The Economics of Investment in High-Speed Rail
High-speed trains can compete successfully with road, air and conventional rail services
on densely trafficked routes where willingness to pay is sufficient at the relatively
elevated fare levels needed to cover costs. High-speed rail investments can also relieve
congestion on the conventional rail network, and the capacity for high-speed rail
to provide fast city centre to city centre services creates new possibilities for
day-return business trips and short-stay leisure trips.
The long cost recovery periods for high-speed lines imply government involvement in
the financing of most investments. The high costs mean that governments can be exposed
to accumulation of large debts, particularly if demand develops more slowly than expected.
Where high-speed rail investments are designed to promote regional integration rather
than meet commercial demand, significant subsidy from central and regional governments
will be needed for the construction of infrastructure and possibly also for train
operations.
This report examines the key factors that drive the costs of high-speed rail investment
and reviews the economic benefits delivered by high-speed rail services on the basis
of experience in countries that have developed large high-speed rail networks.
Published on December 24, 2014
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