Wider economic disbenefits of not implementing the European TEN-T core network corridors (CNC)

Konferenz Verkehrsökonomik und politik Berlin, 11.06.2015 Wider economic disbenefits of not implementing the European TEN-T core network corridors (CNC) Dr. Wolfgang Schade M-Five GmbH Mobility, Futures, Innovation, Economics wolfgang.schade@m-five.de Dr. Michael Krail, Fraunhofer ISI Seite: 1 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

PROJECT OBJECTIVES Quantitative assessment of impacts if TEN-T would not be implemented as defined by TEN-T guidelines and CEF (EU Regulations 1315/2013 and 1316/2013). Assessment of 2 test cases and 3 scenarios: 2 corridors (test cases to develop the methodology), nine CNCs and full core network, crossborder projects and innovative technologies. Focus on wider economic effects, in particular GDP and employment. Detailed qualitative and quantitative analysis of jobs created by the TEN-T (e.g. quality of jobs, innovativeness of jobs). Seite: 2 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

PROJECT TEAM Lead: Partners: Support: Client: European Commission Seite: 3 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

TEN-T CORE NETWORK 9 CNC (CORE NETWORK CORRIDORS) TEN-T network comprises: TEN-T core network, of which 9 core network corridors =75% TEN-T comprehensive network Innovative technologies Seite: 4 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

Macro-economic analysis Classical transport CBA UNDERSTANDING WIDER ECONOMIC BENEFITS Other cost for transport users e.g. operation cost increases TEN-T transport investment Benefits for transport users usually largest are time savings Wider economic benefits Net-Benefits for externalities TEN-T transport investment Macro-economic benefits, either GDP or value-added or disposable income European added-value Net-Benefits for externalities Costs of transport infrastructure BC ratio = Macro-economic benefit = Benefits of transport infrastructure Benefit side Cost side Cost side X Multiplier Source: Own presentation Seite: 5 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

WORKFLOW OF THE PROJECT AND USAGE OF ASTRA MODEL Work plans of 9 corridor studies (CNC) Innovation analysis Types of invested technologies Employment change by NUTS-II zone Annual investments by category (e.g. networks, tunnels, terminals, innovations, etc.) Travel time changes by NUTS-I zone due to accumulated effects by CNC ASTRA model 5 CNC scenarios GDP, employment transport, etc. Transport performance By mode Employment by sector, by country 25 sectors NACE-CLIO Eurostat Regional Statistics EU LFS WIOD EU skills panorama BAC corridor study (network model) Travel time adjustments for zones with overlapping CNC Emissions & External Cost By mode Employment change by occupations PTV-Validate (network model) TENtec Core Networks 2030 HBEFAC Handbook Emission Fact. IMPACT Handbook External Cost Employment change by skill levels Seite: 6 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

ASTRA MODEL (=ASSESSMENT OF TRANSPORT STRATEGIES) INTEGRATED MODEL Source: Fraunhofer-ISI/TRT Seite: 7 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

TEN-T IMPACTS LINKED TO ASTRA ECONOMY MODEL Transport Time/Cost Trade Demand Lead Market Effects Investment TEN-T Investm. Transport Final Demand TEN-T Funding Consumption Transport Transport Cost Input-Output Table Government Household Disposable Income Population Input- Output GDP TEN-T Implementation Gross Value Added Potential Output Employment Supply Capital Stock Total Factor Productivity Transport Time Source: Fraunhofer-ISI Population Labour productivity Seite: 8 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

Inverse Coefficient Matrix. LINKING TRANSPORT CHANGES TO THE ECONOMIC ACCOUNTING GDP (demand side) Travel time and distance Input S1 - S25 Sector 1 Sectors 1 to 25 IO-Table Intermediate Sector Consumption Sector 1 Energy Vehicles Investment Sector 1 Vehicles Export Sector 1 Fuel expenditure Car purchase Vehicle investment Transport cost /tkm, /pkm Inland transport Air maritime transport Sector 25 input to sectors 1 to 25 input to sectors 1 to 25 input to sectors 1 to 25 Inland transport Air maritime transport Sector 25 Metal products Machinery Electronics Computers Vehicles Construction Other services Sector 25 Sector 25 Transport expenditure TEN-T investment Gross value-added by sector Investment Travel times Total Factor Productivity Labour productivity Employment by sector GDP (supply side) Source: Fraunhofer ISI / M-Five Seite: 9 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

SCENARIO SETTING SELECTION OF CNC PROJECTS No CNC ScanMed CNC Scandinavian-Mediterranean longest of all 9 CNC (from Sweden to Malta), crossing 7 countries Highest investments of all 9 CNC large projects like Fehmarn Belt Crossing or Brenner Base Tunnel Planned CNC investments between 2015 and 2030 for EU28 106 billion * No CNC RhAlp CNC Rhine-Alpine crosses 5 countries (from Netherlands to Italy) Already intensive travel demand on this corridor Large projects: Gotthard BT, Rail Karlsruhe-Basle CNC investments between 2015 and 2030 for EU28 31.6 billion (plus 11.3 billion for CH)* Test against Reference Scenario with full core TEN-T network by 2030 *All monetary values are expressed in real terms in constant 2005 Seite: 10 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

