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Analysis of a legislative measure of the Region of Sicily to ---

By Norman Freeman,2014-08-08 21:57
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Analysis of a legislative measure of the Region of Sicily to ---

    Analysis of a legislative measure of the Region of Sicily to promote the use of combined roadsea transport in the

    ports of Sicily through an environmental bonus granted to users.

    INFORMATIVE SUPPORT TO THE ANALYSIS OF COMPATIBILITY WITH EUROPEAN

    UNION LAW

Introduction

    In order to reduce the environmental impact of long-distance road transport with Sicily, the Region of Sicily has decided to introduce a system of temporary incentives, for a maximum of three years, granted to EU road transport companies favouring the development of combined road-sea transport (CRST) between Sicilian ports and the national ports on the continent.

    The reasons for such decision are as follows:

    - higher external costs of road transport compared to sea transport between Sicily and the

    continent. Such costs are borne by Sicily and by other Italian regions;

    - the need to intervene with incentives in a situation where, for structural reasons within the

    haulage sector (low road transport production costs, pressing delivery time required from

    hauliers, need to collect goods along the way, etc.) many hauliers do not find sea

    transport convenient unless the ratio between price and service quality provided by the

    shipping companies is somehow reduced.

    The economic incentive, also called environmental bonus, is granted to any EU haulage company using maritime services, provided by Sicily’s ports, suitable for combined road-sea

    transport.

    The subsidy is granted upon proven shipping of the heavy vehicle. The subsidy is suitable for the use of any maritime service connecting Sicilian ports with other national ports (current or potential services), excluding those having the mere function of crossing the Strait of Messina.

    The subsidy is arranged in such a way that for any route it is always proportional to the external differential costs between road and sea transport for each maritime service (current or potential). The size of the subsidy can always be univocally calculated. The amount is the minimum necessary to convey a significant amount of modal transfer.

    Further on, attention is focussed on some elements of the law text adopted by the Region of Sicily having a greater importance in the analysis of compatibility with EU law.

I Beneficiaries

    The beneficiaries of this measure are all companies set up in the EU member states territory operating in road transport on their own or on behalf of a third party.

    To gain access to the program and to benefit from the bonus, companies will only have to send an application to the Region, using the form which will be available on the internet. Having verified the correctness of data communicated by the enterprises on their identity and professional capacity to carry out haulage activities (possession of permits or authorizations issued by the member state to which they belong) the Region will grant companies access to the bonus.

    The bonus is temporary, it may last for a maximum of three years, and thus it can be considered as a start-up aid.

II Routes and maritime services

    In order to avoid a priori any risk of discrimination between single ports or single routes, subsidies are granted to boarding heavy vehicles, for the use of all maritime services between the ports of Sicily and those of the continental Italian area.

    Hence, complete geographic coverage and total freedom in the choice of the maritime carrier are granted.

    The only exclusion regards maritime services crossing the Strait of Messina and it has been introduced to avoid competition distortions. The exclusion of maritime services is only limited to some areas in Calabria (from Cittadella del Capo to Trebisacce) near the Strait. Such exclusion avoids the risk of interference with ferryboat services operating on the Messina Strait.

    Such exclusion (a small stretch of Calabria’s coast, a ray or approximately 200 km from the

    Strait) has little relevance as far as the measure’s objectives are concerned since:

    a) the (potential) routes that have been left out would be relatively short (on average less

    than 300Km) and the use of shorter routes as an alternative would be of no benefit

    environmentally.

    b) as a matter of fact, the area of Calabria excluded is not equipped with ports suitable for

    Ro-Ro transport, with the exception of Gioia Tauro, which is very close to Messina Strait.

    Benefits for journeys on this route are therefore inconsistent with the Regional measure’s

    aims.

III Competition with rail transport

    The rail transport market to and from Sicily is not influenced in any way by actions in the sector of road-sea combined transport.

