Workshop with EU Member States: Work Package B

Workshop with EU Member States: Work Package B
Session 2 – Summary of findings from case studies 3 February 2011

Content Results Observations for future discussion
Ex ante evaluation Ex post evaluation Ex ante vs. Ex post Observations for future discussion Annexe – detailed results

Review of ex ante CBA Ex post evaluation Ex ante vs. ex post Discussion points Annexe - detailed results

Ex ante CBA – quality of the analysis
Review of ex ante Cost Benefit Analysis Good quality of core analysis for areas covered by guidelines Limited analysis of alternative options Limited use of sensitivity analysis Documentation available often not sufficiently comprehensive

Ex ante CBA – its role in decision making
Compliance with EC CF application requirements (9) Ensure value for money (6) Choose alignment (2) Choose design standards (2) Prioritise elements of national transport strategy (1) Allocate budget and optimise timing (0) Projects 2 4 6 8 10 5

Ex ante stated objectives
Improve safety (8) Reduce travel time (6) Increase capacity/reduce congestion (4) Reduce operating costs (2) Improve connectivity (2) Projects 2 4 6 8 10

Ex ante impacts taken into account in CBA
Impacts on users (Time Savings, VOCs) (10) Impacts on safety (10) Impacts on the environment (4) Impacts on transport operators (3) Other impacts (2) Projects 2 4 6 8 10

Ex post economic evaluation – benefit/cost ratio

Ex post financial analysis
For non-revenue generating projects the financial NPV is generally negative and there is no difference between Low and High case Negative financial IRRs however are to be expected, as these projects are not meant to be self-financing. EC financial contributions are required to ‘unlock’ the economic benefits identified in the CBA.

Benefit distribution

Wider economic effects
Note: ✓ (Observed effect) ?(Difficult to establish a direct causality) It is complicated to establish a causality link between the infrastructure and the observed effects The majority of the effects are related with Land Use, Supply Chain and Environment

Ex ante vs. Ex post – reasons for differences
Note: ✓✓ (Primary reason) ✓(Secondary reason) The ex ante evaluation and the ex post evaluation exhibit differences. Most of the discrepancies are related with differences in travel demand, cost overruns and discount rate used in the analysis

Ex ante vs. Ex post - NPV Overall NPV of the majority of the projects was overestimated in the ex ante evaluation (except for M1 Northern Motorway in Ireland)

Discussion points Satisfactory ex post BCR
With a couple of exceptions, projects have so far delivered positive ex post NPVs and benefit-cost ratios higher than 1 Road projects vs. rail projects Generally, road projects tend to yield a higher BCR – but: rail projects tend to have higher capital costs by definition core CBA is a partial assessment of impact – does not include all factors that may make a rail investment preferable to road investment Short elapsed time since opening This raises two issues for ex post evaluation need to make assumptions about future demand (almost like in ex ante CBA) in most cases, wider impacts take a long time to emerge Identification of wider impacts Lack of monitoring since opening makes the identification of wider impacts particularly challenging (especially for projects implemented as part of a wider investment strategy, against a backdrop of rapid economic change) Source of wider impacts Wider impacts mainly come from new infrastructures because of a step change in accessibility. Socio-economic impacts are more easily identifiable, even anecdotally. In the case of upgrades, most of the key benefits are already captured in the core CBA analysis, and wider impacts are harder to identify against a background of economic and social change

Review of ex ante CBA Ex post evaluation Ex ante vs ex post Discussion points Annexe - detailed results

Projects LAV Madrid – Barcelona – French border (Spain)
A2 Motorway (Poland) Algarve Railway (Portugal) A23 Motorway (Spain) Agiou Konstantinou Bypass (Greece) M1 Northern Motorway (Ireland) Thriassio – Kiato Railway (Greece) IX B Corridor (Lithuania) Bratislava Rača – Trnava Railway (Slovakia) M0 Budapest Ring Road (Hungary)

