92001E1393

WRITTEN QUESTION E-1393/01

by Christopher Huhne (ELDR) to the Commission

(10 May 2001)

Subject: Public investment in the Member States

Will the Commission describe the principle hurdle rate for public investment applied by each Member State government? If there is more than one hurdle rate, will it describe the rate also applied to transport infrastructure projects? Does the prospective flow of returns with which the hurdle rate is compared include social costs and benefits, and if so will the Commission provide a brief description in each case of the procedure and the key values attributed to time-savings and avoidance of deaths?

Answer given by Mrs de Palacio on behalf of the Commission

(13 July 2001)

The Commission understands that the practice of many Member States for transport infrastructure investments is to discount future costs and benefits to establish a net present value rather than use a single minimum hurdle rate (cut off rate). While this approach can be used in a strictly financial analysis, the assessment framework most commonly used is that of social cost-benefit analysis. Here, capital costs are compared with maintenance, vehicle operating, time and accident costs savings. In some Member States environmental damage costs are also monetised whereas in others these and other broader impacts, such as land use or regional economic development, are often taken into account as complementary, qualitative information.

The discount rate normally applied in the cost-benefit analyses in the Member States varies between 3-8 % on real (inflation adjusted) costs and benefits.

The Member States use a wide range of definitions, modal coverage and values for time savings. Using harmonised definitions, the range provided by the EUNET(1) project is between 6,3-23 per hour (h) (1995 prices).

As regards savings from reductions in fatalities, the discrepancies in definitions and measurement among the Member States is even bigger than for time savings. The values in use range from 35 000-1 700 000 per fatality, representing a 48-fold difference. After harmonising for the definitions, the EUNET(2) project reduced this difference to a factor of 4.5 and indicated a weighted average value of 770 000 per fatality (1995 prices). The 2nd Community programme on road safety (1997-2001) introduced the criteria of 1 million for life saved.

The Commission also follows with interest the on-going work of Western European Road Directors on project evaluation and impact assessment.

(1) For more information, see final report of EUNET Socio-economic and spatial impacts of transport, Fourth framework Transport Research programme, forthcoming at http://europa.eu.int/comm/transport/extra/reports.html.

(2) For more information, see final report of EUNET Socio-economic and spatial impacts of transport, Fourth framework Transport Research programme, forthcoming at http://europa.eu.int/comm/transport/extra/reports.html.