Economic Feasibility of Twente-Mittelland Canal. Quick Scan CBA

Economic Feasibility of Twente-Mittelland Canal Quick Scan CBA

Economic Feasibility of Twente-Mittelland Canal Quick Scan CBA This report has been financed by Euregio. Reference: C00435/31887 Version: final Zoetermeer/Essen, Quoting of numbers and/or text is permitted only when the source is clearly mentioned.

Contents SUMMARY 5 1 INTRODUCTION 8 1.1 Background 8 1.2 European context 9 1.3 Objective of this study 9 1.4 Structure of this report 10 2 STARTING POINT FOR THE ANALYSIS 11 2.1 What is a Quick Scan Cost-Benefit Analysis 11 2.2 Business as Usual alternative 11 2.3 Project alternatives 13 2.4 Scenarios 14 3 FORECASTS 15 3.1 Basis for the transport forecasts: ETISplus database and TransTools model 15 3.2 Methodology 15 3.2.1 Corridor definition 17 3.2.2 Forecast model results 19 3.2.3 Tonne-Kms 21 3.2.4 Route choice, waterway 22 3.3 Regional characteristics and development 24 4 DIRECT COSTS 27 4.1 Investment 27 4.2 Maintenance 27 5 DIRECT BENEFITS 29 5.1 Benefits due to shorter travel time/distance 29 5.1.1 Operational cost savings 29 5.1.2 Environmental benefits 32 5.2 Benefits due to modal shift 33 5.2.1 Operational cost savings 33 5.2.2 Environmental benefits 34 5.2.3 Traffic safety 36 5.2.4 Noise 36 5.3 Economic effects related to spatial development 37 5.4 Other monetised benefits 39 5.5 Non monetised effects 39 5.5.1 Nature and landscape 39 5.5.2 Reliability 39 R20120248.doc 3

6 RESULTS 41 6.1 Economic analysis 41 6.1.1 Discount rate 41 6.1.2 Time horizon 41 6.2 Results of CBA 42 6.3 Allocation of benefits over different parties 43 6.3.1 Euregio 43 6.3.2 The Netherlands 43 6.3.3 Germany 44 6.3.4 EU as a whole 45 6.4 Sensitivity analysis 45 7 CONCLUSIONS 48 7.1 Economic value of the TMC link 48 7.2 Environmental gains by realising the TMC link 48 7.3 TMC and development within corridor 2 48 R20120248.doc 4

Summary When looking at a map with the inland waterways network, there seems to be a link missing between the Twente canal and the Mittelland canal. This possible connection, known as the Twente-Mittelland canal, would offer port and industrial centres in the Netherlands and Belgium a shorter connection to the German states along the corridor to Berlin and the Northern German ports. This could also apply to Poland and the Czech Republic. Thus, the Twente-Mittelland canal would create an alternative waterway alongside the existing waterway on the Rhine. It is therefore, not surprising that in the past a number of studies have been conducted towards the possibility of such a connection. In 1994 a cost-benefit analysis was performed in order to assess the economic feasibility of the construction of the Twente-Mittelland canal. In 2004 this feasibility study was updated. In both cases, the analysis pointed out that construction of a link between the Twente and the Mittelland canal is not a feasible investment from an economic point of view. However, since 1994 and 2004 the world has seen many changes and a concise study into the current economic feasibility seems justifiable. Moreover, in October 2011 the EU Commission decided to create a unified pan- European transport network made up of roads, railways, airports and shipping lanes (TEN-T) across Europe. The East-West Corridor 2: Warsaw Berlin Amsterdam/Rotterdam Felixstowe Midlands, forms a central corridor in the core network. Eliminating infrastructural bottlenecks on that corridor is a priority. Adding the Twente-Mittelland Canal link would create extra capacity for inland water transport. Depending on its economic impact, this canal can be thought of as a part of the TEN-T project portfolio for this corridor. Against the background of a renewed interest in the Twente-Mittelland canal, Panteia and Planco were requested to perform a Quick Scan Cost-Benefit Analysis (CBA) in which the most significant cost and benefit flows are quantified. To account for the European dimension, the analysis was in accordance with the practices described in the European Commission s recommendations with regards to Cost-Benefit Analysis, as much as possible. In the project set-up the effects of two project alternatives are investigated. Furthermore, the transport related effects of the Twente-Mittelland canal alternatives are influenced by future exogenous developments, such as transport cost differences between the modalities. In order to estimate how the effects depend on these developments, the Quick Scan CBA was made for three scenarios: a reference scenario and two scenarios with different proportions between costs for inland water, rail and road transport. An essential element of this study was to cover cross-border flows between the Netherlands and Germany that in essence could originate from any other country. For this reason the ETISplus database and the TransTools model were used to forecast future freight flows. The modelling showed that traffic generation and modal split are positive for the development of waterway traffic in case of realisation of the canal, however, the main impact is route diversion. R20120248.doc 5

Overall impacts of the canal are low relative to the entire sum of traffic within the study area, however, a small net increase in waterway traffic can be seen, resulting from the generated traffic and the modal shift. The modelled Twente- Mittelland canal link is estimated to carry around 17 million tonnes per annum in 2035. On average, the traffic flows along this link save some 30-40 kilometres per journey, suggesting that the route-shift effect amounts to around 0.6 billion tonne-kms per annum. Regional developments are in line with the modelling results and the canal could contribute to a larger overlap of seaport catchment areas. In particular, Western seaports such as Rotterdam might try to extend its share in container transport and regional terminal operators such as Combi Terminal Twente, with strong ties to Rotterdam and efficient hinterland chains will support this. However, calculations show that the construction of the Twente-Mittelland canal, as in the previous studies, still is an economically unfeasible activity. The overall costs and benefits are shown in Table 0.1 below. The impact of the TMC on the environment and the landscape, as well as the reliability of the waterway network has qualitatively been included. The +/- symbols used show the influence on the evaluation results. It can be seen that the discounted benefits cover only a small portion of the costs. However, benefits do exist and a large share can be allocated to the Euregio. Furthermore, benefits are distributed evenly between the Netherlands and Germany. Table 0.1: Project evaluation results Alternative A1b Alternative B Present value investment cost (M ) 1,114 1,209 Present rest value (M ) 262 284 Present value maintenance cost (M ) 189 193 Present value total cost (M ) 1,042 1,118 Present value of benefits (M ) 188 204 Net present value (M ) -853-915 Benefit/cost-ratio (M ) 0.18 0.18 Economic rate of return -1.1% -1.0% Other non-monetarised benefits: Impact on nature and landscape - -- Increased reliability of waterway + + network This project evaluation was done in accordance with the European Commission s recommendations with regards to Cost-Benefit Analysis and there are therefore, differences between this approach and the Dutch and German methodology. A sensitivity analysis was carried out to indicate the consequences of the application of Dutch or German evaluation methodology, however, there is no difference in results. In addition, considering the low and high scenarios, which both include assumptions regarding an increasing competitiveness of inland waterway transport, result in only a slight improvement of the results. It can be concluded that based on the findings in this study, the Twente- Mittelland is far from being a feasible infrastructure project. As the Quick Scan shows, alternative routes are available and the benefits from route shift do not justify TMC construction. However, the canal would generate economic effects in R20120248.doc 6

the Euregio and beyond its borders. By far, the majority of economic effects apply to transport cost savings (see Table 0.2). Table 0.2: Economic benefits (M ) Alternative A1b Alternative B Employment 18.3 18.8 Transport cost saving 166.6 182.2 Total economic value 184.9 201.0 The TMC would allow the realisation of only a very modest environmental gain in terms of emission reduction, enhanced traffic safety and noise reduction. As can be seen in Table 0.3, the major share of these environmental gains arises from modal shift. Table 0.3: Environmental benefits (M ) Alternative A1b Alternative B Emission 2.0 1.5 Safety 1.3 1.0 Noise 0.3 0.2 Total environmental gains 3.6 2.7 Developments along TEN-T corridor 2 could stimulate traffic beyond the figures expected in this Quick Scan. Initiatives have started to strengthen the infrastructure and optimise the connections considering all modes and the corridor approach could be an opportunity to combine the Twente-Mittelland canal project with other waterway projects along the corridor. This broader perspective would make modal shift to waterway more likely. Moreover, the modal shift would refer to transport over longer distances. In particular, towards the Eastern part of the corridor waterway characteristics weaken and are a barrier for modal shift. By realising a joint upgrade of these waterway sections, more benefits could arise. However, this would require a large volume of additional investment, which gives rise to doubts on the feasibility. R20120248.doc 7

1 Introduction 1.1 Background The number of European East-West connections over water is restricted through the natural flow of the rivers. The Rhine is indeed an East-West connection within the territory of the Netherlands, however, within the Federal Republic of Germany it is rather a North-South connection. North of the Rhine there are no significant inland navigation connections, other than regional connections between the Netherlands and Germany or the more distant European hinterland. Figure 1.1: Route for freight transport from Almelo to Osnabrück In Figure 1.1, the continuous line shows the current situation regarding a trip by inland water transport from the Twente canals to the Mittelland canal. The dotted line in Figure 1.1 shows the route if there were a direct connection. Intuitively and at first glance this seems to be a logical link. With the realisation of this canal section, port and industrial centres in the Netherlands and Belgium could then have a shorter connection to the German states along the corridor to Berlin and the Northern German ports. Although, and relatively to a lesser extent, this also applies towards Poland and the Czech Republic. This Twente-Mittelland canal (TMC) would create an alternative waterway alongside the existing waterway on the Rhine. It is therefore not surprising that in the past a number of studies have been conducted towards the possibility of such a connection. In 1994 a cost-benefit analysis was performed in order to assess the feasibility of the construction of R20120248.doc 8

the Twente-Mittelland canal 1. In 2004 this feasibility study was updated 2. In both cases, the construction of a link between the Twente-Mittelland canal turned out to not be a feasible investment from an economic point of view. However, since 1994 and 2004 the world has changed. For example: transport flows to and from countries in Central and Eastern Europe have increased; container transport via the Port of Rotterdam has increased and is expected to increase further. the environmental impact of transport has become more and more important. These developments could affect the economic feasibility of the Twente- Mittelland canal. It is therefore, worthwhile to update the economic feasibility studies that were conducted in 1994 and 2004. 1.2 European context In October 2011, the EU Commission decided to create a unified pan-european transport network made up of roads, railways, airports and shipping lanes (TEN- T) across Europe. TEN-T has two levels: a more narrowly defined core network, to be completed by 2030 and the overall network to be completed by 2050. The core network, which includes all of the key connections and hubs, has priority in terms of expenditure policy. It is made up of 10 transport corridors, which each comprise at least three modes of transport, three Member-States and two crossborder regions. The corridors provide the basis for coordinated expansion of infrastructure to make transport across Europe more efficient and to reduce its negative impact on the natural environment. The East-West Corridor 2: Warsaw Berlin Amsterdam/Rotterdam Felixstowe Midlands, forms a central corridor in the core network. Eliminating infrastructural bottlenecks on that corridor is a priority. Adding the Twente- Mittelland Canal link would create extra capacity for inland water transport. Depending on its impact, this canal could be thought of as part of the TEN-T project portfolio for this corridor. 1.3 Objective of this study This report follows Euregio s request for an economic appraisal of the costs and the benefits of the Twente-Mittelland Canal (TMC) when assumed to be operational in 2035. In this appraisal study, the following questions will be answered. 1 What is the economic value of the TMC link? How is this value allocated over the Euregio area, the Netherlands, Germany and Europe as a whole? 2 What environmental gains can be reached by realising this link? The analysis requested is a Quick Scan analysis. 1 NEA Transport research and training and PLANCO, Maatschappelijke kosten-baten analyse Twenthe-Mittellandkanaal, 1994,Reference 2 AVV, Actualisatie kosten-baten analyse Twenthe-Mittelland kanaal, 2004 R20120248.doc 9

