Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

Abstract: The cost of short-sea shipping on the seas surrounding Sweden will increase considerably after 2015 as a result of the introduction of stringent emission limits on NOx and sulphur. This may give trucks and trains an upper hand in market segments where customers can choose between sea transport and land-based modes. This report shows that the balance would shift in favor of shipping if government gives all modes an equal liability for external costs. With the internalization based on the short-term social marginal costs of infrastructure use, accident risk, and emissions of NOx, sulphur and CO2, rail will be losing market shares. In this scenario the current fairway dues would have to be lowered by at least 90 per cent in order to reflect the short-term marginal cost (rather than variable + fixed costs), while at the same time railway infrastructure charges would quadruple. A surprising result of the calculations is that long-distance freight transport by truck on the main road arteries that compete with short-sea shipping will by 2015 have internalized its short-term social marginal costs based on the current (2011) taxation of vehicles, roads and fuels. This is a result of an increasingly cleaner vehicle fleet and the use of the best roads whose social marginal costs for accidents and road tear are well below average. Equal treatment of all modes with regard to social cost liability will make it possible for short-sea shipping to relieve the national railway system of some of its growing capacity problems that would otherwise have to be resolved by substantial investment in additional rail infrastructure.

Keywords: Internalization; freight transport; short sea shipping; intermodal competition

JEL-codes: R48

44 pages, November 3, 2011

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CTS2011-14.pdf  

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