    This statement is based on the following reasons:

    a) transport on “conventional” (non intermodal) wagons to/from Sicily concerns goods which

    are very different from those carried by road transport in terms of value, delivery time, etc. b) accompanied combined transport (“Rolling Highways”) is currently missing in Sicily and,

    generally speaking, it is difficult to implement on long routes such as Sicily-continent,

    owing to the difficulties of reducing transit time, of respecting a regular schedule

    (absolutely necessary for “Rolling Highways”, on a railway system which has relevant

    capacity problems (hence stops and delays) on important railway nodes. c) even un-accompanied road-rail combined transport (semi trailers and swap-bodies) is a

    separate market from that of road-sea combined transport, at least in terms of type of

    services offered by Sicily’s market. Who invests in suitable means (semi trailers with

    special handling equipment, swap-bodies etc.) and plans traffic with the “piggy-back”

    company, does not find convenient to use intermodal equipment in a different way, since

    the maximum return on the investment in “piggy-back” derives from the use of the railway.

IV Basic reference for the estimate of external costs

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    The Region of Sicily has based the calculation system for the environmental subsidy on a scientific research concerning external costs carried out in Italy in 2000 with the most advanced methods recognised at European level.

    The scientific text which collects the results of the research, published by one of the most important editors in Italy in the field of social sciences (Franco Angeli), is as follows: Lombard, P.L, Molocchi, A. (2001), Navigazione e Ambiente un confronto con i costi

    esterni delle altre modalità di trasporto, Milano, Franco Angeli.

    The research is unanimously recognized by the Italian scientific community as the best and most updated source for the estimate of external costs of haulage at national level. The two fundamental parameters on which the calculation of the subsidy is based can be obtained from the basic data of the research carried out by Lombard and Molocchi (pg. 144), expressed in costs external to ton-Km.

    The estimates take into account the costs of:

    ; green house gasses;

    ; air pollution;

    ; noise;

    ; accidents;

    ; congestion.

    For a 14-metre-long heavy vehicle loaded with 20 tons of goods (hereinafter “typical heavy vehicle”) external costs of travels by road and by sea are as follows

    ; for a route of 100 Km on road, the external cost produced by a typical heavy vehicle in

    Italy is estimated at 212.58 Euros.

    ; for a route of 100 Km by sea, the external cost produced by a typical heavy vehicle

    loaded on a ship (national navigation) is estimated in Italy at 79.37 Euros; The concept of typical heavy vehicle refers to the vehicles commonly used in traffic to and 1from Sicily (14 metres long; 20 tons load).

    However, according to ISTIEE, the external cost of long distance haulage between Sicily and the continent is about 20% higher than the national average quoted by Molocchi and Lombard. The reasons are linked to:

    ; a higher accident rate compared to the national average on the motorway connecting

    Sicily to Campania (on the different sections accident rates are from 1.08 to 2.1 times

    higher than the average)

    ; the mountainous area, up to a 6% gradient along the motorway (which entails higher fuel

    consumption);

    ; the presence of old vehicles which increases pollution (average age of vehicles operating

    on Sicily’s market: 9.9 years vs. 8.8 years of Central Italy and 6.7 of Northern Italy);

    ISTIEE’s study estimates that within long distances between Sicily and Italy the external cost produced by a typical heavy vehicle (20 tons, 14 metres long) on a route of 100 Km on road is of 258.30 Euros.

     1 20 tons cargo and 14 meters long are the typical (= average) characters of a vehicle used (on long distance routes) between Sicily and mainland (or other EU) regions.

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    The external cost of maritime transport in Sicily, instead, is equivalent to the national average and can thus be kept as a reference.

    If the external cost parameters derived from Lombard and Molocchi’s research were taken directly to calculate the subsidy, the final amount would have been too high. A subsidy granted on the basis of these costs would not have been compatible with the principle of the minimum necessary and would have exceeded the budget available. It was thus decided to apply, as external cost parameter, a rather small amount of the overall external costs estimate.

    Such amount has been fixed to 6.5%, in order to obtain, on average, subsidies compatible with the criteria of the minimum necessary.