1.4 Structure of this report This report is built up as follows. Chapter 2 describes the idea of a Quick Scan CBA. Furthermore, the Business as Usual scenario, the project alternatives and the scenarios are identified. Chapter 3 deals with the freight transport forecasts. The basis of the transport forecast is the ETISplus database and the TransTools forecasting model. The methodology is explained by examples and model output is analysed. Furthermore, the regional context is discussed. In Chapter 4, direct costs are dealt with. Chapter 5 discusses the direct benefits. Chapter 6 contains the results of this Quick Scan CBA and furthermore, a sensitivity analysis is performed on a number of critical parameters. In Chapter 7, conclusions are drawn with regards to the economic value of the TMC link, the environmental gains that can be realised as well as TMC and further development within Corridor 2. R20120248.doc 10

2 Starting point for the analysis 2.1 What is a Quick Scan Cost-Benefit Analysis A Quick Scan Cost-Benefit Analysis (CBA) makes use of the best possible available information within the limitations of the study 1. The approach is supply oriented ("what data is available?"). Assumptions and estimates are accompanied by information regarding their sources and are described as well as possible. Only the most significant cost and benefit flows are quantified. To account for the European dimension in this Quick Scan, the analysis will be made in accordance with the practices described in the European Commission s Guide to Cost-Benefit Analysis 2, as much as possible. We will examine the impact where substantial differences may occur in the approach compared to the German or Dutch CBA framework. This may for example, be the case for discount rate or time horizon used. With a sensitivity analysis we will test the robustness of the results of the feasibility study. 2.2 Business as Usual alternative The existing network will be used as a base case. Connecting links (Twente Canal, Dortmund-Ems Canal) are currently CEMT class IV, see Figure 2.1. Figure 2.1: Waterways in the Netherlands and Germany Source: www.binnenvaart.be Plans exist to upgrade connecting stretches from class IV to class Va, allowing vessel size to increase from 1350 tonnes (54 HGV equivalent) to 2750 tonnes (120 HGV equivalent), see Figure 2.2. This would match the capability for the 1 Rijkswaterstaat, Evaluatiemethoden - begrippen en toepassing in het kader van OEI 2 DG Regional Policy, European Commission, Guide to Cost-Benefit Analysis of Investment Projects, 2008 R20120248.doc 11

Wesel-Datteln canal route. We take into account that there is a draught dependent speed limitation of 10 kph for vessels (draught > 1,30 m) 1. Figure 2.2: Vessel categories Source: http://www.bureauvoorlichtingbinnenvaart.nl There are also existing plans in Germany to upgrade the Dortmund-Ems canal links to class Va by 2027 and a study will be conducted in 2013 to decide whether the existing Twente Canal links are to be upgraded as well. These associated costs are not taken as part of the TMC construction costs. The 2030 maps (see Figure 2.3) assume that the whole TMC route is class Va. In particular, the Twente canals are expected to be of class Va by that time. Figure 2.3: Map of study region Expected 2030 CEMT Classes Source: ETISplus, Panteia/NEA The business as usual case is not a do nothing scenario. Independent from whether the Twente-Mittelland Canal will be realised or not, further improvements on the network will take place. Therefore, cost savings on the southern route via the Wesel Datteln Canal can be ruled out in case of TMC construction. It is not expected that German authorities would cancel planned 1 See Elwis for more details. R20120248.doc 12

investments for the Wesel-Datteln Canal and Dortmund-Ems Canal. Moreover, capacity constraints and waiting times at locks along this route are no issue. The capacity is sufficient to handle forecasted traffic volumes, irrespective of ongoing lock renewal. In the next three sections, developments regarding the Wesel- Datteln Canal, the Dortmund-Ems Canal and the Twente canals are described.. It should be noted that the Quick Scan CBA will be applied to a period where the benefits would start to arise in 2035. In other words, the TMC is expected to start operation in 2035. Wesel-Datteln canal With regards to the future development of the Wesel-Datteln canal it is assumed that the capacity of the Wesel-Datteln canal will be increased through a lock renewal program. The aim is to replace existing locks by large double locks (between 2 x 190m to 2 x 220m), thus improving the performance by 2030. Furthermore, it is assumed that by 2035 all bridges will have been heightened to provide a clearance of at least 5.25 m to allow 2-layer container transport. Dortmund-Ems canal Between Datteln and Bergeshövede the Dortmund-Ems canal will be upgraded to the CEMT class Vb (2.80m draught) by 2022. In regards to bridge clearance the situation is comparable to the Wesel-Datteln canal. Locks will be replaced by larger locks with a gauge of 12.50m by 2027, so that 110m vessels can use these locks. Each lock will be replaced one by one. A reduction of the number of locks from 5 to 3 due to the extensive negative environmental impact of this measure was decided against. Despite the lock upgrade, CEMT class V will only be achieved with limitations and there will be restrictions for 110m vessels, such as one-way traffic and crossing prohibition. Moreover, depth will be limited to 2.60m 2.70m. We assume that 2-layer container transport along the Mittelland canal is at least possible up until Magdeburg. Along this stretch the upgrade to class Vb has been completed all the way to Magdeburg. Twente canals In spring 2012 the Minister of Infrastructure and Environment of the Netherlands made a decision with regards to a preferred alternative for the construction of a second chamber of the Eefde lock. By constructing this second chamber, congestion problems would be solved. At present, a study on widening the Twente canals from class IV to Va is in its final stages. This widening specifically concerns the canal pounds from Delden to Hengelo, Hengelo to Enschede and the side branch of the Twente canal to XL Businesspark and Almelo. If the Minister of Infrastructure and Environment of the Netherlands decides positively, then the project will enter into the next phase in the Spring of 2013. The widening should then be realised before 1 January 2017. This date also applies to the capacity expansion of the Eefde lock. 2.3 Project alternatives Two project alternatives are investigated; TMC alternative A1b and B (see Figure 2.4, the codes used refer to the alternatives that have been used in the 1994 R20120248.doc 13

study). Therefore, the characteristics of these project alternatives will be included in the existing network. Figure 2.4: Route alignment options Expected 2030 CEMT Classes A1b A2 B D Source: ETISplus, Panteia/NEA 2.4 Scenarios The transport related effects of the TMC are influenced by future developments, such as transport cost differences between the modalities. In order to estimate how the effects depend on these developments, the Quick Scan CBA will be made for three scenarios: a reference scenario and two scenarios with different proportions between costs for inland water, rail and road transport. In the following Table 2.1, the assumptions with regards to these scenarios are summarised: Table 2.1: Scenario matrix Variable Reference scenario Low scenario High scenario Remarks Costs/Policy Road Costs 100 110 120 Higher road costs to reflect carbon taxes. Rail Costs 100 100 95 Lower rail costs to reflect policy goals. W/way Costs 100 95 90 Lower IWT costs to reflect policy goals and infrastructure upgrades. Note that the transport costs have been specified as a proportion of the costs in the reference scenario. It is not possible to state absolute transport cost values, as total transport costs depend on trip length. The so-called low scenario accounts for a decrease in transport costs for IWT, while road transport costs are assumed to be higher. This is to reflect policy measures, such as carbon tax. In the high scenario these effects are even stronger, while the costs of rail transport are also low. R20120248.doc 14

3 Forecasts 3.1 Basis for the transport forecasts: ETISplus database and TransTools model For the current study it is necessary to cover cross-border flows between the Netherlands and Germany. In general, the origin and destination of the freight flows is not limited to the Netherlands or Germany, but may also be to or from other countries. For this reason the ETISplus database and the TransTools model have been chosen to determine the future freight flows. Panteia/NEA have set up a model system based on data input from the ETISplus project (DG-MOVE, FP7) and the TransTools (v2.6) forecasting methodology. The objective is to produce a traffic forecast with and without the proposed canal project, in order to test the impact of the new waterway link upon the traffic flows within the East-West corridor. All results presented are based upon the TMC alternative A1b and alternative B. It is noted that the canal is expected to be in operation in 2035 and the forecast will be extended until 2050. For the CBA, a linear relation is assumed for the years between 2035 and 2050. After 2050 the volume is kept at the 2050 level. The objective here is to exemplify the modelling and forecasting process, in order for it to be refined later. Key goals are therefore, to estimate current flows and to make a forecast based on current (post DG-MOVE White Paper 2011) expectations and to assess the volume that would divert to the new TMC link. 3.2 Methodology ETISplus provides a series of trade and transport matrices based on a combination of Eurostat and national statistical sources. Panteia/NEA have combined these into a transport chain matrix consisting of multimodal chains. This way for example, it is possible to apply different growth rates within the forecast. For example, trade flows transiting the Netherlands (e.g. China to Germany containerised traffic) may have a different growth rate compared to bilateral Netherlands-Germany freight. The modelling process contains three steps: Generation/Attraction/Distribution (growth in tonnes moved per O/D) Mode split: changes in the shares of road, rail and waterway traffic. Assignment: routeing of cargo e.g. along TMC. The first step uses a gravity model approach based on the NEAC model structure. It reacts to changes in gross value added (GVA) per sector per region. Provisional forecast flows are based upon economic forecasts derived from the PRIMES model 1. The model also reacts to generalised costs. Lower costs have the 1 PRIMES model, NTUA, Greece. R20120248.doc 15

effect of generating additional tonnage. Adding a new link, such as the TMC, potentially reduces transport costs between sets of O/D matrices. Traffic growth (step 1) is therefore, composed of two elements: exogenous growth (economy related) and endogenous growth (infrastructure related). The second step is a mode split function, the Transtools mode split model, which uses a logit function to relate changes in transport costs to changes in modal shares. Three sets of transport impedances are calculated for the base year; road, rail and waterway impedances per NUTS3 O/D. For the modelled scenarios the waterway impedances are changed in order to reflect the shorter transport distances offered by the TMC route for the affected O/D pairs. Thus, the model will potentially shift traffic towards waterway if waterway costs fall and other modes remain constant. The third step is traffic assignment, in which the predicted traffic flows are routed within the networks. This is needed in order to calculate link flows and to calculate traffic performance (tonne-km per mode). Example of model assumptions As an example, the relation between Overijssel and Hannover is observed. In the business as usual scenario (without TMC) the ETISplus networks are used to calculate a trip length between Utrecht and Hannover (both highlighted NUTS3 regions, see Figure 3.1) of 476km by waterway 1. In the with TMC scenario the distance is shortened to 424km (a saving of 52km). Figure 3.1: Example of Model Assumptions; Utrecht-Hannover Source: Panteia/NEA, ETISplus, 2012 1 Google Maps indicates a road distance of 356-448km between Utrecht and Hannover. R20120248.doc 16

