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The Channel Tunnel--an ex post economic evaluation

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  • Anguera, Ricard

Abstract

The forecasts underpinning the construction of the Channel Tunnel largely and systematically overestimated the total size and growth of the cross-Channel passenger and freight markets. The share of the cross-Channel markets captured by the Tunnel was accurately predicted. However, this was only achieved through a competitive battle with ferry operators, which resulted in reduced tariffs. The combination of these two factors resulted in revenues much lower than predicted. For completely separate reasons, the construction costs of the Tunnel doubled. The cost benefit appraisal of the Channel Tunnel reveals that overall the British economy would have been better off had the Tunnel never been constructed, as the total resource cost outweighs the benefits generated. Users have gained significantly at the expense of owners (producers). The latter--both ferry operators and the Tunnel operator have incurred substantial losses. The single biggest component of user's gain has not, as originally expected, been in terms of travel time savings, but due to the transfer from producers. The longer-term evaluation of the project confirms the poor viability of the investment both in financial and cost benefit terms. Eurotunnel has in recent months been the focus of much media attention. In the Extraordinary General Meeting (EGM) of April 2004 the shareholders voted to replace the management with a new French-dominated Executive. Project DARE was launched in October 2004, with the aim to address the company's difficult situation. The developments over the next few months will be critical for Eurotunnel, given the approaching end of the Minimum Usage Charge (MUC) period in November 2006 and the start of the repayment of junior debt from 2007.

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  • Anguera, Ricard, 2006. "The Channel Tunnel--an ex post economic evaluation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(4), pages 291-315, May.
    • Handle: RePEc:eee:transa:v:40:y:2006:i:4:p:291-315
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    Cited by:

    1. Bent Flyvbjerg, 2021. "Four Ways to Scale Up: Smart, Dumb, Forced, and Fumbled," Papers 2101.11104, arXiv.org.
    2. Bent Flyvbjerg, 2014. "What You Should Know About Megaprojects, and Why: An Overview," Papers 1409.0003, arXiv.org.
    3. Sanko, Nobuhiro & Morikawa, Takayuki & Nagamatsu, Yoshitaka, 2013. "Post-project evaluation of travel demand forecasts: Implications from the case of a Japanese railway," Transport Policy, Elsevier, vol. 27(C), pages 209-218.
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    6. Bjarnason, Thoroddur, 2014. "The effects of road infrastructure improvement on work travel in Northern Iceland," Journal of Transport Geography, Elsevier, vol. 41(C), pages 229-238.
    7. Plakandaras, Vasilios & Papadimitriou, Theophilos & Gogas, Periklis, 2019. "Forecasting transportation demand for the U.S. market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 195-214.
    8. Knudsen, M.Aa. & Rich, J., 2013. "Ex post socio-economic assessment of the Oresund Bridge," Transport Policy, Elsevier, vol. 27(C), pages 53-65.
    9. Jing Du & Hongyue Wu & Xianbo Zhao, 2018. "Critical Factors on the Capital Structure of Public–Private Partnership Projects: A Sustainability Perspective," Sustainability, MDPI, vol. 10(6), pages 1-27, June.
    10. James Odeck, 2019. "Variation in cost overruns of transportation projects: an econometric meta-regression analysis of studies reported in the literature," Transportation, Springer, vol. 46(4), pages 1345-1368, August.
    11. Polydoropoulou, Amalia & Roumboutsos, Athena, 2009. "Evaluating the impact of decision making during construction on transport project outcome," Evaluation and Program Planning, Elsevier, vol. 32(4), pages 369-380, November.
    12. Gwilym Pryce, 2013. "Housing Submarkets and the Lattice of Substitution," Urban Studies, Urban Studies Journal Limited, vol. 50(13), pages 2682-2699, October.
    13. Aigner, Rafael & Weber, Katharina, 2017. "The Fehmarn Belt duopoly – Can the ferry compete with a tunnel?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 100(C), pages 1-15.
    14. Ürge-Vorsatz, Diana & Kelemen, Agnes & Tirado-Herrero, Sergio & Thomas, Stefan & Thema, Johannes & Mzavanadze, Nora & Hauptstock, Dorothea & Suerkemper, Felix & Teubler, Jens & Gupta, Mukesh & Chatter, 2016. "Measuring multiple impacts of low-carbon energy options in a green economy context," Applied Energy, Elsevier, vol. 179(C), pages 1409-1426.
    15. Massiani, Jérôme & Maltese, Ila, 2022. "Thirty years of socio-economic evaluation of the Lyon–Turin High–Speed rail project," Research in Transportation Economics, Elsevier, vol. 94(C).
    16. Wu, Qitao & Fan, Jie & Zhang, Hongou & Ye, Yuyao, 2017. "The spatial impacts model of trans-strait fixed links: A case study of the Pearl River Delta, China," Journal of Transport Geography, Elsevier, vol. 63(C), pages 30-39.
    17. Pieter W. M. Vasbinder & Antoine W. G. de Vries & Wim Westerman, 2021. "Hydrogen Infrastructure Project Risks in The Netherlands," Energies, MDPI, vol. 14(19), pages 1-19, September.
    18. Olsson, Nils O.E. & Krane, Hans Petter & Rolstadås, Asbjørn & Veiseth, Mads, 2010. "Influence of reference points in ex post evaluations of rail infrastructure projects," Transport Policy, Elsevier, vol. 17(4), pages 251-258, August.
    19. Morten Skou Nicolaisen & Patrick A. Driscoll, 2016. "An International Review of Ex-Post Project Evaluation Schemes in the Transport Sector," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 1-33, March.
    20. Carl Koopmans & Piet Rietveld, 2013. "Long-term impacts of mega-projects: the discount rate," Chapters, in: Hugo Priemus & Bert van Wee (ed.), International Handbook on Mega-Projects, chapter 14, pages 313-332, Edward Elgar Publishing.
    21. Koopmans, Carl & Groot, Wim & Warffemius, Pim & Annema, Jan Anne & Hoogendoorn-Lanser, Sascha, 2013. "Measuring generalised transport costs as an indicator of accessibility changes over time," Transport Policy, Elsevier, vol. 29(C), pages 154-159.
    22. Thomas, Peter & O’Donoghue, Daniel, 2013. "The Channel Tunnel: transport patterns and regional impacts," Journal of Transport Geography, Elsevier, vol. 31(C), pages 104-112.
    23. Nabin, Munirul H. & Sgro, Pasquale M., 2018. "Bilateral international agreement, cooperation and reneging," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 27-33.
    24. Welde, Morten, 2011. "Demand and operating cost forecasting accuracy for toll road projects," Transport Policy, Elsevier, vol. 18(5), pages 765-771, September.

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