Project description The LAV (Línea de Alta Velocidad ) Madrid – Barcelona – French border is a high speed railway line connecting Madrid to the French border via Barcelona. The LAV between Madrid and Barcelona covers 621 kilometres, and it was developed in three stages: Section Madrid – Lleida (442 km): opened in October 2003 Section Lleida – Tarragona (78 km): in operation since December 2006 Section Tarragona – Barcelona (100 km): operational since February 2008. Section Barcelona – Figueres (132 Km) is still under construction. Expected to be completed in 2012. Project includes 12 subprojects. Total Cohesion Fund contribution was equivalent to 72.25% of eligible costs (€1,042m) Construction of 72 km of rail bed and the installation of 610 km of railway tracks Part of the TEN-T Priority Project 3 (high-speed railway axis of south-west Europe), whose main objective is to provide high-speed rail connections between the Iberian Peninsula and the rest of Europe.

Results of ex ante and ex post CBA
NPV (€ million, 2008) Economic IRR Benefit / Cost ratio Ex post Low case -2,736 2.6% 0.6 High case -1,948 3.7% 0.7 Ex ante Economic CBA 1,091 6.3% 1.07 Social CBA 4,125 8.9% 1.26 Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2009 onwards. High (low) case assumes 5% (2.5%), 2.5% (1.25%) and 1.3% (0.6%) for short, medium and long run respectively. Ex ante CBA (May 2001 by INECO) covers the 1997 – 2025 period. It is a single cost-benefit analysis of the whole LAV (including the Barcelona – French border section, which is not completed at the moment) Key sources of discrepancy between ex ante and ex post assessments Infrastructure Ex ante CBA analyses the whole line for the period. Ex post analyses only the Madrid – Barcelona section for the period Traffic / Capital costs Ex ante CBA assumes higher number of passengers. Ex post capital costs are substantially higher Additional effect Ex ante CBA includes employment generation in the social analysis

Wider impacts and use of CBA in decision making
Wider economic impact Mobility Significant increase in the number of passengers. Change in the average traveller profile. A new type of traveller: the commuter Tourism Effects especially in Zaragoza and Lleida. Number of visitors grow, increase the number of congressional and business meetings and increase of overnight stays. New activities Zaragoza: logistics, international events and business land. (2008 International Exhibition about Water and PLAZA, a logistics platform). Lleida: the LAV and the technology park (Parque Científico y Tecnológico Agroalimentario de Lleida – PCiTAL) Additional effects New industrial park, PLHUS, located near the city of Huesca. It covers an area of around m2 CBA in the decision making process TO BE UPDATED

Project description Construction of approximately 100 km of ‘non-toll’ A2 motorway between Konin and Strykow Total cost: €406m Two subsections: Konin to Emilia (€348m) Emilia to Strykow (€58m) Total Cohesion Fund contribution was EUR 325m (82% Konin - Emilia, 75% Emilia - Strykow) EIB also contributed financing up to the overall maximum allowed (90%) Source: Openstreetmap.org Dual two-lane motorway – substitute for a wide single lane road (the R2), subject to varying speed limits and route quality The R72 (former route between Konin and Lodz) is similar to R2 and passes through a number of towns and villages

NPV (€ million, 2003 ex post, 2003 ex ante) Economic IRR (discount rate = 5.5% ex post, 8% ex ante) Benefit / Cost ratio (discount rate = 5.5% ex post, 8% ex ante) Ex post Low case 523 18% 3.0 High case 900 23% 4.4 Ex ante 1,867 20.2% 3.1 Two cases (Low / High) considered in ex post CBA, based on different assumptions on traffic flows and speed Key sources of discrepancy between ex ante and ex post assessments Ex post CBA uses a 5.5% discount rate. Ex ante uses 8% Discount rate Value of parameters Ex post CBA uses updated values for parameters such as value of time, reduction in VOC, accident costs Additional impacts Ex post CBA considers some induced traffic and foregone government revenues, which ex ante CBA does not consider Review of ex ante CBA Large amount of (gross) benefits generated, in excess of €11billion - reasons for this result have been investigated CBA documents not always provide enough clarification regarding key assumptions used in the analysis (e.g. journey times, split between light and heavy vehicles) Formal risk assessment not undertaken, even though key risks were identified and some results from various sensitivity test are available