    6.5% of the two estimates of full external cost (258.30 Euros per truck for 100 Km by road and 79.37 Euros per truck for 100 Km by sea) is shown in the table 1.

    As one can see, these are rather modest amounts compared to those applied in other cases of environmental public aids in accordance with European law.

    It is clear that the ratio between road transport and sea transport parameters remains exactly the same (=3.25) compared to that between “full” external costs.

    Tab. 1 External cost parameters used for subsidy calculation (= 6.5% of full external costs) Typical heavy vehicle (20 tons cargo) Euros per 100 Km

    by road 14.0 (a)

    by sea 4.3 (b)

    a/b = 3.25

VI Bonus calculation and differentiation according to the routes

    Having chosen the basic parameters for calculations (Tab.1), a mechanism of calculus for the actual subsidy was created.

    This process was set up in order that:

    ; it could be always possible to calculate (and grant) the subsidy in a general way, i.e. for

    any route (real or potential) to and from Sicily;

    ; it would be strictly respected, for all routes, the principle of proportionality between

    external differential costs and subsidy.

    In general, the basic subsidy (“environmental bonus”) is calculated on the basis of the external differential costs (DEX) following the formula:

a] DEX = EXr*Ar - EXs*As - EXr*Pr

    EXr = Average external costs for road transport calculated per kilometre on the Northern- Southern routes in Italy

    Ar = Length (Km) of road routes avoided by using maritime services.

    EXs = average short sea shipping external costs, per kilometre, ascribable (share pertaining to the Ro-Ro shipping external costs) to the sample vehicle loaded on a Ro-Ro.

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Ls = Length of the maritime route (in kilometres)

    Pr =Length of road routes from/to the ports to/from the destination/origin of the cargo. In order to avoid elements of discrimination between ports and routes the subsidy system is diversified geographically into “areas” encompassing the whole Italian coast, on the basis of the coastal arches shown in fig.1.

Fig. 1 The coastal arches

    Muggia (TS)

    Cattolica (RN)

    Ponte S. Ludovico (IM)Castiglioncello (LI)

    San Salvo Marina (CH)

    Sperlonga (LT)

    Trebisacce (CS)Cittadella del Capo (CS)

     Arco Tirrenico SettentrionaleFinale (PA)Arco Tirrenico CentraleArco Tirrenico Meridionale

     Arco Adriatico SettentrionaleArco Adriatico Centrale Gela (CL)Arco Adriatico Meridionale Arco Orientale SiculoArco Occidentale Siculo Baricentri costieri

    For each pair of areas (one in Sicily and the other on the continent- see for example the matrix of Tab.2) an average DEX has been calculated, following the formula a].

    This DEX corresponds to the basic subsidy that will be granted for the loading of a heavy vehicle from any port of Sicily to any port of the continent (and vice versa). For example, the DEX for the Genoa-Palermo route (or Palermo-Genoa) is the DEX between the Sicilian western area and the Northern Tyrrhenian Arch area.

    DEX calculation

    The calculation of Ar; As; Pr that are necessary to determine the average DEX between

    areas, results from the following:

    ; statistical analysis (source ISTAT) of the truck flows from Sicily and the rest of the

    continent, identifying the weight which single areas (regions, provinces, in Italy and

    abroad) bear on total Sicilian traffic within the potential catchment area of a maritime

    service.

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    ; an assessment of the geographical position and capacity of Italian ports to accommodate

    Ro-Ro traffic, which allows to identify geographical coastal barycenters (representative

    port) for each coastal arch (for example: Central Tyrrhenian Arch = Civitavecchia). As far as the DEX for the Western Sicily/Central Tyrrhenian Arch is concerned, the Ar has been calculated as the average distance covered by all the traffic travelling from/to Sicily in North-South routes.

    By “average distance” we mean the average kilometres calculated with reference to internal barycentric points in the regions of Northern Italy (representing the heart of production or consumption areas) considered according to the importance of each region in terms of truck traffic density.

