Estimating and Charging Marginal Transport Costs in Finland

The resent proposals made by the European Commission on marginal cost pricing of the use of transport infrastructure have initiated this national study for reviewing the cost accounting methodology available or under development in Finland. The methods for estimating marginal infrastructure damage costs, congestions and scarcity, emissions, noise and accidents, as well as charging instruments currently in use are examined for road, railway, waterway and air transport. The report serves as a state-of-the-art review, and a background document for national statements on marginal cost pricing. The conclusion on cost estimation is, that marginal costs in general are not yet thoroughly known, but considerable effort has taken place in introducing estimation methodologies. However, estimation of track costs in the railway sector is already well developed and used, as well as estimation of emission costs for road, rail and waterway transport. Methodologies are being explored concerning the costing of accidents and maintenance costs on roads. Congestion costs and the costs of scarcity of infrastructure capacity have not been actively explored in Finland. Currently, marginal cost based charges already exist on the railway, but not on other modes. In aviation, on fairways and at ports, more or less full cost type of pricing is applied. Particularly the national airport networks, as well as ports, apply charging principles similar to business enterprises, which may pose a serious barrier for implementing marginal costing principles in charging instruments. Nevertheless, the charges are user related to a large extent in these modes. Charges on the road mode are not related to the costs of use of the network, except for the carbon tax in the fuel excises. The most confusion with respect to marginal cost pricing concerns the estimation and charging of sunk investment costs, as well as fixed maintenance costs. Furthermore, it has not been debated whether marginal cost pricing is a relevant mechanism to be used in all transport environments. The expected benefits of charging for marginal costs seem insignificant in situations where their share is low, i.e. on parts of networks in less intensive use. This raises the question of separating between e.g. urban and non-urban networks in future discussions. Thus, more research is needed on the efficient designs of charging regimes on all modes and different traffic situations. Also methodologies are needed for providing quantified evidence on the likely impacts of marginal cost pricing. However, wherever sophisticated charging instruments based on marginal cost information can be expected to bring about benefits by providing socio-economically favorable behavioral incentives, they should be developed accordingly. This report is available at http://www.mintc.fi