Wider impacts as a direct result of the scheme are difficult to determine in quantitative terms A2 regarded as a key enabler of economic regeneration and development (Lodz Special Economic Zone) Faster and more reliable connectivity within Poland and to bordering countries has helped increase Foreign Direct Investment; Assisted in the growth of Logistics sectors and has facilitated the emergence of a broadened industrial base Greater business efficiency and productivity brought about by improved journey times Quality of life benefits through removing traffic from built up areas along the parallel routes (R14 and R72); Increased land values in the vicinity of the A2 and proposed A1 alignment (Strykow) Source: LODZ SEZ Flexicurity – Our Key to Success (Lodz Special Economic Zone, 2008) Benefits of scheme partially offset by poor reliability on the R14 between Lowicz and Warsaw; Increased traffic on the R14 has contributed to worsening road safety, air quality and noise; Increased access to tourist and cultural opportunities; and Some disturbance to agricultural patterns (severance) and animal movements. Lessons on use of CBA CBA played no role in the choice of the route alignment As a result of EU guidance, the establishment of CUPT and greater experience of CBA analysis for EU projects, it is generally felt that the reliability and application of CBA at the national level is improving.

Project description Modernisation of railway link (more than 300Km) between Lisboa (south) and Faro The project was subdivided in four subsections, involving: duplication of the rail track construction (3) and renewal (12) of stations installation of a new control system to increase maximum speed Total cost: €490m (NPV, 2008 prices) Pinhal Novo to Ermidas + Linha de Sines (€137m) Coina to Pinhal Novo (€114m) Pinheiro to Km 94 (€12m) Ermidas to Faro (€227m) Total Cohesion Fund contribution was €323m, equivalent to 80% of eligible costs (€405m) Modernisation of the railway line, Lisboa to Algarve (Faro) The project is part of the TEN-T Priority Project 8 (Multimodal axis Portugal/ Spain-rest of Europe – Railway)

NPV (€ million, 2008) Economic IRR Benefit / Cost ratio Ex post Low case 48.2 6.7% 1.15 High case 79.2 7.4% 1.24 Ex ante 156.7 9.1% 1.6 Two cases (High / Low) considered in ex post CBA, based on different evolution in future passenger volumes and freight volumes and their impact on operating costs Ex ante CBA barely complete (insufficient information on key assumptions and no Sensitivity and risk assessment). Section Coina to Pinhal Novo excluded in this ex ante CBA. Overestimation of time savings Key sources of discrepancy between ex ante and ex post assessments Traffic volumes Forecast traffic in ex ante CBA does not match with actual traffic outturn in the first ten years of the project Costs Differences in the period when capital costs were incurred. Treatment of foregone fuel tax revenues Benefit calculation Differences in the value of parameters, application of the “rule of half” and treatment of revenues (REFER and CP) Discount rate Ex post CBA uses a 5.5% discount rate. Ex ante uses 5%

Wider economic impact Effects largely captured by the core CBA Counties (concelhos) that have a direct relation with the Lisbon – Algarve railway have increased their IPC (Indicador per Capita) with the exception of Setúbal Additional environmental action: implementation of a noise barrier in Funcheira, according to legal requirements. REFER: journey times to Setúbal, Évora, Beja and Faro are normally higher than for road transport due to limited capacity on the “25 de April” bridge. Future projects: Lisbon – Porto; Porto – Vigo (Spain); and Lisbon – Madrid (will use part of the Lisbon – Algarve railway track, specifically the Lisbon – Évora section) CBA in the decision making process Limited role of ex ante CBA in the decision-making process From discussions with project stakeholders in Portugal it seems that the quality of CBA has increased, playing now a central role in the project appraisal

Project description Construction of approximately 75 km of ‘non-toll’ A23 motorway The project was subdivided in four subsections: Huesca – Nueno (11.5 Km) Monreal del Campo – Calamocha (14.8 Km) Santa Eulalia – Monreal del Campo (21.9 Km) Teruel – Santa Eulalia (26.8 Km) Total cost: €247m (NPV, 2010 prices) Huesca – Nueno: €29m Monreal del Campo – Calamocha: €78m Santa Eulalia – Monreal del Campo: €98m Teruel – Santa Eulalia: €43m Total Cohesion Fund contribution was equivalent to 85% of eligible costs (€205m, NPV, 2010 prices) Construction of 75 km of ‘non-toll’ A23 motorway in Spain Although the A23 is not part of any TEN-T corridor, it belongs to the European route E07 connecting Pau in France to Zaragoza in Spain