TIME SAVINGS ASSESSMENT APROACH Basic input: List of about 634 projects/investments from CNC work plans of the two corridors (total TEN-T core network has about 2,700 projects) Individual assessment of time savings by project and CNC for each NUTS1 zone (plus NO and CH) Rules for estimating travel time savings of: Innovative technologies (ERTMS, SESAR, RIS, etc.) Literature review SESAR 10% time savings per EU flight (SESAR Joint Undertaking 2011*) ERTMS max. 20% time savings for level 2 (Obrenovic et al. 2006**) RIS max. 10% (mainly for safety, but optimization at locks, etc.) Cross-border: Large projects e.g. Fehmarn Belt, Brenner, etc. Literature review Rule of thumbs for multi-modal platforms, logistic hubs, etc. * SESAR Joint Undertaking (2011): Assessing the macroeconomic impact of SESAR. ** Obrenovic et al. (2006): European Transport Conference: Proceedings of the ETC; Migration of the European Train control system (ETCS) and the impacts on the international transport markets Seite: 11 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

INPUTS OF TRANSPORT TIME CHANGES BY NUTS-I ZONE: INTERNATIONAL TRANSPORT (NATIONAL/REGIONAL TRANSPORT SEPARATE) International Transport %-travel time increase in case of non-completion - range of all NUTS-I zones affected by a CNC PASSENGER travel time changes in 2030 Rail Car Bus Air SCM Scandinavian-Med 10%-68% 3%-68% 3%-68% 5%-10% RHA Rhine-Alpine 20%-45% 3% 3% 5% International Transport %-travel time increase in case of non-completion - range of all NUTS-I zones affected by a CNC FREIGHT travel time changes in 2030 Rail Truck Maritime IWW SCM Scandinavian-Med 10% - 118% 5%-68% 5% n.a. RHA Rhine-Alpine 20%-45% 5% 5% 10% Source: Fraunhofer ISI / PTV Seite: 12 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

[Mio Euro] [Mio Euro] SCENARIO SETTING AVOIDED INVESTMENTS No CNC ScanMed 423 projects from CNC work plan Planned investments: 130 billion* (2015 and 2030: 106 billion*) 16% of all projects / 23% of investments 14,000 12,000 10,000 8,000 6,000 Investments Scandinavian-Mediterranean SE NO MT FI AT DK 4,000 DE 14,000 Investments Rhine-Alpine 2,000 IT 12,000 0 2015 2017 2019 2021 2023 2025 2027 2029 10,000 8,000 6,000 4,000 2,000 0 2015 2017 2019 2021 2023 2025 2027 2029 Source: Fraunhofer-ISI NL FR BE CH DE IT Source: Fraunhofer-ISI No CNC RhAlp 211 projects from CNC work plan Planned investments: 61 billion* (2015 and 2030: 43 billion*) 8% of all projects / 9% of investments * All monetary values are expressed in real terms in constant 2005 Seite: 13 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

[Delta in Mio Euro 2005 compared with REF] CORRIDOR SCENARIOS LOSS OF GDP 20 0-20 -40-60 -80 GDP losses for EU27 as against Reference with full core TEN-T network by 2030 2030 t 2015 2030 t 2015 GDP RhAlp GDP ScanMed 384,000 ScanMed RhAlp 807,000 No ScanMed 2030: - 98 bn 2015-2030: 807 bn No RhAlp 2030: - 49 bn 2015-2030: 384 bn -100-120 2014 2016 2018 2020 2022 2024 2026 2028 2030 Source: Fraunhofer-ISI * All monetary values are expressed in real terms in constant 2005 Seite: 14 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

[Delta in Thousand Jobs] CORRIDOR SCENARIOS JOBS NOT CREATED 20 No ScanMed 0 FTE jobs -20-40 -60 2030 t 2015 Emp RhAlp 758,000 RhAlp 2030: - 139,000 2015-2030: - 1,6 million -80-100 -120 2030 t 2015 Emp ScanMed 1,589,000 RhAlp - FTE ScanMed ScanMed - FTE No RhAlp FTE jobs -140 2030: - 71,000-160 2015-2030: - 758,000-180 2014 2016 2018 2020 2022 2024 2026 2028 2030 Source: Fraunhofer-ISI Seite: 15 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

