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EU - Projekt "MC ICAM"

"Implementation of Marginal Cost Pricing in Transport -
Integrated Conceptual and Applied Model Analysis "

MC ICAM Web-Site

Emphasis of research:   Marginal cost pricing, acceptance, phased approach
Head:   Bernhard Schlag
Staff:   Jens Schade
Project life:   04/2001 to 06/2003

Financed by:

  EU DG TREN

 

 

MC-ICAM Newsletter "Implementing Innovative Pricing in Transport", published September 2003

Conference on transport pricing acceptability (23-24th May, 2002): more information ...

 

Description

Marginal cost pricing has been identified, both in the (theoretical) economic literature and in various Commission documents, e.g. in the White Paper on Fair payment for infrastructure use (1998), as the pricing regime that maximises efficiency in the transport system and sector. However, examples of its implementation in transport are rare. Even in situations where efficiency is the primary concern, non-price regulatory measures have been far more common while marginal cost pricing is typically viewed as a theoretical concept that is too difficult to put into practice. In practice, in those cases where pricing has been implemented, it has not been marginal cost pricing but its aim has rather been to collect revenue.

A starting point of the study is the obvious tension or paradox between the economic theory, which suggests marginal cost pricing is the right solution, and practical experience, which suggests that such pricing measures are hard to implement. In particular, road pricing, which has attained greatest attention in the literature and policy debate, appears to enjoy notably scant support among the population in general and is a controversial topic among politicians and professional policymakers.

The reasons for this situation can be manifold:
(i) the gap between the underlying economic theory of marginal cost pricing and the requirements for practical implementation may be too large;
(ii) important legal and institutional barriers to implementing marginal cost pricing in practice may exist;
(iii) concerns of the distributional effects of marginal cost pricing may in practice overshadow considerations of the positive efficiency gains; and
(iv) public and political acceptance of marginal cost pricing may be low because of various non-economic factors.

This MC-ICAM study is designed to address the issues and questions related to the phased approach to implementation, while having a clear primary focus on intermodal situations. The study will identify and include all significant intermodal competition distortions and related issues affecting the implementation of marginal cost pricing. Naturally, in order to allow for all relevant information and to be able to provide a balanced overall picture (in a situation where modal level distortions may be interlinked with intermodal distortions), the study will also cover intramodal and intersectoral situations.

 

Publications

Schade, J. & Schlag, B. (eds.) (2003). Acceptability of transport pricing strategies. Oxford: Elsevier.

Further MC-ICAM Publications

 

Links

Sister project IMPRINT-EUROPE is a Fifth Framework Thematic Network project for the European Commission (2001-2004).

Urban Transport Pricing in Europe

Further links

Please visit our AFFORD or CUPID Site