NPV (€ million, 2010) Economic IRR Benefit / Cost ratio Ex post Low case -27.7 4.6% 0.9 High case 27.6 6.3% 1.1 Ex ante 120.3 9.1% 1.6 Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. We used 5% (i.e. the average annual growth rate for the A23 between 1998 and 2008) for the High case and 2.5% for de Low case. Not a unique ex ante CBA for all the 4 subprojects. New segments were not generate induced traffic. Time saving is the main driver of economic benefit. It more than compensates increase in VOC and fuel consumptions due to higher speed. Key sources of discrepancy between ex ante and ex post assessments Parameters Ex post: Fuel costs is more that 100% higher while value of time is approx. 50% higher than in the ex ante CBA Time saving Ex post: significant lower minutes saved. Ex ante assumes 27 and 33 mins. and ex post used 13 and 9.3 mins for cars/LGV and HGV respectively. Traffic growth Ex ante CBA assumes around 3% annual traffic growth rate on the new A23

Wider economic impact Teruel New logistic and industrial park, PLATEA, developed by the Government of Aragón and managed by Platea Gestión S.A. Industrial aeronautical platform, PLATA, developed by the Government of Aragón and the Teruel City Council. It is expected to be completed by late 2010 Spanish Government is considering two new road connections, providing links to the A23 (Alcolea - Monreal del Campo and Cuenca - Teruel) Huesca New industrial park, PLHUS, located near the city of Huesca. It covers an area of around m2 The technology park, WALQA. It is situated in the outskirts of Huesca, on the dual carriageway Autovía Mudéjar that directly links to Madrid CBA in the decision making process Ministerio de Fomento - Unidad de Carreteras de Aragon (stakeholder): the decision to construct the A23 motorway was mainly political. Economic analysis where carried out to decide on different alternatives on the exact configuration of the new A23 by the “Demarcación de Carreteras del Estado en Aragón”

Project description Construction of dual two lane Agiou Konstantinou Bypass (Motorway Standard) Complex structure including the construction of 7 tunnels through mountainous landscape Total cost: €317.8m Total Cohesion Fund contribution was €117m (37% of total cost) Objectives To increase motorway speeds and road connectivity between Greece and other EU countries; To improve safety record; Reduce load/capacity ratio; and Improve journey times Source: Openstreetmap.org

NPV (€ million, 2000 ex post, 2000 ex ante) Economic IRR (discount rate = 5.5% ex post, 5% ex ante) Benefit / Cost ratio (discount rate = 5.5% ex post, 5% ex ante) Ex post Low case 233 12.6% 2.1 High case 283 13.4% 2.4 Ex ante 422.1 17.6% 3.1 Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and therefore Do Something demand – these are shown for the 30 yr assessment (as per the ex ante) Key sources of discrepancy between ex ante and ex post assessments Re-assignment and Traffic Growth Assumptions Ex post CBA showed that 84% of corridor traffic has switched to the new road compared to a forecast of 64%. Furthermore post opening traffic volumes were lower than forecast (recession effects) Additional impacts Ex post CBA did not quantify the maintenance costs benefits that were included in the ex-ante appraisals Discount rate Ex post CBA uses a 5.5% discount rate. Ex ante uses 5% Review of ex ante CBA No assessment of the monetary impacts of externalities was made e.g. noise, CO2, Air Quality impacts There was absence of evidence regarding how the accident benefits were derived and monetised The CBA was conducted on the assumption that revenues would contribute to the national treasury, rather than the concessionaire that operates the scheme. No detailed risk assessment was undertaken as part of the ex-ante appraisal