Between Rotterdam and Hannover, the distance changes from 505km (current situation) to 489km with TMC, a saving of 16km. The saving is less from Rotterdam, compared to Utrecht, because there is less of a diversion to the South when using the route towards Munster. In a more extreme case e.g. Overijssel to Hannover, waterway distances fall from 441km in the current situation to 324km in the TMC scenario and the TMC prevents the need to detour to the West as shown in Figure 3.2. Figure 3.2: Example: Overijssel - Hannover Source: Panteia/NEA, ETISplus, 2012 In this Quick Scan the effect of different scenarios is tested by changing journey times and transport costs pro-rata with distance. No additional assumptions have been made regarding the vessel speeds, congestion levels, locks, or the operational efficiency of the vessels using the route. The model is simply allowing a new route to be used, saving some 30-40km per O/D across the corridor. 3.2.1 Corridor definition A broad region has been defined for the study, following the example of the NEA/PLANCO study in 1994 1, see Figure 3.3. 1 NEA/PLANCO, Maatschappelijke kosten baten analyse Twente-Mittellandkanaal, 1994 R20120248.doc 17

Figure 3.3: Map of Corridor Regions Corridor regions Waterways network ETISplus Source: Panteia/NEA, ETISplus, 2012 Panteia/NEA calculates the following flows along this corridor 1 seen in Table 3.1. in 2005, as can be Table 3.1: Freight Flows between Corridor Regions, 2005, Tonnes (000s) 1000 t NL BE FR Total Total E-W W-E E-W W-E E-W W-E E-W W-E Total DE Ww 11,186 11,717 1,604 1,462 52 39 12,843 13,218 26,060 Road 17,179 17,957 4,218 5,287 1,391 1,529 22,788 24,774 47,561 Rail 4,303 4,827 924 1,160 9 18 5,236 6,005 11,241 Total 32,669 34,501 6,746 7,909 1,451 1,586 40,866 43,996 84,863 CZ Ww 10 7 1 43 0 0 12 50 62 Road 276 340 132 267 74 71 482 678 1,160 Rail 355 71 64 19 1 6 420 95 515 Total 641 418 198 329 75 77 914 823 1,737 PL Ww 3 34 90 43 0 0 93 77 171 Road 118 120 80 267 19 13 217 399 617 Rail 1 22 26 19 0 0 27 41 68 Total 122 176 196 329 19 13 337 518 855 Total Ww 11,200 11,758 1,695 1,549 52 39 12,947 13,345 26,293 Road 17,573 18,417 4,430 5,821 1,483 1,613 23,487 25,851 49,338 Rail 4,659 4,920 1,015 1,198 9 24 5,683 6,141 11,824 Total 33,432 35,094 7,140 8,567 1,545 1,676 42,117 45,337 87,455 Source: ETISplus, 2005 data, Panteia/NEA In Table 3.1 the flows are presented in the form of a screen-line table, in which we capture the volumes moving between the Westerly regions of the Netherlands, Belgium and a small part of Northern France and the Easterly 1 This corridor does not include the full TEN-T Corridor 2 that stretches from Warsaw in Poland all the way to the Midlands in Great-Britain. R20120248.doc 18

regions of Poland, the Czech Republic and Northern Germany. Only the regions highlighted in the map are considered. This in effect creates a screen-line running North-South along the Dutch/German border. The Northern half of this screen-line is of particular relevance for TMCrelated traffic. Hence, total corridor volume is 87.455 million tonnes, of which 49.338 million tonnes (56%) travel by road, 26.293 million tonnes go by waterway (30%) and 11.824 million go by rail (14%). The majority of the traffic is between the Netherlands and Germany, with 32.669 million tonnes moving East to West (Germany to the Netherlands) and 34.501 million travelling in the opposite direction. These flows, which are extracted from the ETISplus database match up quite closely with the volumes predicted by NEA/PLANCO in 1994. At that time it was predicted that volumes would be as in Table 3.2. Table 3.2: Corridor Volumes, forecast by 1994 study, tonnes (000s) 1990 2010 BVWP 2010 EU Total Growth 1990-2010 EU% Avg. Annual Growth % Waterway 14,834 21,052 25,227 170% 2.7% Road 23,482 33,405 46,841 199% 3.5% Rail 3,390 12,120 11,806 348% 6.4% Total 41,706 65,577 83,874 201% 3.6% Total (Index, 1990=100) 100 160 201 Two forecasts were made in the 1994 study, one based on the Bundesverkehrswegeplan (BVWP) and another based on the European Renaissance scenario of the Dutch Centraal Planbureau (CPB), labelled here as 2010 EU. Considering that the 1994 study forecasts up to 2010, whereas the base year for the current analysis is 2005, it may appear that actual performance is higher than originally expected. However, following the global financial crisis, crossborder volumes have not been growing rapidly between 2005 and 2010. Volumes have therefore, doubled approximately over twenty years, as predicted. 3.2.2 Forecast model results For this Quick Scan study, new forecasts have been developed using the Transtools 2.6 methodology as described above. Forecasts have been developed for 2035 and for 2050 for various combinations of project alternatives (Business as usual, A1b and B) and scenarios (Reference, low and high). In Table 3.3 and 3.4 the 2035 results for the reference case are shown without and with TMC (A1b link). Hereafter, these results will be analysed. Results and analysis of the other combinations are similar. R20120248.doc 19

Table 3.3: Reference Forecast 2035, without TMC 1000 tonnes NL BE FR Total Total E-W + E-W W-E E-W W-E E-W W-E E-W W-E W-E DE inland waterway 16,547 16,747 2,338 1,697 54 44 18,939 18,488 37,427 road 25,251 25,336 5,526 6,409 1,775 1,925 32,551 33,671 66,222 rail 6,693 7,934 1,112 1,363 12 25 7,817 9,322 17,139 total 48,490 50,018 8,976 9,469 1,840 1,994 59,307 61,481 120,787 CZ inland waterway 13 11 2 64 0 0 15 75 90 road 521 526 231 442 146 119 898 1,087 1,984 rail 964 99 140 27 2 12 1,106 139 1,245 total 1,498 636 373 533 148 132 2,019 1,301 3,320 PL inland waterway 10 70 230 64 0 0 240 134 374 road 261 231 188 442 43 23 492 695 1,188 rail 2 49 73 27 0 0 75 76 151 total 274 350 490 533 43 23 807 906 1,713 Total inland waterway 16,570 16,829 2,570 1,825 54 44 19,194 18,698 37,892 road 26,032 26,093 5,945 7,292 1,964 2,067 33,941 35,453 69,394 rail 7,659 8,083 1,325 1,417 14 38 8,997 9,538 18,535 total 50,261 51,004 9,840 10,535 2,031 2,148 62,133 63,688 125,820 Table 3.4: Reference Forecast 2035, with TMC 1000 tonnes NL BE FR Total Total E-W + E-W W-E E-W W-E E-W W-E E-W W-E W-E DE inland waterway 16,618 16,784 2,345 1,708 54 44 19,017 18,535 37,552 road 25,233 25,330 5,525 6,408 1,775 1,925 32,533 33,664 66,197 rail 6,681 7,921 1,112 1,363 12 25 7,805 9,309 17,114 total 48,532 50,035 8,982 9,479 1,841 1,994 59,355 61,509 120,864 CZ inland waterway 13 11 2 64 0 0 15 76 91 road 521 526 231 442 146 119 898 1,087 1,984 rail 964 99 140 27 2 12 1,106 139 1,245 total 1,498 636 373 533 148 132 2,019 1,301 3,320 PL inland waterway 10 70 230 64 0 0 240 135 374 road 261 231 188 442 43 23 492 695 1,188 rail 2 49 73 27 0 0 75 76 151 total 274 350 490 533 43 23 807 906 1,713 inland waterway 16,642 16,865 2,576 1,836 54 44 19,272 18,745 38,018 road 26,015 26,087 5,944 7,292 1,964 2,067 33,923 35,446 69,369 rail 7,647 8,070 1,325 1,417 14 38 8,985 9,525 18,510 total 50,304 51,022 9,846 10,546 2,031 2,149 62,181 63,716 125,897 In the two alternatives, volumes are expected to increase in 2035 to 125.820 million tonnes without TMC and 125.897 million tonnes with TMC, which is approximately 39 million tonnes higher than the 2005 levels. This implies an overall annual average growth rate of 1.4% per annum. The new canal link is expected to generate traffic, as seen in the slight difference between the volumes in the reference and TMC forecasts. However, this can be considered as a conservative figure, since the model does not consider changes in land use and logistical activity, which might potentially accompany the development of waterway links and inland ports. In addition, there is a slight modal shift. In the TMC case, waterway traffic increases relatively to the reference forecast from 37.892 million tonnes to 38.018 million tonnes (+126,000 tonnes), while road and rail both decrease. The fact that the modal shift is only slight, originates from cost differences that are too great between road/rail transport and IWT for many origin-destination R20120248.doc 20

