in the new 'Investment Plan for Europe' (the Juncker Plan).

The proposed LRT/Tramway is one of the effective measures in a recently completed and adopted Sustainable Urban Mobility Plan (SUMP), approved by the Thessaloniki Public Transport Authority (ThePTA) Board. The Thessaloniki SUMP received the 'Special Prize of the Jury' in the SUMP Awards by the European Commissioner for Transport in 2015. The above appraisal based on overall external cost reduction combined with the SUMP process is expected to improve the opportunities for EU co-funding of the LRT/Tramway project, in accordance with the EU Urban Mobility Package and the ERDF regulation.


Association for European Transport