Wider impacts as a direct result of the scheme are difficult to determine in quantitative terms Removal of traffic from bypassed settlements supports better urban spatial planning (car parking; pedestrianisation; access to cultural opportunities; provision of holiday accommodation –est new homes) and growth of the tourist industry in particular. Facilitate drainage works to address historical flooding problems; Anecdotal evidence of improved air and noise conditions; Enhanced access to ferry port in Agios Konstantinos (shipping route to Skiathos); Creation of better conditions for local economic growth with faster and more reliable links to Athens, Thessalloniki and countries north of Greece; and Landscape impacts have been mitigated through construction of tunnel sections Lessons on use of CBA Only one option considered and therefore CBA played no role in option choice. CBA good tool for scoping out impacts prior to scheme construction CBA doesn’t necessarily fully capture measurable impacts on regional development which may take time to materialise EU Guidance on CBA regarded as useful tool for standardising CBA across the community

Project description Construction of approximately 16.5 km of motorway between Dublin Airport and Balbriggan Bypass Total cost: €232m Two subsections: Dublin Airport to Lissenhall (€163m) Lissenhall to Balbriggan (€69m) Total Cohesion Fund contribution was: €152m 65% total costs, 88% eligible costs Source: Openstreetmap.org Dual two-lane motorway – substitute for a single carriageway road (the N1), subject to varying speed limits and route quality

NPV (€ million, 2002) Economic IRR Benefit / Cost ratio Ex post Low case 3,805 53 17.2 High case 3,905 17.6 Ex ante 534 16 5.5 Ex ante CBA was objective and consistent with standards of the day (1995). Used a ‘link based’ only model. Traffic flows Current traffic volumes are between 177% and 218% of those forecast for Traffic growth was significantly underestimated due to higher than expected economic and population growth between 2003 and 2007. Key sources of discrepancy between ex ante and ex post assessments Investment costs Outturn costs were 58% higher than anticipated in 1995. Other Journey time modelling, maintenance costs, accident predictions, valuation parameters and discount rate

Difficult to establish causal link between the project and wider impacts: - Project is small (16km) with respect to overall investment in Ireland’s transport network - Occurred at a time of rapid economic and population growth in Ireland Linked to expansion of Dublin Airport and growth in Swords (population increased by 6,500 up 25%) Use of CBA in decision-making In Ireland CBA forms an integral part of: - Public sector expenditure assessment - Transport appraisal With respect to transport : - Value for money indicators are part of the case made for transport budget to the DoF - CBA forms part of route selection, preliminary design and project close out; - CBA elements form part of a Multi-Criteria Assessment

Project description Construction of a new grade separated double track standard gauge railway line between Thriasio and Kiato. Replaces an outdated single track metric line In total the line included four applications for cohesion funding Total cost: €508.0m Total Cohesion Fund contribution: €238.4m (47% of total spend) OBJECTIVES Reduce rail journey times Increase revenues and decrease operating costs Improve safety Improve connectivity to the wider rail network Promote mode shift from highway to rail Source: Openstreetmap.org

NPV (€ million, 2000) Economic IRR Benefit / Cost ratio Ex post Low case 32 6.05% 1.10 High case 258 9.30% 1.79 Ex ante 396 7.3% 1.50 Two cases (Low / High) considered in ex post CBA, based on different assumptions regarding rail demand originating from beyond Kiato Key sources of discrepancy between ex ante and ex post assessments Scope of the assessment Ex ante CBA considers the planned future extent of the line to Patra in the West, rather than the current extent of the line to Kiato Value of parameters Ex post CBA uses updated values for parameters such as value-of-time, value of externalities, accident costs and operating costs Additional impacts Ex post CBA considers the safety benefits of removing level crossings from the line, this was not considered in the ex ante CBA Review of ex ante CBA The CBA does not apply the rule of half to new rail passengers diverted from the highway Assumptions that future year operating costs would be comparable to costs per passenger km on existing standard gauge railways in Greece are dependant on comparable utilisation Formal risk assessments were not undertaken although the results of various sensitivity test were presented

