Appraising transport investments in a regulatory regime

The traditional approach to transport investment appraisal assumed that such investments were taking place in a world where transport users were operating under perfect competition. There has been considerable work in recent years improving the methods for the economic and financial appraisal of transport investments where this assumption does not hold and thus there are wider economic benefits. This paper examines the situation where the market for transport provision operates under a regulatory regime. The impact of regulation has tended to focus on the price and output decision rather than the investment decision. In this paper we look in more detail at the implications for appraisal. This develops further the issues which arise in the appraisal of investments by public-private partnerships where essentially different objectives may be used by the private and public sectors, for example differential consideration of the wider economic benefits arising from the investment. The paper discusses the theoretical issues involved in different forms of regulatory regime and examines the experience with investments in regulated transport markets in the UK and in the case of appraising Trans-European Networks to provide some empirical evidence and the implications for the development of appraisal.