combinations. For rail transport, this outcome is supported by a recent TNO study 1 that investigates if IWT would be a good alternative for rail transport via the Dutch-German border. In this study cases are elaborated where IWT or a combination between IWT and rail transport could form an alternative to direct rail transport. Results show that apart from total transport costs being higher transport times are often also considerably longer when compared to direct rail transport.. This implies that modelled traffic generation and modal split are positive for the development of waterway traffic, but it can be expected that the main impact is likely to be route diversion. Therefore, to address this point (cargo routeing) we have made a traffic assignment using the ETISplus transport networks. 3.2.3 Tonne-Kms In the base year we have assigned traffic flows to the network, and estimated the total freight volume within the designated regions for the corridor (see Table 3.5). The traffic set for this is larger than the set of flows shown in the previous section. We now include flows such as domestic German or Dutch traffic which use the network within the study area, but which do not cross the German-Dutch border. Tonne kilometre results are therefore, based on a much larger traffic set. Table 3.5: Modal share within total study area, German part and Dutch part, billion tonne-kms. year 2035 Total study area German part Dutch part Reference scenario Ref Ref+A1b Ref Ref+A1b Ref Ref+A1b billion- tkm road 411.831 411.825 203.033 203.027 70.267 70.266 rail 142.819 142.812 84.169 84.166 13.012 13.008 inland waterway 89.078 89.696 14.675 13.912 58.148 59.528 total 643.729 644.333 301.876 301.105 141.427 142.801 modal split road 63.98% 63.91% 67.26% 67.43% 49.68% 49.21% rail 22.19% 22.16% 27.88% 27.95% 9.20% 9.11% inland waterway 13.84% 13.92% 4.86% 4.62% 41.12% 41.69% Overall impacts, as can be seen in Table 3.5, are very low and relative to the entire sum of traffic within the study area. However, it can be seen that there is a slight net increase in waterway traffic, resulting from the generated traffic and the modal shift. There is also a geographical re-distribution caused by the diversion of waterway traffic from the Dortmund-Munster route (the current short path for East-West waterway traffic) towards the more Northerly TMC option. This can be seen in Table 3.5 where the volumes are split between Germany and the Netherlands. There is an estimated net increase in Dutch waterway tonne kilometres from 58.148 to 59.528 billion tonne-km and a net decrease in German waterway 1 TNO, 2012, Van spoor naar binnenvaart: Onderzoek naar de mogelijkheden dat spoorgoederenvervoer via de Nederlands-Duitse grens uitwijkt naar de binnenvaart R20120248.doc 21

traffic from 14.675 to 13.912 billion tonne-km. Since the traffic shifts are difficult to discern at this aggregate level, we look next at the waterway traffic patterns estimated by the model in detail. 3.2.4 Route choice, waterway In the base year, the assignment model clearly shows the main cross-border transport axes, which concentrate traffic onto the NW-SE Rhine corridor towards Duesseldorf. There is an East-West stretch leading towards Dortmund, followed by a Northerly section before the Mittelland canal can be reached. Along this route (marked by arrows, see Figure 3.4) there is a steady decrease in volume. Figure 3.4: Base Year Waterway flows Waterways Assignment tonnes 2005 BREMEN 100,000,000 to 200,000,000 50,000,000 to 100,000,000 20,000,000 to 50,000,000 10,000,000 to 20,000,000 5,000,000 to 10,000,000 1,000,000 to 5,000,000 1 to 1,000,000 0 AMSTERDAM ROTTERDAM DORTMUND ANTWERPEN DUSSELDORF BRUXELLES Source: ETISplus, Panteia/NEA In 2035, the traffic model predicts an increase in volume for all transport modes, including waterborne freight. This can be seen below, in comparison to the previous map. The entire Rhine corridor from Rotterdam to the South of Düsseldorf now exceeds 100 million tonnes per annum. In addition, the Mittelland canal now exceeds 10 million tonnes per annum, resulting in an expected growth on this East-West route. Traffic growth related to Amsterdam, Rotterdam and Antwerp focuses upon the existing main border crossing (see Figure 3.5). R20120248.doc 22

Figure 3.5: 2020 Reference Forecast, Waterway Flows Waterways Assignment tonnes 2030 w/o TMK BREMEN 100,000,000 to 200,000,000 50,000,000 to 100,000,000 20,000,000 to 50,000,000 10,000,000 to 20,000,000 5,000,000 to 10,000,000 1,000,000 to 5,000,000 1 to 1,000,000 0 AMSTERDAM ROTTERDAM DORTMUND ANTWERPEN DUSSELDORF BRUXELLES Source: Panteia/NEA In the 2035 alternative with TMC, the main impact is a re-routing of cargo towards the TMC itself. There is a corresponding decrease on the Wesel-Datteln canal near Dortmund and also on the stretch of the Dortmund-Ems canal linking Dortmund with the Mittelland Kanal. In the Netherlands, there is now an Amsterdam-Mittelland route which is better marked and no longer overlaps the busier Rotterdam-Düsseldorf route (see Figure 3.6). R20120248.doc 23

Figure 3.6: TMC Scenario, Waterway traffic estimated for 2030 Waterways Assignment tonnes 2030 with TMK BREMEN 100,000,000 to 200,000,000 50,000,000 to 100,000,000 20,000,000 to 50,000,000 10,000,000 to 20,000,000 5,000,000 to 10,000,000 1,000,000 to 5,000,000 1 to 1,000,000 0 AMSTERDAM ROTTERDAM DORTMUND ANTWERPEN DUSSELDORF BRUXELLES Source: Panteia/NEA The modelled TMC link is estimated to carry around 17 million tonnes per annum (in 2035). On average, the traffic flows along this link save some 30-40 kilometres per journey, suggesting that the route-shift effect amounts to around 0.6 billion tonne-kms per annum. Note, that generated traffic and modal-shifted traffic along the route increases overall waterway tonne kilometres, because their impact is multiplied by the entire distance. The route shifting effect is only applied to the distance saved. Thus, the forecast shows that there is a net increase in waterway tonne kilometres, even though affected trips save distance. 3.3 Regional characteristics and development Regional developments are in line with the modelling results. There might be some traffic generation and modal shift due to the canal construction, however, on a very moderate level. Moreover, it is not sure if these developments really arise related to the canal development. At least local stakeholders see potential in strengthening the region as a seaport hub where hinterland corridors from both Western and Northern seaports overlap. Today, the catchment area of the Western port reaches only a fraction across the border, where German ports dominate. The canal could contribute to a larger overlap of seaport catchment areas. In particular, Western seaports such as Rotterdam might try to extend its share in container transport and regional terminal operators such as Combi Terminal Twente with strong ties to Rotterdam and efficient hinterland chains will support this. R20120248.doc 24

CTT has shown a very successful development over the last years. Terminal expansion and efficient structures, as well as the strong regional economy contributed to a volume of 180,000 TEU. Today, approximately 50% of the containers already have origin/destination in Germany. The catchment area in Germany concentrates within a radius of 50 km, but extends to Emmerich, Lingen and Osnabrück. However, only for 10,000 TEU is the pre- or endhaulage longer. Further growth is expected due to expansion of the Maasvlakte II. However, this might be primarily related to the existing hinterland. A longer inland waterway transport to Germany would cannibalise existing chains via Hengelo. However, CTT sees an abstract potential for longer seaport related flows beyond its existing terminal. Origins/destinations in Germany/Poland and the Czech Republic could be an opportunity. They refer to traffic counts and number plate observation along motorway A1, which shows a 380 TEU truck transit on a weekday during the daytime. Increasing pressure for modal shift of transit in the Netherlands could strengthen canal traffic. In contrast to expectations of CTT, transport cost calculations show that a seaport change in hinterland regions is not expected. Assuming the existence of the canal, it will remain cheaper to serve the German regions by barge from Northern ports than from Western ports. However, this does not rule out that operators such as CTT and partners will extend operations to Germany to better utilise their network. This perspective however, remains questionable, so that it does not initiate an adjustment of the modelling results. Analogue, Dutch regions, e.g. Hengelo, are better served via Rotterdam. The moderate impact on transport cost is related to the limited dimension of a CEMT-Class Va canal, which will be the dimension of the TMC. It cannot be compared with high volume Rhine traffic and related cost figures of inland navigation. Even the expansion of Rotterdam seaport by Maasvlakte II and the opportunity to save maritime transit time will not influence this development. Deep-sea shipping lines will continue to serve German seaports and hence, their hinterland will not significantly change. This applies in particular, to the envisaged long distance flows to Eastern Germany, Poland and the Czech Republic. Even in container transport time is rarely a more important factor than the costs for transport decisions. As hinterland costs account for a relatively large share of overall maritime transport costs, time saving will not lead to a significant seaport shift from the Northern to Western ports, as shippers will not accept higher hinterland transport costs. For some high value goods it might be important to discharge the container at the first port of call and subsequently load the container at the last port of call. However, only a minor share of these containers will be carried by barge. Further expansion of the CTT terminal and the port in Hengelo is expected in relation to the canal development and inland waterway transport through the region. Moreover, a new port or terminal might be established at the TMC. This could contribute to generate additional waterway transport, however, these perspectives are to abstract to adjust transport forecasts. On the German side, the terminal of Doerpen offers frequent inland waterway connections to the Northern and Western ports. Today, 20,000 TEU per annum are carried between Doerpen and the Western seaports, as well as 10,000 TEU between Doerpen and Bremerhaven by barge. R20120248.doc 25