Old Metric Line (passing loop) The scheme has only been open in its entirty for just over three years, it may take many years for significant social and environmental impacts to materialise Although new out of town station locations have received some negative feedback they offer potential for new development sites and are included in a number of local expansion plans Removal of trains from built up areas has offered local congestion benefits and associated benefits in terms of noise, air quality and congestion caused by disruption at level crossings The line has improved gateway access; the line accesses Piraeus directly where ferries depart to Greek islands, and via interchange at Piraeus to Athens International Airport. The existing line will contribute to further wider economic benefits if the line is extended to Patra port, as planned, providing a rail link to EU markets New Standard Gauge Line Lessons on use of CBA CBA had played no role in the choice of the route alignment as there was little potential for an alternative route. Stakeholders recognised CBA as being a necessary procedure to gain funding and a useful tool for prioritising options where alternatives can be tested The OSE Group reorganisation plan for 2010 includes the objective to manage the real objectives of investments both in terms of feasibility and in terms of economic profitability

Project description Modernisation of one of the two main motorway routes in Lithuania. The project was subdivided in four subprojects: 2000/LT/16/PT/001: widening and strengthening of 32.7 km and the strengthening of 135 km of motorway 2002/LT/16/PT/007: widening and strengthening of 30.9 km and the strengthening of 70.9 km of motorway 2004/LT/16/CPT/003:widening and strengthening of 37.8 km and the strengthening of 20.1 km of motorway 2004/LT/16/CPT/008:construction of the Vilnius bypass, a new road 3.2 km long The total aggregate cost €154m. Total amount eligible: €148,8m. Total ISPA / Cohesion Fund contribution was €121,9m (82% of the eligible costs) Modernisation of one of the two main motorway routes in Lithuania. This is part of the IX B transport corridor, 315km of motorway linking the port city of Kleipeda with the capital city of Vilnius, via Kaunas. The route then links Lithuania with other destinations in Eastern Europe. The project also involved the construction of the Vilnius Southern bypass

Upgrading of the IX B Corridor NPV (€ million, 2009) Economic IRR Benefit / Cost ratio Ex post Low case 200.3 55% 3.3 High case 212.2 56% 3.4 Ex ante 83.2 21% 2.5 Vilnius Southern bypass NPV (€ million, 2009) Economic IRR Benefit / Cost ratio Ex post 142.1 29.1% n/a Ex ante 111.9 22.8% 4.5 Two cases (High / Low) considered in ex post CBA based on traffic growth rate from 2010 onwards. High Case applies growth rates that the LRA assumed in the ex ante CBA. Low Case assumes no traffic growth Ex ante CBA was carried out separately for the upgrading of the motorway and for the Vilnius bypass Key sources of discrepancy between ex ante and ex post assessments Upgrading of the IX B Corridor Higher NPV in the ex post CBA driven by higher – than -forecast VOC. Vilnius Southern bypass Higher NPV in the ex post CBA driven by higher – than - expected traffic volumes

Wider economic impact Socio economic impact Traffic flows had grown fasted than assumed in the ex ante analysis Expansion of the Kleipeda Free Economic Zone and the set up of the Kaunas Free Economic Zone. 3 public logistic centres were set up alongside the route of the IX corridor Empty lots near the major cities have been developed and turned into shopping centres as they became more accessible to the public. Environment Impact of the project on soil pollution, both during construction and operation, has not been significant, Other projects Vilnius Western bypass and a new outer bypass are being developed CBA in the decision making process In 1994, the Lithuania Road Administrator (LRA) developed its own CBA guidance manual. In Lithuania, however, ex ante CBA is not used to choose between alternative projects competing for limited funding. LRA uses ex ante CBA as a way to identify the project specifications (such as the design of a junction) and technologies (such as the asphalt type) that would yield the best value for money

Project description Modernisation and upgrade of 37 km track between Bratislava Rača and Cίfer, supporting line speeds of up to 160km/hr. Station upgrades to all stations between Rača and Trnava. Total cost: €213m Two subsections: Rača to Šenkvice track (€46m) Šenkvice to Cífer track and Rača to Trnava stations (€167m) Total Cohesion Fund contribution was €127m (75% of Rača-Šenkvice and 50% of Šenkvice-Cίfer eligible costs) Remaining costs paid for by the state budget Source: Openstreetmap.org TEN-T Corridor Va track upgraded to support line speed between Rača and Cίfer up to 160km/hr , with station improvements at all stations shown Later applications for funding submitted to improve sections northbound of Trnava (under implementation) to complete upgrade from Bratislava – Žilina – Košice

