Rail infrastructure charging EU-directive, Swedish concerns and theory

Abstract

The first railway package is being recast by the legislative bodies of the European Union. One point of departure in this paper is how Swedish agencies treat issues concerning marginal cost based charges, financing charges and allocation of scarce capacity and it discusses these issues from a welfare point of view, partly by use of theoretical modelling. It is seen here that the Swedish infrastructure manager (the Swedish Transport Administration) so far has no method for calculation of marginal costs as a base for charging, especially for costs of scarce capacity, and that the infrastructure manager is applying or discussing various methods for allocations of scarce track capacity. The EU-recast gives no guidance on principles for calculation of charges for scarce capacity, so we recommend the Swedish Transport Administration to develop such charges. The Administration seems to ignore important externalities that should be taken into consideration from a welfare point of view, with respect both to efficient charging and to allocation of scarce capacity. The analytical modelling part of the paper aims to derive these charges in principle, taking these externalities into account. If financing charges exceeding social marginal costs are applied, the model shows how to minimise the welfare loss of these increases. It also shows that financing charges should primarily be applied to market segments that cause large external costs from the operation of the train, where its customers have low valuation of wait time and delay time, where customers of other segments have high valuations of delay and where increased profits for other operators are induced.