Community Research and Development Information Service - CORDIS

FP5

REVENUE Report Summary

Project ID: 12952
Funded under: FP5-GROWTH
Country: Italy

Acceptability of road pricing and revenue use in the EU

While the determination of prices for the use of transport infrastructure has been the focus of much previous and some current European research, it has become obvious that how revenues from transport related taxes and charges could be used most efficiently is also highly relevant. Therefore, the Revenue project focused on analysing the efficiency and equity impacts of different options to use revenues from infrastructure charges, and deals also with the acceptability and feasibility of these options.

More specifically, the Revenue project was set up with the following three main objectives:

- to assess current practice for transport revenue use;
- to develop guidelines for good use of the revenues from social marginal cost pricing;
- to examine current practice and the use of the guidelines on a set of case studies.

The main results and conclusions of the Reveneue project are summarized herein, pointing to the most relevant questions that were addressed in the studies carried out to examine current practice and the use of the guidelines for good use of the revenues from social marginal cost pricing:

1) The merits of earmarking

Although widely practised, earmarking remains controversial. It was seen that the circumstances in which complete earmarking of revenue for use within the mode on which it is raised could be theoretically justified were likely to be rare, and the case for earmarking is therefore more likely to rest on pragmatic grounds. The case studies identify circumstances in which revenues are best allocated to particular uses in which case earmarking the revenues for them is justified. This may entail returning the money to the facilities on which the charges are levied, or it may call for cross-subsidisation of other facilities or other modes. The case studies also report survey and other evidence that earmarking enhances acceptability. Earmarking may increase efficiency too if it deters politicians from making self-interested decisions that are socially wasteful. But earmarking can harm efficiency by preventing money from going to the most economically worthwhile uses. A clear example of this is the requirement in Britain that all revenue from urban congestion charges must be devoted to transport. In the case of Edinburgh, efficient charges would produce more revenue than can efficiently be used in the transport sector, and the opportunity to use this revenue to reduce other distorting taxes is prevented by this requirement. In some circumstances earmarking may in fact channel revenues to both economically efficient and publicly acceptable uses. Yet, even well-targeted earmarking schemes will be undermined if funds from other sources are reduced in an offsetting way.

2) Acceptability of charging and revenue use policies

There is now abundant evidence from various countries that acceptability is a condicio sine qua non of transport policy reform. Acceptability appears to have been a major consideration in the design of the pricing and revenue use policy packages (both implemented and proposed) that were examined in the case studies. There is ample evidence in the case studies that earmarking may help achieve acceptability. However, stakeholders must be convinced that charges will be imposed fairly and evolve (or remain fixed as the case may be) as promised. And if revenues are earmarked, there must be assurance that moneys will be allocated as intended and without offsetting reductions from other sources. For instance, the Edinburgh study remarked on how a lack of legal obligation for the City of Edinburgh Council (CEC) to share revenues undermined the confidence of residents outside the city.

3) The institutional arrangements and assignment of responsibilities for charging and revenue allocation

Institutional arrangements are very important. Assignment of responsibilities for user charging and revenue use decision-making depends on various considerations. One is local knowledge about congestion, the merits of alternative infrastructure investments and so on, which favours assignment of responsibility to local governments. By contrast, spill over problems between regions related to inter-regional traffic, pollution, etc., call either for centralised government control or coordination between neighbouring regional governments. The Edinburgh case study illustrates the dangers of delegating decision-making to an authority below the level at which the impacts will be felt, and correspondingly the need to develop proposals on a consensus basis between authorities. In Oslo, consent of all affected authorities was required and the negotiation between neighbouring authorities worked more smoothly. It has become popular to delegate transport infrastructure financing and operation to the private sector – this is common for ports and airports, as well as significant parts of the motorway system (only in rail transport is it rare). The primary motivation is to lower costs but it is naturally associated with earmarking of revenues. In other cases responsibilities have been devolved to independent bodies. The Swiss railway investment fund FINÖV and the French funding agency AFITF are two examples mentioned in the case studies.

Contact

Andrea RICCI
Tel.: +39-0636-12920
Fax: +39-0632-13049
E-mail
Record Number: 45250 / Last updated on: 2010-08-14
Information source:
Collaboration sought: Information exchange/Training
Stage of development: Scientific and/or technical knowledge (basic research)
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