[Delta jobs compared to REF] CORRIDOR SCENARIOS SECTORAL EMPLOYMENT 0 Delta of jobs per sector in EU27 - ScanMed CNC No ScanMed -5,000-10,000-15,000-20,000-25,000-30,000-35,000-40,000-45,000 2020 2030 Strongest impact on construction and service sectors 2 nd round impacts on agriculture Modal shift from rail to road compensates loss of rail (and air) jobs Source: Fraunhofer-ISI Seite: 18 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

[Delta jobs compared to REF] CORRIDOR SCENARIOS SECTORAL EMPLOYMENT CNC No RhAlp Similar impacts Strongest impact on construction and service sectors 2 nd round impacts on agriculture Modal shift from rail to road compensates loss of rail (and air) jobs 0-5,000-10,000-15,000-20,000-25,000-30,000-35,000-40,000 Delta of jobs per sector in EU27 - Rhine-Alpine 2020 2030-45,000 Source: Fraunhofer-ISI Seite: 19 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

KEY FINDINGS WIDER ECONOMIC IMPACTS NO CNC SCANMED AND NO CNC RHALP SCENARIO Indicator No CNC ScanMed No CNC RhAlp Avoided investments for EU27 (2015-2030) Loss of GDP for EU27 in 2030 compared with REF Cumulated loss of GDP for EU27 (2015-2030) Jobs not created (Total/FTE) in EU27 in 2030 compared with REF Job-years (Total/FTE) not created in EU27 (2015-2030) 106 billion 43 billion - 98 billion - 49 billion - 807 billion - 384 billion 162,000 / 139,000 83,000 / 71,000 1.8 million /1.6 million 0.87 million / 0.76 million Seite: 20 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

ECONOMIC MULTIPLIER OF TEN-T INVESTMENTS Multiplier from investment to economic impact Direct economic effects e.g. in GVA in construction Indirect economic effects in supplier industries Second round effect increase of income, spending on all sect. TEN-T investment Generation of investment multiplier + Generation of transport time multiplier Growth effects increase BIP and employment Time savings by new transport infrastucture and innovative technologies Increase of factor productivity (sectoral and total) Structural change in IO-table and trade changes Source: Schade/Krail 2015 Seite: 21 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

COMPARISON OF WIDER ECONOMIC IMPACTS OF THE TWO CORRIDORS Economic Multipliers Scenario Value Unit FTE-Job-Years per billion investment Accumulated GDP gain per investments (both in bn ) Period 2015 to 2030 Effects continue after 2030 No_CNC_ScanMed No_CNC_RhAlp Literature values No_CNC_ScanMed No_CNC_RhAlp 14,683 Person-Years/B 25,935 Person-Years/B 12,700 to 37,300 Person-Years/B 7.5 GDP/INV Multiplier 13.2 GDP/INV Multiplier Source: own elaboration Seite: 22 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

KONTAKT Dr. Wolfgang Schade Wissenschaftliche Leitung, Geschäftsführung M-Five GmbH Mobility, Futures, Innovation, Economics i.g. Frankenstr. 8, 76137 Karlsruhe wolfgang.schade@m-five.de Seite: 23 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

OPTIONAL SLIDES Seite: 24 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

IMPACTS OF INFRASTRUCTURE INVESTMENTS IN DIFFERENT SECTORS Investment e.g. Funding structure e.g. Transport, Energy, Transport, Energy, Education, IT, etc. Education, IT, etc. Sector specific direct economic impacts Sector specific split vector to split investment onto economic sectors Construction Machinery Electronics Metal products Planning services Etc. sector Transport Education Energy Etc. sector Travel cost Transport time Accesibility, etc. Human capital Labour market, etc. Energy cost Energy tax revenues Energy imports, etc. Government Private Financial sector PPP User (e.g. tolls) National European, etc. Within sector retained earnings Domestic investors Foreign investors (FDI) Banks (EIB, KfW, Priv.) Risk averse investors Wider economic effects of the sectoral investment: GDP, íncome, employment, trade, etc. Source: Schade/Krail 2015 Seite: 25 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015

AVERAGE EMPLOYMENT GENERATION OF INFRASTRUCTURE INVESTMENT (JOB-YEARS / BN$ INVESTED) Project type Studies reviewed Total employment generated (Direct + Indirect + Induced) Average values Total Range Energy 16 26,136 8,829 51,185 Transportation 25 24,223 12,709 37,259 Highways 5 34,288 22,535 37,259 Roads and bridges 8 33,770 18,926 35,307 Rail 4 18,871 12,709 22,286 Mass Transit 5 29,295 23,329 32,430 Buildings 10 26,204 17,736 32,119 Water 6 25,297 18,352 30,435 Telecommunication 3 28,608 19,729 31,646 Health 1 20,356 20,356 Source: National Roads Authority (2013). The Employment Benefits of Investment Projects. International Studies. Seite: 27 09.06.2015 M-Five 2015 Schade/Krail, Wider economic disbenefits of not implementing TEN-T CNC, Berlin, 11.06.2015