Insights on Transport Project Evaluation Techniques

Sudhir GotaClean Air Initiative for Asian Cities Center

Training on the Transport Co-benefits Guidelines27-28 October 2010Metro Manila

How to evaluate projects?

∑ COSTS

∑BENEFITS

Skillful quantification of project implications. Assumes road user as a consumer.A Physician would never think of expressing general state of health by a single indicator – Janos Kornai (1979)

NPV,IRRBCRFYRR etc

Different Approaches/Methodologies

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“There exists different approaches to evaluate projects, calculate cost and benefits and one needs to use appropriate ‘tools’ depending upon data, accuracy, resources, requirement etc.”

Making a decision on which decision making tool to use is a big problem in itself !!

Source : http://interacc.typepad.com/synthesis/2009/09/hammers-and-nails.html

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Costs of Transportation

1. Transport Infrastructure costs2. Vehicle costs – Fixed and Variable (Fixed Costs – Vehicle

purchase, Registration cost, Taxes, Insurance. Variable Costs - Fuel, Oil, Tires, Parking, Toll, Maintenance, Repair)

3. Travel Time costs4. Accident and safety costs5. Environmental costs – Air and Noise pollution and Climate

impact

Costs – Transportation User Costs

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Vehicle Operating CostsTime Costs

• Fuel• Lubricant oil• Tire wear• Crew time• Maintenance labor• Maintenance parts• Depreciation• Interest• Overheads

• Passenger time• Cargo holding time

Accidents Costs

•property damage•administration costs•lost output•medical costs•human costs

Benefits in transport projects

6Source: ADB and CAI-Asia Center, 2009

Wider Impact

Direct Impact

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Benefits in transport projects ( 1990’s)

“Although there is no consensus on the nature of the impact of infrastructure on growth, many studies have indicated that the role is substantial and frequent, and often greater than that of investment in other forms of capital.BUT there is need to explain why the findings vary so much from study to study. Until this problem is resolved, results are neither specific or solid enough to serve as a basis for designing policies for infrastructure investment.”

Box 1.1, page 15

World Development Report, 1994

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Benefits in transport projects ( 2000’s)

SACTRA Report - Little empirical evidence of broader impacts, and what there is is contradictory. Some indicates significant impact on rates of economic growth, most suggests that there is some impact but that it is small. The state of the art is poorly developed, and the results do not offer convincing evidence of the size, nature or even direction of regional and local impacts.

ADB - Based on the available econometric literature reviewed, roads appear to have strong indirect and direct effects on poverty reduction, and these are even clearer when roads are combined with complementary investments, such as schooling.

Multi Criteria Appraisal

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Multi-criteria appraisal overcomes some of the problems of traditional approaches by allowing the decision-maker to assess the weights to be assigned to different indicators, objectives and impact groups.

Preferences differ from decision maker to decision maker, so the outcome depends on who is making the decision and what their goals and preferences are.

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Few insights on Project appraisal/evaluation

1. Importance of Dynamic Baseline (1)

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1. Importance of Dynamic Baseline (2)

Modeshift to Ahmedabad BRTS

1st

Month2nd

Month3rd

Month4th

Month5th

Month6th

Month7th

Month8th

MonthWalk 7 4.2 3.6 1.3 4.9 3.9 3.6 0.8Cycle 7 3.8 5.8 2.2 3.3 1.2 2.3 1.9

Rickshaw 14 18 25.4 25.2 15.3 10.9 26.3 13.22-Wheeler 12 21 16.7 20 19.2 21.2 14.1 204-Wheeler 3 4 6.5 11.3 9.8 6.7 1.3 0.9

Bus 57 49 42 40 35.5 44.4 46.8 48.7Shared-Rickshaw 0 0 0 0 12 11.7 5.6 14.5

Average passenger/day 17315 23086 31327 35672 35166 37184 48789 51207

Source : Ahmedabad Municipal Corporation

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2. Ex-ante and Ex-post require different approaches

Modified from John Rogers, World Bank

SKETCH ANALYSIS

DETAILED ANALYSIS

3. Estimating Speed is critical

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CO2 PM NOx

SPEED 2W 3W Cars LCV Bus HCV Car LGV Bus HGV Car LGV Bus HGV15 -70 -70 -61 -69 -61 -61 -43 -30 -21 -60 -43 -35 -56 -4420 -43 -43 -34 -38 -51 -51 -26 -18 -16 -55 -32 -23 -46 -3625 -26 -26 -20 -22 -39 -39 -18 -10 -12 -45 -23 -14 -37 -2830 -21 -21 -12 -18 -23 -23 -11 -4 -9 -35 -16 -8 -29 -2235 -7 -7 -5 -6 -15 -15 -6 -1 -7 -25 -10 -3 -21 -1540 -4 -4 -3 -3 -9 -9 -3 1 -4 -16 -5 -1 -14 -1045 -1 -1 0 0 -3 -3 -1 1 -2 -7 -2 0 -7 -450 0 0 0 0 0 0 0 0 0 0 0 0 0 055 0 0 -1 -1 2 2 0 -2 2 6 1 -2 6 660 -2 -2 -3 -4 5 5 -1 -4 3 10 1 -4 13 965 -4 -4 -6 -7 5 5 -3 -8 3 12 1 -7 13 970 -8 -8 -9 -12 6 6 -6 -11 3 12 -1 -11 13 975 -12 -12 -13 -16 0 0 -9 -15 1 12 -3 -15 10 780 -18 -18 -18 -23 -4 -4 -13 -19 -1 10 -5 -19 7 485 -23 -23 -24 -29 -7 -7 -17 -23 -5 7 -9 -24 4 190 -30 -30 -30 -37 -12 -12 -22 -28 -8 4 -12 -28 1 -295 -37 -37 -36 -45 -16 -16 -27 -32 -8 -14 -16 -33