    The average distance between the coastal barycenters and “inland points” (inland points are the real origins and destinations of cargoes) known as Pr, has been subtracted from Ar. By so doing even though the truck is loaded on a ship, it travels on the road to reach the same points it would have reached had it arrived by road.

    Finally Ls, has been calculated as maritime distance between the two coastal “barycentric”

    sites of the two coastal arches (Civitavecchia and Palermo).

    In general, for all the arches, the road routes avoided results in the net values presented in table 2.

Tab. 2 Road routes avoided (net of trips from/to the ports)

     Road-based distance minus terrestrial routes from ports (distance from

    coastal barycentres) in km

    (Ar Pr)

     Western Sicily Eastern Sicily

    Northern Tyrrhenian Arch 1,233 1,103

    Central Tyrrhenian Arch 941 811

    Southern Tyrrhenian Arch 714 584

    Northern Adriatic Arch 1,345 1,215

    Central Adriatic Arch 969 839

    Southern Adriatic Arch 843 702

    Given fixed coastal barycentres, represented in fig. 1, the maritime route has been calculated as shown in tab.3

    Tab.3 Maritime routes (in Km) between barycentres of coastal arches

     Maritime distance in Km between coastal barycentres

    (Ls)

     Western Sicily Eastern Sicily

    Northern Tyrrhenian Arch 800 900

    Central Tyrrhenian Arch 480 630

    Southern Tyrrhenian Arch 370 450

    Northern Adriatic Arch 1,300 1,200

    Central Adriatic Arch 1,100 1,000

    Southern Adriatic Arch 750 600

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    The availability of all parameters (cost and distance) enables in the end to quantify base DEX referred to a “typical vehicle” (14-metre vehicle with a 20 tons cargo), for the all routes of the matrix (see Tab.4)

    Dividing by the linear metres of the vehicle (14) we obtain the subsidy amount calculated per linear metre (Tab. 5).

    Tab. 4 Estimated external costs (Euros) for the typical heavy vehicle (14 linear metres)

     Western Sicily Eastern Sicily

    Northern Tyrrhenian Arch 139 116

    Central Tyrrhenian Arch 111 87

    Southern Tyrrhenian Arch 84 63

    Northern Adriatic Arch 133 119

    Central Adriatic Arch 89 75

    Southern Adriatic Arch 86 73

    Tab.5 Estimate of external costs (Euros) per linear metre

     Western Sicily Eastern Sicily

    Northern Tyrrhenian Arch 9.9 8.3

    Central Tyrrhenian Arch 8.0 6.2

    Southern Tyrrhenian Arch 6.0 4.5

    Northern Adriatic Arch 9.5 8.5

    Central Adriatic Arch 6.4 5.4

    Southern Adriatic Arch 6.2 5.2

    The table included in the law was drawn up with slight adjustments considering particular market conditions on different routes (principle of the minimum subsidy necessary to reach the effect).

    All quantifications are quoted in the study carried out by the University of Trieste ISTIEE.

VI Effects on competition between ports

    The measure is basically neutral towards the port market of Calabria. Indeed: a) at the moment there are no sea transport services for vehicles between the ports in

    Calabria and other Italian ports;

    b) there is no risk that, even in the future, Sicily’s ports, thanks to the bonus, become a point

    of arrival/departure of heavy vehicle fluxes serving Calabria (it would be necessary to

    travel the opposite way and cross Messina Strait, increasing the travelling time which is

    not acceptable by the “stressed” haulage market of Southern Italy); even in the future, at

    least until the “Bridge over the Strait” is built, Ro-Ro services from Calabria ports will not

    overlap with those of the Sicilian market.

    c) The position of Calabria ports (across the strait) is such that even Sicilian haulage, would

    not use them intensively since they are located across the strait and too far away from

    the places of origin/destination of goods to be able to serve in time departing transport

    (evening) and arrivals (morning) from Sicily.

