Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 REVENUE: Revenue Use from Transport Pricing Interurban Case Study: Rotterdam Port L. Rudzikaite, H. Visser, J. Kiel

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Presentation Contents  Research scope of the Study Case  Level Playing Field  Policy schemes analyzed  Modelling approach  Case Study Outcome  Conclusions

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Research Scope  Existing and planned practices on pricing, investment & revenue use at competing ports of Rotterdam and Antwerp  Testing theoretical trade-off alternatives towards optimizing efficiency, equity and acceptability Focus exclusively on: Container Transport (most rapidly growing branch)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Why Container Transport? Double volumes in 10 year time - capacity shortage threaten both ports!

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Coastal map

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Level playing field Both competing ports are driven by : »rapid growth of container transport »threatening infrastructure capacity problem : Rotterdam: reclaiming sea-land for Maasvlaakte 2 terminal Antwerp: building Deurganck terminal, ensuring/improving access for bigger (container) vessels, minimizing tide- dependence) »Competition pressures (pricing/investment trade-offs) »Legal obligations (Dutch leg of the access to Antwerp) versus environmental threats »Sustainable welfare targets

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Elements Scrutinised  Port infrastructure capacity (port access for container vessels, container terminal)  Pricing policy (port dues policy for container vessels, navigation charging policy on waterway network)  Investment policy (of port authority, local authority, government : infrastructure expansion, nature damage compensation)  Environmental concerns/legal obligations (Interstate obligations Netherlands –Belgium)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Policy Schemes Analysed »Status quo situation ( ) Ownership status (port authority-local authority-government) Current pricing/taxation policy (harbor dues for container vessels 2004) Ongoing infrastructure investment financing (new infrastructure at ports, hinterland access) »Adopted policy for the future ( ) Launching new infrastructure (sea land reclamation Maasvlakte 2, Deurganck container terminal) Sea-wall for Rotterdam Obligation to maintain necessary depth on the Westerschelde access route »Negotiated trade-off policy for the future ( ) Launching new infrastructure (Maasvlakte 2, Deurganck) Sea-wall for Rotterdam Obligation to maintain necessary depth on the Westerschelde access route Negotiated further deepening of the Westerschelde access route Nature/flood protection on the Westerschelde access route Low acceptability by the Dutch society

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Regulation schemes: Theoretical option “User Pays” Although navigation on waterways is free of charge, make an exception on Westerschelde route by applying a “User Pays” principle => i.e. assuming Belgium, as a major user of the Westerschelde route, pays a contribution to the “Westerschelde Investment Fund” of the Netherlands Arguments: maintenance/deepening and nature protection costs are beared by the Netherlands, the major benefits go to Belgium Indirectly supporting the biggest competitor In fact, the Dutch and the Flemish governments concluded a political trade-off: –Netherlands fully bear the costs of deepening the Westerschelde –Belgium facilitates the operation of a high-speed train service “Amsterdam-Paris”

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Approach Molino model  Abstraction towards two port competition only (third option is ignored)  Artificial inclusion of passenger transport (to make model running)  Simplification of port ownership relations (to trace revenue flow)  Operator’s concept is replaced with Resultant Operator concept (resultant shipper)  Overcoming dual government problem  Costs related to tide-waiting are assumed as infrastructure capacity restriction costs Having in mind the complexity of the port system and the restrictions of the model, the outcome should be considered as TENTATIVE

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Regime variants (as suggested by MOLINO) »Reference (actual port dues) »Fixed toll (to pay-back investments) »MSC-tolling Methodological difficulties with »Nash (Private/Private) »Mixed (Private/MSC)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Outcome: Policy bound tolls (per variant)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Outcome: Effects of pricing policy on demand

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Outcome: Policy Bound Revenues Versus Investments Toll revenues (Euro mln) / At the end of the period/ Status Quo Policy Criteria End 2006 Adopted Policy Critreria End 2012 Negotiated Policy Criteria End 2012 Rotterdam route Antwerp Route (+ maintenance Westerschelde ) Rotterdam route Antwerp route (+ maintenance Westerschelde) Rotterdam route Antwerp route (+ deepening & maintenance Westerschelde) Reference Fixed MSC Investments Required accumulative net payment to Westerschelde Fund (“User Pays”)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005 Conclusions  Fixing the level of charges sufficiently high to self-finance the investment costs significantly reduces the container transport volumes and has a negative impact on welfare levels  Charging at marginal cost levels scores better, but does not produce sufficient revenues to recover the investment costs for big scale projects, like Westerschelde en Maasvlakte 2  Existence of a “third port” competition makes it even more difficult to earn the investments back  Modification of current port tariffs might struggle with a legal problem on waterways charging in the Netherlands  Practical solution of the cross-border problem of the Westershelde project is a political trade-off /an impropriate example on transparency of seaport bound investments/