The terminal serves a catchment area with a radius of 50 km, which focuses on the German side and extends to Lingen, Bad Zwischenahn and Oldenburg. The Western ports are served by barge via the IJssel lake. As three-layer container transport is possible on this routing, limitations to two-layer transport along the TMC route would be a barrier for modal shift. Moreover, the requirement to pass the locks along the Dortmund-Ems canal and limited distance savings make a possible TMC routing less favourable. The terminal operator expects seaport container volumes in inland waterway transport to continue its growth, but as outlined, even after construction of TMC it will concentrate along existing routes. Moreover, railway operators might compete for additional volumes. This applies to operators serving Doerpen and also other terminals in the region, such as in particular Coevorden on the Dutch side. In the vicinity of the possible canal link, port and terminal development along the waterways is likely to follow the canal construction on the German side. This is necessary as the port/terminal density is rather limited in this region. Plans already exist to construct a container terminal in Bohmte near Osnabrueck at the Mittellland canal. Moreover, facilities in Spelle-Venhaus could be a candidate for expansion. Aside from Bohmte at the Mittelland canal, different and more distant locations such as and in particular, Minden, could benefit from the canal. However, with the growing distance to the Western ports the business is focused more towards the German ports at these locations. On the German side good prospects related to the location at the intersection of the main seaport hinterland corridors are regarded as an asset for further development. The TMC could be a factor to attract additional business activities, such as distribution centres. The region Osnabrueck was able to attract some large enterprises with one reason for this being the good accessibility with different transport modes, including inland waterways. In particular, large distribution centres that have decided to locate within the region require a wide range of possible transport chains, including Western and Northern seaports, as well as all modes to ensure flexibility and reliability. To maintain good accessibility with respect to growing transport flows in the future, modal shift to inland waterway transport could be a valuable contribution. The TMC is regarded as giving an additional impulse for this development. Aside from container traffic the generation and modal shift of other traffic is also expected, due to the realisation of the TMC, e.g. in the bulk segment. However, in regards to container transport, the expectations are not sufficiently concrete. In this Quick Scan it was not possible to identify reliable additional containerised and non-containerised flows along the canal beyond those included in the model. Existing inland waterway traffic, which would benefit from a route-shift to the TMC, refers mainly to stagnating commodities, such as cereals, building materials and petroleum. This is another reason for the rather moderate impact for the realisation of the TMC. R20120248.doc 26

4 Direct costs In this chapter the investment costs and the maintenance costs will be estimated. With regards to the investment costs and maintenance costs for the project we will use the 1994/2004 data for the alternatives that are investigated. These data have been adjusted for inflation. 4.1 Investment In 1994, investment costs for alternative A1b were calculated as M 701 based on the 1993 price level. For the 2004 study the investment costs were inflated to the 2003 price level, yielding an updated cost figure of M 949. For this Quick Scan, cost estimates of the 2004 study are inflated to the current price level, assuming the investment costs of the canal link has not structurally changed since 1994. The German Construction price index for road infrastructure 1, which is regarded as a reliable indicator for price developments of canal investment, increased by 26% between 2003 and 2012. Applying this price index, investment costs have increased to M 1,192 at the current price level (2012). Correspondingly, investment costs for alternative B have increased to M 1,294 for the current prices. According to the Dutch methodology, VAT has to be included in the costs. Applying the VAT level of 21%, the investment costs rise to M 1,442 for alternative A1b and M 1,565 for alternative B. In contrast, German and European methodology do not consider VAT. The investment costs accumulate over the first five years after the start of project realisation, yielding a present value dependent on the discount rate applied (see Chapter 6). 4.2 Maintenance The canal construction will require maintenance during the lifetime of the canal. Maintenance is the main component of operating costs, which also includes operation and administration of the canal. Aside from costs along the canal, the new link may reduce maintenance costs on other waterway stretches, such as the Wesel-Datteln canal and the Dortmund-Ems canal-south, due to a diversion of traffic. Moroever, as referred to in earlier studies applying the EU-scenario, additional investments on adjacent stretches may be required. However, in this Quick Scan study, we assume that neither investment nor maintenance on other or adjacent routes are affected by the TMC project. This corresponds to the planning of the German waterway authority, that does not expect any related investment and maintenance cuts in case the canal should be realised. Moreover, due to the limited impact, further investments to increase capacity on adjacent routes are not expected to be required with regards to the canal traffic. 1 See Federal Statistical Office of Germany, Construction price index, Other buildings, www.destatis.de, 2012 R20120248.doc 27

Adjacent upgrades to enhance waterway dimension to CEMT-class Va, which are required to exploit the full TMC benefits, are assumed to be carried out anyway. The operating costs of the canal link are updated corresponding to the investment costs. Annual operating costs for alternative A1b were estimated at M 7.0 in the 1994 study and updated to M 9.4 in the 2004 study. Applying the German Construction price index for road infrastructure, annual maintenance costs of alternative A1b have increased to M 11.8. Maintenance costs of alternative B were estimated in 1994 M 7.1 and updated to M 9.6 in 2004. Applying a 26% price increase between 2003 and 2012, the annual operating costs are M 12.1 for the current price level. Considering VAT for the Dutch methodology, the annual maintenance costs are calculated as M 14.3 for alternative A1b and M 14.6 for alternative B. The present value of operating costs depends on the applied discount rate (see Chapter 6). R20120248.doc 28

5 Direct benefits In this chapter the benefits from the realisation of the TMC will be determined. Benefits may be related to route-shift or modal shift. Furthermore, the benefits may be operational benefits or benefits arising from external effects. In order to monetise the effects, various data sources are utilised. These sources are indicated in the text. 5.1 Benefits due to shorter travel time/distance The modelling shows a diversion of 17.3 mio. tonnes in alternative A1b and respectively 17.4 mio. tonnes in alternative B in 2035 from the Wesel Datteln canal and Dortmund Ems canal route to the TMC route. In 2050, 19.8 mio. tonnes are expected to shift route. The route shift leads to an average reduction of journey length by 35 km and a journey time of 5 hours in alternative A1b. The corresponding savings in alternative B are 40 km and 5.5 hours. The benefits in terms of transport costs are calculated in the following section. 5.1.1 Operational cost savings Operational cost savings in inland waterway transport due to reduction of trip length in inland waterway transport are realised via a reduction in capital costs, staff costs and fuel costs of a vessel. While fuel cost savings are directly related to distance, vessel and staff cost savings are related to time savings due to shorter distances. In this Quick Scan analysis, we assume that 75% of the inland waterway traffic refers to a Large Rhine Ship class, with an average carrying capacity of 2,750 tonnes and 25% of the inland waterway traffic to the Europe Ship class, with an average carrying capacity of 1,350 tonnes (see Figure 2.2). For the number of vessels required, we consider the average vessel utilisation at the locks in Bergeshoevede at the crossing of the Dortmund-Ems canal and the Mittelland canal in the year 2010, which is 65%. This figure considers both the impact of unloaded vessels and underutilisation of loaded vessels. 1 The capacity utilisation implies an average of 2.3 m for the Large Rhine Ship and 2.0 m for the Europe Ship. The route-shifted inland waterway transport volumes implies a shift of 13,800 vessel passages to TMC in 2050 assuming alternative A1b. In alternative B the number of vessels is 14,000 (see Table 5.1 and Table 5.2). 1 German waterways and shipping authority Mitte, Traffic report 2010, Hannover R20120248.doc 29

Table 5.1: Route shift - alternative A1b Vessel class TMC volume route shift (M ) Number of vessel passages 2035 2050 2035 2050 Europe ship 4.3 5.0 4,812 5,502 Large Rhine Ship 13.0 14.9 7,267 8,308 Total 17.3 19.8 12,079 13,810 Table 5.2: Route shift - alternative B Vessel class TMC volume route shift (M ) Number of vessel passages 2035 2050 2035 2050 Europe ship 4.4 5.0 4,844 5,592 Large Rhine Ship 13.1 15.1 7,315 8,444 Total 17.4 20.1 12,160 14,036 Cost figures used in the Evaluation for Federal Transport Infrastructure Plan in Germany are applied for vessel and staff costs per hour. 1 For the cost calculations, the continuous operation for 22 hours per day is assumed. The share of dry commodity vessels is assumed to be 75% and the share of liquid bulk vessels 25%. Liquid bulk vessels will e.g. carry petroleum between seaports and the refinery in Lingen. This share of vessel types is applied to calculate the average fixed costs per vessel-hour on the TMC (see Table 5.3). Table 5.3: Vessel and staff cost of inland waterway transport Vessel class Vessel cost per hour ( /h) Staff cost per hour ( /h) Total fixed cost per hour ( /h) Europe Ship 40.18 56.91 97.09 Large Rhine Ship 60.45 68.92 129.37 Costs per vessel hr on TMC 55.38 65.92 121.30 Fuel costs per km are determined based on our own calculations with regards to the characteristics of traffic, which will divert to the canal. According to the German methodology fuel burn is determined using the specified vessel and waterway characteristics. In regards to waterway characteristics, it is assumed that half of the diverted route refers to the river Rhine and each of the canal streches with a maximum draught of 2.8 m. For fuel cost calculations we use the average gasoil price January August 2012 reported by the Central Bureau voor de Rijn- en Binnenvaart (CBRB) of 80 per 100 l. 2 Based on the assumed vessel type share the average fuel burn and cost figures are determined (see Table 5.4). 1 PLANCO, Valuation methodology for feasibility studies in Federal Infrastructure Planning, Essen, 2010 2 Centraal Bureau voor de Rijn- en Binnenvaart (CBRB) R20120248.doc 30

Table 5.4: Fuel cost of inland waterway transport Vessel class Energy consumption per vessel-km Fuel burn per vesselkm (l/km) Fuel cost per vessel-km ( /km) (kwh/km) Europe Ship 14.6 2.9 2.65 Large Rhine Ship 20.7 4.1 3.75 Total 19.1 3.8 3.48 Vessels travelling along the canal save on average, 35 km compared to the routing via the Wesel-Datteln canal and the Dortmund-Ems canal. While the number of locks would be equal for Rhine and Mittellland canal traffic, six locks less have to be crossed for rerouted Dortmund-Ems canal-north traffic. In this Quick Scan study we assume that each of these traffic flows accounts for half of the canal volume. Hence, on average, 35 km and three lock passages are saved in alternative A1b. The shorter route and one lock less for alternative B allows a higher time saving, which is estimated as 5.5 hours. According to speed regulation on the German canal network, we assume an average speed of 10 km/h. Therefore, the average time saving is estimated at 5 hours per TMC passage in case of alternative A1b. Combining the number of vessels passing along the canal and an average time saving, 69,000 vessel hours per annum are saved in 2050 in case of alternative A1b. This would mean an amount of M 8.4 per annum of total fixed cost savings in the case of alternative A1b (see Table 5.5). For alternative B this amounts to M 9.4 (see Table 5.6). Table 5.5: Fixed cost savings of inland waterway transport - Alternative A1b Vessel class Vessel passages Vessel hour savings Annual fixed cost savings (M ) Year 2035 2050 2035 2050 2035 2050 Total 12,079 13,810 60,395 69,050 7.3 8.4 Table 5.6: Fixed cost savings of inland waterway transport - Alternative B Vessel class Vessel passages Vessel hour savings Annual fixed cost savings (M ) Year 2035 2050 2035 2050 2035 2050 Total 12,160 14,036 66,880 77,198 8.1 9.4 Vessels passing along the canal save on average a distance of 35 km and 40 km, respectively. For 13,800 vessels passing along the TMC in 2050 in case of alternative A1b, this would lead to a reduction of 483,000 vessel-km. Applying an average fuel cost of 3.48 per vessel-km, the annual fuel cost saving related to the TMC can be determined as M 1.7 for 2050 in the case of alternative A1b (see Table 5.7). For alternative B, this is M 2.0 for 2050 (see Table 5.8). R20120248.doc 31

