Marginal Cost Pricing in the Maritime Sector

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Marginal Cost Pricing in the Maritime Sector

• Henrik Swahn
• senior adviser
• Swedish Maritime Administration
• Department for Maritime Policy and Public Affairs
• Paper presented at the 3d Imprint Seminar,
  Brussels Oct 23d and 24th, 2002

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Disposition

• Background
• The (marginal) cost structure of martime
  transport
• Conclusion A
• Differentiation of charges based on relative
  marginal cost differences -a few Swedish examples
• A few words on institutional issues
• Conclusion B

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A general marginal cost formula
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Three separate cost calculations

• Navigation in coastal waters
• Navigation from coastal waters in access fairways
  into the port area
• Loading and unloading of goods (passengers)
  to/from ships

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Major off coast fairways
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MCinfra
MCext
Air, Water pollu-tion
Low Marginal Cost
Off coast
Public goods-gtfinancing problem-gtuser charges?
MCcharges? Regulation? Permits?
MC charges
Port access fairways
MC pricingopens for infrastructure competition
Market Prices
Noise Air Water
Port operations
Some infra competition. Transparency controls
subsidies
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Conclusions (1)

• Terminals and ports use a combination of
  production facilities partly infrastructure. In
  the presence of transparency the pricing error of
  decentralised price setting most likely will be
  small
• Marginal infrastructure cost tends to become
  arbitrary in the absence of investment criteria

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Conclusions (2)

• Pricing of environmental externalities is a key
  issue in marginal cost calculation and
  implementation in the martime sector
• Efforts to estimate marginal cost of maritime
  transport in coastal waters should be intensified
• Differentiation of user charges has the potential
  to move the transport system in the direction
  towards efficiency

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Differentiated infrastructure charging in
Sweden-examples

• KM charging for Heavy Goods Vehicles
• Environmentally differentiated fairway dues
• Air traffic and landing charges
• The Baltic Strategy - ship generated waste
• A marginal cost approach - Swedish railway
  charges

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Examples of institutional initiatives in Sweden

• The Govnment Freight Commission
• Shippers, transport industry, ministry, transport
  agencies
• Issues pricing of terminals implmentation of
  port directive (if it becomes effective)
• Ministry/agency/research working group for
  continuos development of marginal cost estimates
  for transport subsectors

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ENVIRONMENTAL DIFFERENTIATION