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    As far as the effects on other ports are concerned, currently there are no sea transport services for vehicles between Sicily and foreign ports (e.g. Slovenia and France) which could be affected by competition distortions.

    Being the subsidy allocated on the basis of coastal arches, the use of one port or the other within the same geographic area is equal and does not affect competition between ports on the peninsula.

VII Subsidy per linear metre

    For each shipped vehicle, the overall subsidy will be the product of the subsidy per linear metre times the length of the vehicle.

    The subsidy is calculated on the basis of the linear metre mainly to maintain the relation between subsidy and maritime fare constant for all hauliers. In fact, most maritime transport fares are calculated on the basis of the linear metres occupied by the truck inside the hold. Thus, the subsidy per linear metre:

    a) is compatible, in principle, with the “environmental” criterion which requires a link

    between subsidy and external costs. Indeed, the smaller the vehicle is: ; the less energy is used and the less pollutant emission per kilometre is produced; ; -the less space is occupied on the roadway, hence producing a reduced impact on traffic

    congestion;

    ; the smaller is the amount of external navigation costs (less space occupied in the hold); b) avoids discrimination between different vehicle categories with reference to the cost of

    the sea lag fare, since a subsidy per linear metre reflects the fare system of shipping

    companies. In fact, excluding a part of fixed fare (which is not very relevant) the maritime

    fare is substantially based on the rate per linear metre, which corresponds to the

    opportunity costs (space occupied in the hold) of the shipping company.

VIII The relation between maritime fares and subsidy

    On an average level of the current maritime transport market, the subsidy (basic amount) granted in compliance to the law would be for the “typical vehicle” about 26% of the maritime fare currently offered by companies (see Tab.6). In general, therefore, the amount of costs covered by the subsidy stays within the limits (30%) accepted as the ceiling to public intervention.

    Tab. 6 Influence of the environmental Bonus on maritime freight, June 2003 (14 linear metre vehicle)

     Fare for a loaded % of the subsidy Fare for an empty % of the subsidy on truck (Euros) on the fare truck (Euros) the fare

    Services

    Palermo-Salerno 231 33% 200 13% 1

    Palermo-Naples 327 23% 256 10% 2

    Palermo-Naples 287 26% 225 11% 3

    Palermo-Genoa 561 25% 365 12% 4

    Palermo-Livorno 495 28% 351 12% 5

    Trapani-Livorno 564 25% 424 10% 6

    Trapani-Formia 336 23% 225 11% 7

    Termini Imerese-Genoa 537 26% 414 11% 8

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    Termini Imerese-Genoa 541 26% 502 9% 9

    Catania-Ravenna 564 22% 401 10% 10

    Catania-Venice 585 21% 415 9% 11

    Catania-Livorno 465 26% 310 12% 12

    Catania-Naples 322 19% 280 7% 13

    Messina-Salerno 305 20% 266 7% 14

    Fonte: ISTIEE

IX Competition in the maritime service system

    The analysis carried out by ISTIEE show that on most Tyrrhenian routes involving Sicily served by RO-RO transport for heavy vehicles there are different operators which grant the presence of competition forces reducing the risk that environmental subsidies due to road hauliers are “appropriated” by shipping companies through a relevant increase of fares which

    would cancel the real effects of the subsidy.

    Moreover, on the remaining routes (the Adriatic ones), where there is no real competition, the particular market situation and public service obligations weighing on shipping companies form a barrier to the “securing” of the subsidy by maritime operators.

    The reasoning on which the aforementioned conclusions derive is proposed after Tab. 7 showing the situation of services operating with Sicily on the Adriatic side routes marked (A)

     and the Tyrrhenian.