Table 5.7: Fuel cost savings inland waterway transport - Alternative A1b Vessel class Vessel passages Vessel km reduction (1,000 vkm) Annual fuel cost savings (M ) Year 2035 2050 2035 2050 2035 2050 Total 12,079 13,810 423 483 1.5 1.7 Table 5.8: Fuel cost savings inland waterway transport - Alternative B Vessel class Vessel passages Vessel km reduction (1,000 vkm) Annual fuel cost savings (M ) Year 2035 2050 2035 2050 2035 2050 Total 12,160 14,036 486 561 1.7 2.0 5.1.2 Environmental benefits The reduction of transport distance and related fuel savings reduces damage to the environment,due to the emission of harmful pollutants. Emission coefficients forecasted are based on fleet developments for the year 2025 and monetary values as used in the Germany CBA methodology are applied. 1 Emission per vessel km is based on an operational speed of 10 km/h and the fleet assumptions regarding operational cost saving, i.e. Europe Ships accounts for 25% and Large Rhine Ships for 75%, as well as tank ships account for 25% and dry cargo ships for 75% of all vessels passing along the TMC (see Table 5.9). Table 5.9: Emission cost saving inland waterway transport along TMC Emission type CO2 Nox SO2 PM CO NHMC Emission (g/kwh) 635 0.8 0.34 0.04 0.6 0.2 Emission (g/vkm) 63.5 0.08 0.034 0.004 0.06 0.02 Emission cost ( /t) 70 3,600 5,200 92,000 2.4 1,200 Emission cost savings per vessel-km ( /1,000 4.45 0.29 0.18 0.37 0.0001 0.02 vkm) Total emission cost savings ( /1,000 vkm) 5.30 Applying the emission cost saving of 5.30 per 1,000 vessel-km to the vesselkm reduction related to the TMC, the total cost saving is less than 3,000 per annum (see Table 5.10 and Table 5.11). 1 PLANCO, Economical and Ecological Comparison of Transport Modes: Road, Railways, Inland Waterways, Essen, 2007 R20120248.doc 32

Table 5.10: Emission cost saving inland waterway transport - Alternative A1b Year Vessel km savings (1,000 vkm) Annual emission cost saving ( ) 2035 423 2,241 2050 483 2,563 Table 5.11: Emission cost saving inland waterway transport - Alternative B Year Vessel km savings (1,000 vkm) Annual emission cost saving ( ) 2035 486 2,579 2050 561 2,977 5.2 Benefits due to modal shift Benefits related to modal shift are regarded as important factors related to waterway projects. However, according to global modelling and regional analysis we expect only a very low modal shift from road to inland waterway related to TMC construction. The modal shift related to TMC accounts for less than 0.1% of the forecasted cargo volume. In absolute terms this means a modal shift of approximately 100,000 tonnes depending on year and alternative. According to modelling, road and railway account for an approximate equal share of modal shift. 5.2.1 Operational cost savings Shippers will be able to realise cost savings in case of a modal shift from road and railway to waterway. Assuming an average trip length of waterway transport of 350 km, which seems a reasonable assumption considering that Lingen is approximately 300 km and Minden is approximately 400 km from Rotterdam seaport. In particular, seaport traffic related to Rotterdam will account for a large share of transport and both Lingen and Minden are routes with rather strong seaport ties. The calculations based on these assumptions and the methodology applied as discussed above yield average inland waterway costs of 1.4 eurocent per tkm. Considering comparable road and railway transport with an average distance of 350 km, costs are calculated assuming an average load of 10 tonnes and respectively 1,350 tons. We use further assumptions and input data as applied in the German methodology. 1 For the 350 km distance truck transport costs are 5.3 eurocent per tkm. Assuming an average load of 1,080 tonnes of trains the average railway costs are calculated with 2.6 eurocent per tkm. On average the operational costs of competing modes are 4.0 eurocent per tkm. 1 PLANCO, Economical and Ecological Comparison of Transport Modes: Road, Railways, Inland Waterways, Essen, 2007 R20120248.doc 33

Applying these cost figures, modal shift yields an average operational cost savings of 2.6 eurocent per tkm. The envisaged modal shift of 32.5 mio. tkm related to TMC considering alternative A1b in 2050 will lead to cost savings of M 0.8 per annum and M 0.6 for alternative B (see Table 5.12 and Table 5.13). Table 5.12: Transport cost saving modal split - Alternative A1b Year Modal shift tkm (mio. tkm) Annual modal split cost saving (M ) 2035 26.8 0.7 2050 32.5 0.8 Table 5.13: Transport cost saving modal split - Alternative B Year Modal shift tkm (mio. tkm) Annual modal split cost saving (M ) 2035 21.1 0.5 2050 24.4 0.6 5.2.2 Environmental benefits Furthermore, from the results of the forecasting model we can derive the change in emissions and related emission cost savings. Based on the expected modal shift in terms of tkm and an assumed average road transport load of 10 tonnes (truck) and for railways 1,350 t (train) we determine the reduction in truck and train km. In addition, we apply the assumed average vessel tonnage of 1,566 tonnes to determine the vessel km that would be required as a substitute. The average fuel burn and related emission of inland vessels (see above) is compared with the emission of trucks and railways. This allows for the calculation of the emission cost savings of modal shift related to TMC. Road transport and railway emissions are based on the fuel burn per vehicle-km for a typical journey over a 350 km distance. Aside from CO 2 emission, emission factors per truck km expected for 2020 are applied to determine truck emissions. In addition, parameters used in the German methodology are applied for railway transport 1 In this Quick Scan emission factors for free-flowing traffic along motorways are used. This is considered reasonable, as modal shift refers mainly to transit traffic along motorways. CO 2 emission is determined by applying an emission factor of 3.175 kg per kg fuel on the average fuel consumption of 0.25 kg per vehicle-km, which is derived from cost calculations for the typical transport over a distance of 350 km. Calculations show that the emission cost for railway transport is about 64 per 1,000 vehicle-km (see Table 5.14). 1 PLANCO, Economical and Ecological Comparison of Transport Modes: Road, Railways, Inland Waterways, Essen, 2007 R20120248.doc 34

Table 5.14: Emission cost of truck transport1 Emission type CO2 Nox SO2 PM CO NHMC Emission (g/truck-km) 778 1.80 0.003 0.03 0.76 0.35 Emission cost ( /t) 70 3,600 5,200 92,000 2.40 1,200 Emission cost per truckkm ( /1,000 truck-km) Total emission cost ( /1,000 truck km) 54.47 6.48 0.02 2.58 0.002 0.42 63.96 Regarding railway transport electric trains are assumed to handle 100% of traffic. Emission cost are calculated as 1,974 per 1,000 train km (see Table 5.15). Table 5.15: Emission cost railway transport Emission type CO2 Nox SO2 PM CO NHMC Emission (g/train-km) 23,791 19.7 26.5 1.1 5.7 1.1 Emission cost ( /t) 70 3,600 5,200 92,000 2.4 1,200 Emission cost per truckkm ( /1,000 train-km) Total emission cost ( /1,000 train-km) 1,665 70.8 137.7 98.7 0.01 1.3 1,974 Applying the emission costs per vehicle-km to the shifted volume, emission cost savings of 128,000 per annum are achieved with the construction of TMC in 2050 in the case of alternative A1b. For alternative B this amounts to 96,000 (see Table 5.16 and Table 5.17). Table 5.16: Emission cost savings alternative A1b Mode Modal shift vehicle km Emission cost ( ) (mio. vkm) Year 2035 2050 2035 2050 Truck -1.3-1.6-85,766-103,940 Railway -0.01-0.01-19,607-23,762 Inland waterway +0.02 +0.02 90 110 Emission cost saving -105,283-127,592 5.17: Emission cost savings alternative B Mode Vehicle km (mio. vkm) Emission cost ( ) Year 2035 2050 2035 2050 Truck -1.1-1.2-67,523-78,108 Railway -0.01-0.01-5,437-17,857 Inland waterway +0.01 +0.02 71 83 Emission cost savings 72,889 95,882 1 PLANCO, Economical and Ecological Comparison of Transport Modes: Road, Railways, Inland Waterways, Essen, 2007 R20120248.doc 35

5.2.3 Traffic safety The modal shift from road to IWT leads to increased traffic safety, as accidents happen more frequently in road transport compared to inland waterway transport. The benefits are monetised in terms of fatalities, injuries and material damage avoided. Based on German accident data and monetary values average accident cost are 53.1 eurocent per 100 tkm in truck transport, 6 eurocent per 100 tkm in railway transport and 3.3 eurocent per 100 tkm in inland waterway transport. 1 Assuming a modal shift of 50% for road and railway transport on average, the accident costs are reduced by 26.3 eurocent per 100 tkm. For instance, the accident costs are based on a monetary value of M 1.16 per fatality avoided, which is close to the commonly accepted value in EC CBA of M per fatality avoided. Upon realisation of the TMC, accident costs are reduced by up to 86,000 per annum in 2050 for the alternative A1b and 64,000 for alternative B (see Table 5.18 and Table 5.19). 5.18: Accident cost saving - Alternative A1b Year Modal shift tkm (mio. tkm) Accident cost saving (1,000 ) 2035 26.8 70.5 2050 32.5 85.5 5.19: Accident cost saving - Alternative B Year Modal shift tkm (mio. tkm) Accident cost saving (1,000 ) 2035 21.1 55.5 2050 24.4 64.2 5.2.4 Noise Inland waterway transport is regarded as a transport mode that causes little noise. Therefore, the modal shift from roads to inland waterways causes a significant noise reduction. In monetary terms, noise costs are estimated with 0.7 eurocent per truck-km and 52.1 eurocent per train-km outside of populated areas. 2 In comparison, noise costs of inland waterway transport is regarded to be zero. Hence, the reduction of vehicle-km in road and railway transport would lead to a benefit in terms of reduced noise cost. Noise costs of up to 18,000 per annum could be realised in 2050 in the case the TMC is constructed (see Table 5.20 and Table 5.21). 1 PLANCO, Economical and Ecological Comparison of Transport Modes: Road, Railways, Inland Waterways, Essen, 2007 2 ECORYS, OEI bij MIT-planstudies, 2008 R20120248.doc 36