NPV (€ million, 2008 ex post, 2001 ex ante) Economic IRR (discount rate = 5.5% ex post, 10% ex ante) Benefit / Cost ratio (discount rate = 5.5% ex post, 10% ex ante) Ex post Low case 104 9.7% 2.1 High case 216 12.4% 3.2 Ex ante -0.77 9.93% 0.99 Two cases (Low / High) considered in ex post CBA, based on different assumptions of GDP growth and therefore Do Something demand – these are shown for the 20yr assessment (as per the ex ante) Key sources of discrepancy between ex ante and ex post assessments Value of parameters Ex post CBA uses updated values for parameters such as value of time and accounts for inflation of these values over the evaluation period Ex post CBA considers externality benefits (noise, CO₂, air pollution) and foregone government revenues, not considered in the ex ante CBA Ex post CBA uses a 5.5% discount rate. Ex ante uses 10% Additional impacts Discount rate Review of ex ante CBA CBA documents not always clear on price base used, and rounding of small numbers in the document means precision is lost Assumption that all new users would transfer from highway – no allowance for induced travel Do Minimum assumes no growth of patronage on the line without the scheme, with Do Something demand growing proportionally with GDP growth

Wider impacts as a direct result of the scheme are difficult to determine; Improvements upstream of the project cause delays and disruption to this section of track; Overall decline of rail patronage across national ŽSR network, with increasing car ownership; Beneficial for linking people to jobs in Bratislava and Trnava (where a number of global firms are present); Draws tourists from Bratislava out to rural provinces (Carpathian Mountains); and Following completion of upstream projects, improved links between the business cities of Bratislava, Žilina and Košice will enhance national development and trade links. Lessons on use of CBA Only one option considered (upgrade) therefore CBA played no role in option choice Ex ante CBA seen as a thorough assessment process which is taken very seriously by the Slovak authorities – demonstrated by the level of detail in the application Use of CBA in Slovakia is improving, particularly with the development of local CBA guidelines

Project description Construction of approximately 39 km of motorway around Budapest Total estimated cost: €371m Two subsections: M0 Eastern Sector M31 Gödöllö Connection Total Cohesion Fund contribution is: €285m 85% eligible costs M0 Eastern Sector Lots 2, 3 and 4) M31 not constructed in 2008 2008 truck flows in Hungary Source: New dual two-lane motorway – part of new orbital route around Budapest

NPV (€ million, 2002) Economic IRR Benefit / Cost ratio Ex post Central case 1,522 25.8% 6.8 Zero growth post 2010 317 13.6 2.2 Ex ante 1,178 16.1 3.2 Ex ante CBA was systematic, objective and consistent with standards of the day (2004). Traffic modelling did not include induced traffic. Key sources of discrepancy between ex ante and ex post assessments Traffic flows Traffic growth in general from 2003 to 2010 has been lower (24%) than was anticipated (approx 50%). This is due to lower economic growth. Traffic flows on southern sections of M0 project are higher than expected due to absence of competing infrastructure Investment costs Outturn costs are 25% lower than anticipated. Other sources Growth over time in valuation parameters, discount rate, opening year

Difficult to establish causal link between the project and wider impacts: - Project is ‘youthful’. - Definition of the counterfactual (economic recession and other transport projects) - Local (to M0) visual, air and noise pollution issues - Improved accessibility between outer suburbs in north and east Budapest - Some new retail parks and logistic centres adjacent to M0. Use of CBA in decision-making CBA is an integral part of the decision-making process: - Route selection; alignment selection; prioritisation There exists a tension between CBA and environmental assessment: - Environment permit needed for construction; - Environment authorities look to minimise impact on environment. Reportedly they pay little heed to CBA; - There is a need to better integrate the environment and the CBA.

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Workshop with EU Member States: Work Package B

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