    Tab. 7 Total maritime fares and per (maritime)Km for the shipping of a heavy vehicle (14 linear metres) (August 2003 data)

     Fare for Fare for Departures Routes Shipping company Fare for Fare for loaded empty per week loaded empty vehicle/Km vehicle/Km vehicle vehicle

    0,75 0.65 1 Palermo-Salerno Grimaldi Naples 231 200

    1.06 0.83 7 Palermo-Naples Tirrenia 327 256

    0.93 0.73 7 Palermo-Naples SNAV 287 225

    0.71 0.46 6 Palermo-Genoa Grandi Navi Veloci, Grimaldi Genoa 561 365

    0.76 0.53 3 Palermo-Livorno Grandi Navi Veloci, Grimaldi Genoa 495 351

    0.88 0.66 2 Trapani-Livorno Italtrag 564 424

    0.91 0.61 3 Trapani-Formia S.A.e.M 336 225

    0.66 0.51 4 Termini Imerese-Genoa Adriatica 537 414

    0.69 0.54 4 Termini Imerese-Genoa Strade blu 564 436

    0.50 0.35 3-4 Catania-Ravenna Adriatica 564 401

    0.49 0.35 1 Catania-Venice (A) Adriatica 585 415

    0.55 0.36 2 Catania-Livorno Adriatica 465 310

    0.78 0.68 7 Catania-Naples TTT Lines 322 280

    1.05 0.92 7 Messina-Salerno Cartour 305 266

The Adriatic Sea

    First of all it should be pointed out that on the Adriatic the demand of combined road-sea transport is not so high because this route is not so convenient for geographic reasons. The fact that there is no active competition of services on the Adriatic sea (single company: “Adriatica di Navigazione”) does mean there is a particular risk that the ship-owner takes

    advantage of the monopoly power (price increase and appropriation of the bonus).

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    The company providing services on the Adriatic sea is subject to public service obligations by the Italian Ministry of Transport.

    Currently, the fare per mile is on average low for shipping services on the Adriatic - see Tab. 7, the two routes marked (A) just because the services are favoured by the public service obligation policy.

    Such a particular situation ensures a certain fare stability on current levels, which are rather low, despite the lack of a non-explicit competition.

    Moreover, should the fares of the company subject to public service obligations increase for some reason, space for new private companies is likely to increase as well instead of reducing.

    This considering the fact that the level of cost coverage could be better if the competing public operator has higher freight charges (today, it is very difficult for a private company to enter the market of the Adriatic making a good profit, due to the low freight charges of the public operator).

    A monopoly system is in force on the Adriatic; however, thanks to the effects of public service obligations, without entrance restrictions, and in presence of a steady weak demand, this monopoly is actually self-controlled.

The Adriatic Sea

    The greater potentialities of the Tyrrhenian compared to those of the Adriatic, enabled the development of a large number of services.

    Routes on the Tyrrhenian create a competitive context which appears to be sufficiently developed. First of all it should be mentioned that in the most busy market segments there are more ship-owners offering their service between the same ports. This is the case of the routes Palermo-Naples (two operators) and Termini Imerese-Genoa.

    But actually there is an active competition between the operators even in the case of services which do not involve the same port.

    In some cases, the distances between ports are so short (within 50 Km) that pairs of routes such as the Palermo-Salerno and the Palermo-Naples, or the Termini Imerese-Genoa and the Palermo-Genoa can be considered as being essentially the same route.

    Along the routes between the area of Palermo/Termini Imerese and Genoa there are three active lines, managed by different companies. The same holds true for the group of routes between Palermo and the area of Salerno/Naples. Three companies operating on the same route already provide a sufficient level of competition.

    The idea of competition, in the case of Ro-Ro routes, could be legitimately extended, from a geographic standpoint, also to routes calling at rather distant ports

    Let us consider for instance a haulage company that from Sicily (for example from Palermo area), has to reach a central point of the Pianura Padana (e.g. Parma or Verona). The ports of Genoa or Livorno offer two quite similar alternatives from a geographic standpoint, as far as road routes and travelling time are concerned.

    Using the Ro-Ro routes, once ashore there are no constraints to the fast movement of trucks along the road network: it is thus possible to talk about competition even between services calling at ports which are far apart such as the case of Genoa and Livorno.

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