Table 5.20: Noise cost reduction - Alternative A1b Mode Modal shift vehicle km (mio. vkm) Noise cost saving( ) Year 2035 2050 2035 2050 Noise cost saving truck 1.3 1.6 9,387 11,375 Noise cost saving railway 0.01 0.01 5,175 6,272 Noise cost saving total 14,562 17,647 Table 5.21: Noise cost reduction - Alternative B Mode Modal shift vehicle km (mio. vkm) Noise cost saving ( ) Year 2035 2050 2035 2050 Noise cost saving truck 1.1 1.2 7,390 8,548 Noise cost saving railway 0.01 0.01 4,074 4,713 Noise cost saving total 11,464 13,261 5.3 Economic effects related to spatial development Regional benefits in terms of employment can be realised, as the canal will attract economic activity. We will estimate this effect in terms of employment. In line with the German CBA methodology we will distinguish between employment related to construction and operation of the TMC. According to the German methodology transport infrastructure investments generate employment of 1,630 staff-years per M 100 investment volume. It is assumed that 40% of employment can be allocated in the project region. Moreover, according to the regional employment situation it has statistically been determined what share of this employment would not be employed without the construction activity. Per additional staff-year, which is created, regional agencies save 10,600 1. This amount of public support would be required to establish employment per staff-year. As the employment situation in the German and Dutch part of the project region can be regarded as similar, the application of the German methodology seems reasonable here. Table 5.22 summarises the employment effects for the TMC. 5.22: Employment effects related to TMC Alternative Infrastructure Investment (M ) Construction employment (staff years) Construction employment benefits (M ) A1b 1,192 544 5.8 B 1,294 590 6.3 The employment can be attributed to the Netherlands and Germany corresponding to the share of investment. In alternative A1b 61% of investment refers to the Netherlands, while the share is 59% for alternative B. Hence, employment benefits for the Netherlands would be M 3.5 and M 3.7 1 PLANCO, Valuation methodology for feasibility studies in Federal Infrastructure Planning, Essen, 2010 R20120248.doc 37

respectively. Corresponding benefits in Germany amount to M 2.3 and M 2.6 respectively These benefits are equally distributed over the construction period of five years. Employment effects during the operation of TMC are related to a better accessibility of the region. This would influence businesses to locate in the region. Moreover, an increase of cargo turnover and logistical developments are expected, which could strengthen the hub function of the region. At least one new port / terminal in Germany in the vicinity of the canal and an expansion of existing facilities on the Dutch side e.g. Hengelo, would be related to the canal. For the estimation of these effects we apply the approach used in the German methodology. It refers to the relative improvement of the regional accessibility. The methodology considers the regional relevance of mode and transport routes, which benefit from the project. 1 Corresponding with the modelling results the relevance of inland waterway is assumed with 30%. Approximately 50% of waterway transport uses the canal and benefits from improved accessibility. In relation to the average reduction of waterway distance by 35 km and average trip length of 350 km, we assume a cost improvement of inland waterway transport by 10%. Overall, the accessibility indicator is improved by 1.5%. Moreover, the regional employment situation is considered. Once again, the situation is regarded to be comparable in the Netherlands and Germany. However, in terms of accessibility improvement two thirds of the benefits and hence employment effects will arise in Germany, due to the large share of traffic from/to Western seaports. Employment benefits related to the operation of the TMC are monetised in a similar manner to the benefits of construction related to employment with public support, which would be required to establish a job over a period of one year. An amount of 807,000 employment benefits arise per annum related to the operation of the TMC (see Table 5.23). Table 5.23: Operational employment benefits Area Operational employment (staff years) Operational employment benefits (1,000 ) Netherlands 25 269 Germany 51 538 Total 76 807 Apart from these general employment and regional effects related to construction and operation of the TMC, no additional regional impact will be related to the TMC. As outlined above, a shift of maritime transport from Bremerhaven/Hamburg to Rotterdam is not expected. The employment refers to additional employment on a global scale, which is distributed along the corridor as outlined. Distributional effects related to a locational shift of economic activity from other regions to the TMC region are not expected. Therefore, we do not level out in a CBA with a national or European scope. 1 PLANCO, Valuation methodology for feasibility studies in Federal Infrastructure Planning, Essen, 2010 R20120248.doc 38

5.4 Other monetised benefits Specific to the German methodology for evaluation of transport infrastructure it is considered that the TMC contributes to the improvement of international relations 1. In such cases a 10% bonus of the operational transport cost savings in international transport are added to the project benefits. As all TMC transport is expected to be international transport, 10% of operational cost savings due to route shift and modal shift are regarded as benefits to strengthen international relations. This means additional benefits of up to M 1.2 per annum (see Table 5.24 and Table 5.25). Table 5.24: Benefits to strengthen international relations alternative A1b Year Operational cost savings (M ) Benefits to strengthen international relations (M ) 2035 9.5 0.95 2050 10.9 1.09 Table 5.25: Benefits to strengthen international relations alternative B Year Operational cost savings (M ) Benefits to strengthen international relations (M ) 2035 10.4 1.04 2050 12.0 1.20 5.5 Non monetised effects 5.5.1 Nature and landscape Constructing the TMC link will likely have a negative impact on the environment and landscape. The landscape is separated by a waterway, meaning that valuable environmental sites are fragmented. Alternative B has the largest negative effects, as almost the entire route intersects ecologically valuable areas, causing loss of forest and nature. A monetisation of these effects is very difficult. Therefore, these aspects will be taken qualitatively into account in the analysis. 5.5.2 Reliability The TMC closes a gap in the inland waterway network. This project would also increase the reliability of inland waterway transport on this corridor, as it provides an additional alternative to the route along the German canal network. Although the combination of the Rhein-Herne canal and the Wesel-Datteln canal already provide a degree of redundancy on that part of the network today, there are no existing alternatives for barges in case of closure of the Southern stretch of the Dortmund-Ems canal. Today this would require a long detour via the IJssel lake. However, due to additional costs and lack of acceptance amongst shippers, 1 Federal Ministry of Transport, Construction and Housing, Federal Transport Infrastructure Plan, Methodology for economic evaluation, Berlin, 2005 R20120248.doc 39

this is not considered as a serious alternative. In addition to this, the detour requires free passage on the Northern strech of Dortmund-Ems canal. This was not possible in 2005, when dam failure at the Southern stretch and the sinking of a vessel at the Northern stretch occured, yielding a double blockade. In that situation, TMC would have provided an alternative route and inland shipping on the East-West-corridor could have been continued, despite the double blockage. Therefore, the TMC can be regarded as a contribution towards strengthening the reliability of inland waterway transport on this corridor. This effect cannot be monetised adequately. However, as a simultaneous blockade of two stretches, which would require a TMC link to continue inland navigation, it is very unlikely, that the impact on reliability would be overrated. Moreover, coexistence of the Wesel-Datteln canal and the Rhein-Herne canal and planned/ongoing replacement of locks in the German canal network will reduce the vulnerability of the waterway network. R20120248.doc 40

6 Results 6.1 Economic analysis The socio-economic feasibility of the project will be expressed in terms of: Net Present value (NPV): the value that results from present costs minus present benefits; Benefit-Cost ratio (B/C-ratio): the ratio of the present value of social benefit to the present value of social costs over the time horizon; Economic Rate of Return (ERR): the return rate where the present value of social benefit to the present value of social costs over the time horizon are in balance. The EC Guide to Cost-Benefit Analysis of Investment Projects refers to the NPV as the most important and reliable social CBA indicator and should be used as the main reference economic performance signal for project appraisal. Although ERR and B/C-ratio are meaningful as they are independent of the project size, they may however, cause problems sometimes. In particular cases, for example, the ERR may be multiple or not defined, while the B/C ratio may be affected by considering a given flow as either a benefit or a cost reduction. 6.1.1 Discount rate In order to determine NPV and B/C-ratio, the choice of the discount rate is essential. The European Union, the Netherlands and Germany work with different discount rates in project evaluation. The European Commission suggests a social discount rate of 5.5% for Cohesion and IPA countries and for convergence regions elsewhere with a high growth outlook. For other regions, a discount rate of 3.5% is advised. In contrast, OEI in the Netherlands assumes a higher discount factor of 5.5%. The discount rate is composed of a real, risk-free discount rate of 2.5% and the standard 3% risk surcharge is applied. The German methodology however, calculates with a rather low interest rate of 3%. For the CBA of the TMC, the intermediate discount rate of 3.5%, which is recommended by the European Commission, will be applied. Consequences of the application of the discount factors intended for Dutch and German project evaluation will be shown in the sensitivity analysis. 6.1.2 Time horizon For CBA, the EC suggests a time horizon of 30 years for investments in projects concerning water and the environment. At the end of the time horizon of the project, a rest value can be included. For the determination of the rest value we assume a linear depreciation of the canal investment over a lifetime of 100 years. In contrast, according to the Dutch guidelines of National Social Costbenefit Analysis a period of 100 years has to be considered in project evaluation. However, within light of the 5.5% discount rate, later years add relatively little to the benefits. The first periods are the most important. Time horizon in German R20120248.doc 41

methodology is determined by the average lifetime of project components. As the structure of investment cost is assumed to be unchanged, analogue to the 1994 study, an average lifetime of 80 years is applied. Corresponding to the application of the discount factor, the EC recommendation will be applied and the influence of the longer time horizon in German and Dutch methodology will be shown in the sensitivity analysis. 6.2 Results of CBA Benefits and costs are discounted in order to determine the present value for the year 2030. Considering the planned opening of the TMC in 2035 and an expected time for canal construction of 5 years, construction would start in the year 2030. Therefore, we discount costs and benefits for the year 2030 for a harmonised comparison based on present values. The present value of the investment costs as mentioned in 4.1 is M 1,114 for alternative A1b and M 1,209 for alternative B. However, the investment costs can be reduced with the rest value after 30 years. The present rest value amounts to M 262 in alternative A1b and M 284 in alternative B, respectively. Therefore, present value net investment costs for the time horizon observed are M 852 and M 925. Maintenance costs over 30 years amount to M 189 and, M 193 in alternative B, respectively. Overall benefits over 30 years have a present value of M 188 for alternative A1b and M 204 for alternative B. For alternative A1b the benefits appear insufficient to compensate the maintenance costs of the TMC. A low margin exists between benefits and maintenance costs in alternative B with M 11. NPV is M 853 and respectively M 915. Together with the net investment costs, maintenance costs are considered as costs in the B/C-ratio. Therefore, the ratio is 0.18 for both alternatives. The ERR is calculated as -1.1% and -1.0%, respectively. For the overall results of the project evaluation, see Table 6.1. The impact of the TMC on the environment and landscape, as well as the reliability of the waterway network has qualitatively been included. The +/- symbols used show the influence on the evaluation results. Table 6.1: Project evaluation results Alternative A1b Alternative B Present value investment cost (M ) 1,114 1,209 Present rest value (M ) 262 284 Present value maintenance cost (M ) 189 193 Present value total cost (M ) 1,042 1,118 Present value of benefits (M ) 188 204 Net present value (M ) -853-915 Benefit/cost-ratio (M ) 0.18 0.18 Economic rate of return -1.1% -1.0% Other non-monetarised benefits: Impact on nature and landscape - -- Increased reliability of waterway + + network R20120248.doc 42