100 -37 -37 -36 -45 -16 -16 -32 -36 -8 -16 -20 -38

4. Be careful with Speed flow equations

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Not accurate after V/C ratio exceeds 1

Source : Green Transport- ADB, HCM-2000 and IRC

5. Vehicle Operating Costs – Roughness(1)

16Source : modified from Green Transport- ADB

KMPLRougness (m/km) Truck-Small

Truck-Medium Truck-Large Car Mini-Bus

Large Bus Trailer

2 7.11 3.25 2.90 13.59 4.07 3.31 1.943 7.06 3.22 2.86 13.55 4.05 3.28 1.914 7.00 3.19 2.83 13.51 4.04 3.25 1.895 6.94 3.16 2.80 13.48 4.03 3.22 1.866 6.89 3.13 2.76 13.44 4.01 3.19 1.847 6.84 3.10 2.73 13.40 4.00 3.16 1.828 6.78 3.08 2.70 13.37 3.99 3.14 1.799 6.73 3.05 2.67 13.33 3.98 3.11 1.77

10 6.68 3.02 2.64 13.30 3.97 3.08 1.7511 6.63 2.99 2.61 13.26 3.95 3.05 1.7312 6.57 2.97 2.58 13.23 3.94 3.03 1.7113 6.53 2.94 2.56 13.19 3.93 3.00 1.6914 6.48 2.92 2.53 13.16 3.92 2.98 1.6715 6.43 2.89 2.50 13.12 3.91 2.95 1.65

Assuming roughness is decreased from 13 to 2 for 1 km, assuming 1000 large buses/day

= savings of 400,000 Pesos/Year/km on fuel ONLY

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5. Vehicle Operating Costs – Roughness (2)

Source : World Bank Review

6. Transportation User Costs (1)

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Source : Modified from World Bank Review

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6. Transportation User Costs (2)

Based on a World bank review of 44 projects

1. Fuel Costs are 38% (say 40%) of total VOC for ASEAN

2. Travel Time costs are 12% of VOC for ASEAN

3. Maintenance Part and Labor are 12% of total VOC for ASEAN

Thus, in case you have CO2, back calculate fuel use and then derive VOC !!

7. Include Induced Traffic

20Source : ADB 2010

Impact of Induced traffic

0.0

0.5

1.0

1.5

2.0

2.5

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Kilo

tons

of C

O2

/Km

BAU e=0 e=0.25

e=0.5 e=0.8 e=1

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8. Consider Replication Effects where possible

Source : ITDP

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9. Make realistic traffic projections

Source : Phil. Sayeg, Sam Zimmerman and others

10. Impact of Construction

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1. construction causes delay, increased and slow vehicle operation, accident, and environmental costs

2. A typical 4 lane high speed road generates 2000 tons/km of CO2 emissions.

3. In a metro - construction emissions are of high intensity and it can range from 3 to 12 years of operation emissions

Source : Mikhail Chester el al.

11. Select appropriate Project lifecycle

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-4000-2000

02000400060008000

100001200014000

CO2 saved (20 years) with construction

CO2 saved (10 years) with construction

Tons

/Yea

r/km

Impact of Project Life on Emissions

Source : ADB (2010) – Reducing Emissions from Transport Projects

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12. Consider Technological Improvements

1. By assuming an annual increase in fuel efficiency of 1% and 3% in a typical Indian expressway project , it has been estimated that the decrease amounts to 4700 tons/km, 12600 tons/km cumulatively over twenty years’ lifecycle or in other words reductions of 11% and 29% from without change in technology scenario.

2. The fuel can become less carbon intensive, more cleaner and thus may change the emission profile. Analyst needs to consider such improvements in future.

3. Though the impact would be similar in with and without project case but it would prevent inflating the numbers !!

13. Co-benefits in Economic Analysis

EIRR

10.73% 10.37%

18.09%20.96%

13.66% 13.11%

31.17% 32.22%

0%

5%

10%

15%

20%

25%

30%

35%

EIRR WithVOC + VOT

+ CO2

EIRR WithVOC + VOT

EIRR WithVOC + VOT

+ CO2

EIRR WithVOC + VOT

EIRR WithVOC + VOT

+ CO2

EIRR WithVOC + VOT

EIRR WithVOC + CO2

EIRR WithVOC

Laos- Rural AccessRoads Project (c1)

Laos- Rural AccessRoads Project (c2)

(Ho Chi Minh City–LongThanh–Dau Giay

Expressway

Surat ManorExpressway

EIRR

Quantifications with CO2 with 85 $/ton, PM10 with 15000 $/ton and NOx as 3500 $/ton.

CO2 would make significant impact on economic analysis ONLY when it exceeds 400$/ton

Source : ADB 2010

Find out more:

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www.cleanairinitiative.orgwww.cleanairinitiative.org/portal/GreenTrucksPilot

CAI-Asia Center

“Air Quality in a Changing Climate”

www.BAQ2010.orgFor information email: baq2010@cai-asia.org

Bert Fabian, Transport Program Managerbert.fabian@cai-asia.org

Sudhir Gota, Transport Specialistsudhir@cai-asia.org

Alvin Mejia, Environment Specialistalvin.mejia@cai-asia.org

Unit 3505, 35th floorRobinsons-Equitable Tower

ADB Avenue, Pasig CityMetro Manila 1605

Philippines