6.3 Allocation of benefits over different parties 6.3.1 Euregio A large share of TMC benefits can be allocated to the Euregio and total employment related to construction of TMC refers to Euregio. The present value of benefits over 30 years are M 5.4 for alternative A1b and M 5.8 for alternative B. In regards to operational benefits, it is assumed that 50% of employment related to operation applies to Euregio. These benefits have a present value of M 6.5. Moreover, operational benefits regarding route and modal shift of traffic with O-D in Euregio arise in the region. The share of this traffic is estimated at 20% according to current waterway traffic. This means a present value of M 33.2 benefits for alternative A1b and M 36.4 benefits for alternative B in the Euregio. As all traffic is regarded as international traffic, 20% of the benefits arising from improved international relations, as considered in the German methodology, would refer to the Euregio. This means additional benefits of M 3.3 respectively and M 3.6 but these benefits are not considered in the base evaluation applying EC methodology. Emission cost savings due to route shift does not apply in the Euregio, as the diversion leads to additional waterway traffic in the Euregio. However, modal shift will reduce emissions, noise and traffic accidents in the Euregio. Considering the extension of approximately 140 km of the Euregio in East-West direction and the assumed average distance of 350 km for shifted transport, a reasonable estimate is that on average 40% of shifted vehicle-km and related emission, safety and noise impacts apply to the Euregio. Related benefits amount to M 1.4 for alternative A1b and M 1.1 for alternative B. For an overview of the benefits that can be attributed to the Euregio, see Table 6.2. Table 6.2: Benefits (M ) attributed to Euregio Alternative A1b Alternative B Construction employment 5.4 5.8 Operational employment 6.5 6.5 Transport cost saving 33.2 36.4 Environmental benefits 1.4 1.1 (emission, safety, noise) Total 46.5 49.8 Overall, benefits with a present value of M 46.5 in alternative A1b and M 49.8 in alternative B can be allocated to the Euregio. 6.3.2 The Netherlands Based on various criteria the benefits are distributed between the Netherlands and Germany. Construction employment is related to the investment cost share, which applies to the Netherlands. This share is 61 % in alternative A1b and 59% in alternative B. This yields a benefit of M 3.3 and respectively M 3.4. Operational cost savings of traffic is mainly related to traffic between the Netherlands and Germany. Half of the savings are allocated to the Netherlands, while the other half applies at the other end of the transport route, i.e. Germany. R20120248.doc 43

M 83.3 benefits for alternative A1b and M 91.2 for alternative B could be attributed to the Netherlands. The same shares apply for benefits to improve international relations, which are only considered according to the German evaluation methodology. The additional benefits would amount to M 8.3 and respectively M 9.1 but are not considered in the base evaluation applying the EC methodology. Emission cost savings related to route shift refer completely to Germany, as waterway traffic would be diverted from Germany to the Netherlands. However, 60% of modal shift related benefits regarding emission, safety and noise are assumed to apply to the Netherlands. This assumption is based on the fact that the Netherlands accounts for 60% of truck km for a typical transport. Present value of benefits are M 2.1 for alternative A1b and M 1.6 for alternative B. As outlined above one third of operational employment benefits are assumed to apply to the Netherlands. Due to the improvement of seaport connectivity, in particular, the German side benefits in terms of accessibility. The employment benefits have a present value of M 4.3. Table 6.3: Benefits (M ) attributed to the Netherlands Alternative A1b Alternative B Construction employment 3.3 3.4 Operational employment 4.3 4.3 Transport cost saving 83.3 91.2 Environmental benefits 2.1 1.6 (emission, safety, noise) Total 93.0 100.5 Overall, benefits arising in the Netherlands have a present value of M 93.0 alternative A1b and M 100.5 in alternative B, see also Table 6.3. 6.3.3 Germany Most of the remaining benefits refer to Germany. Germany accounts for 39% in alternative A1b and 41% in alternative B of construction related employment. This means benefits with a present value of M 2.1 and respectively M 2.4. Half of the operational cost savings apply to Germany. The present value of these benefits amount to M 83.3 in alternative A1b and M 91.1 in alternative B. This share applies to improvement of international relations as well, meaning additional benefits of M 8.3 in alternative A1b and M 9.1 in alternative B. These benefits are not considered in the base evaluation applying the EC methodology. As waterway traffic is diverted from Germany to the Netherlands, all related emission cost savings of M 0.1 refer to Germany. However, related to the share of vehicle km in Germany only 40% of modal shift related emission, safety and noise benefits arise in Germany. The benefits are M 1.4 for alternative A1b and M 1.1 for alternative B. Due to the improvement of seaport links, Germany accounts for the majority of two thirds of employment benefits related to TMC operation. The employment benefits have a present value of M 8.6. R20120248.doc 44

Table 6.4: Benefits (M ) attributed to Germany Alternative A1b Alternative B Construction employment 2.1 2.4 Operational employment 8.6 8.6 Transport cost saving 83.3 91.1 Environmental benefits 1.4 1.1 (emission, safety, noise) Total 95.4 103.2 Overall, benefits of M 95.4 in alternative A1b and M 103.2 in case of alternative B arising in Germany, see also Table 6.4. 6.3.4 EU as a whole The total benefits of M 188 in alternative A1b and M 204 in alternative B will arise at an EU level. Additionally, in case of application of the German CBA methodology additional benefits of M 16.7 and M 18.2, respectively, can be derived from the improvement of internal relations (see also Table 6.5). Table 6.5: Benefits (M ) Europe wide Alternative A1b Alternative B Construction employment 5.4 5.8 Operational employment 12.9 12.9 Transport cost saving 166.6 182.2 Environmental benefits 3.5 2.7 (emission, safety, noise) Total 188 204 6.4 Sensitivity analysis Project evaluation of transport infrastructure projects underlies different assumptions on at European, Dutch and German levels. As outlined, the discount rate, time horizon and benefit components vary. A sensitivity analysis is carried out to indicate the consequences of the application of Dutch or German evaluation methodology instead of the methodology recommended by the European Commission. Moreover, the sensitivity analysis will allow us to highlight the impact of a variation of key factors on the feasibility of the project. The evaluation, investment costs and the transport volume on the canal including route shift and modal shift can be identified as key factors which determine the feasibility of the project. As a starting point, a sensitivity analysis will be applied regarding methodological aspects of the evaluation. For the sensitivity analysis regarding the transport volume, the low and high case scenarios are used. Firstly, instead of the EC methodological recommendations, the Dutch and German methodologies are applied. According to Dutch methodology the discount rate is 5.5% and time horizon is 100 years, while the discount rate is 3.0% and the time horizon is 80 years in the German methodology. Moreover, R20120248.doc 45

the Dutch methodology considers VAT for investment and maintenance costs and the German methodology considers improvement of international relations as a separate benefit. In contrast to the EC and Dutch approach, the German methodology considers maintenance costs as negative benefits. The latter is only relevant for the determination of the B/C-ratio. The NPV worsens when applying the Dutch or German methodology. The B/Cratio also worsens in particular, when applying the German methodology (see also Table 6.6). Table 6.6: Sensitivity analysis - methodology Alternative A1b B Methodology Criteria EC Netherlands Germany NPV (M ) -853-1,329-1,096 B/C-ratio 0.18 0.09 0.03 NPV (M ) -915-1,443-1,170 B/C-ratio 0.18 0.09 0.04 Investment and maintenance costs have a high influence on the results of the project evaluation. As the cost estimates date back from the 1994 study and have been extrapolated according to the price index, there is uncertainty regarding the accuracy of the applied cost figures. Therefore, a sensitivity analysis assuming 10% lower cost figures is carried out to show the impact on the project feasibility. However, a cost decrease of 10% only slightly improves the NPV and B/C-ratio of the project (see Table 6.7). Table 6.7: Sensitivity analysis investment cost Alternative A1b B Criteria Base Investment cost -10% EC EC Netherlands Germany NPV (M ) -853-749 -1,183-952 B/C-ratio 0.18 0.20 0.10 0.06 NPV (M ) -915-803 -1,285-1,016 B/C-ratio 0.18 0.20 0.10 0.08 Considering the low and high scenarios, which both include assumptions regarding an increasing competitiveness of inland waterway transport, the results improve only slightlyas well. The scenarios show a higher transport demand of 5% (low scenario) and 10% (high scenario) along the TMC. In the low scenario, which refers to alternative A1b, the B/C-ratio increases to 0.19. The high scenario with alternative B shows a B/C-ratio of 0.20 (see also Table 6.8). However, these results are far from figures that would demonstrate the feasibility of the project, which requires a B/C-ratio above 1.0. R20120248.doc 46

Table 6.8: Sensitivity analysis - scenario Alternative A1b B Scenario Criteria Reference Low High NPV (M ) -853-845 B/C-ratio 0.18 0.19 NPV (M ) -915-900 B/C-ratio 0.18 0.20 R20120248.doc 47

7 Conclusions 7.1 Economic value of the TMC link The TMC is far from being a feasible infrastructure project. However, the TMC would generate significant economic effects in the Euregio and beyond its borders. The TMC would generate economic benefits of M 185 in the case of alternative A1b and M 201 for alternative B. The largest part of the economic effects apply to transport cost savings (see Table 7.1). Table 7.1: Economic benefits (M ) Alternative A1b Alternative B Employment 18.3 18.8 Transport cost saving 166.6 182.2 Total economic value 184.9 201.0 7.2 Environmental gains by realising the TMC link The TMC would allow the realisation of environmental gains in terms of emission reduction, enhanced traffic safety and noise reduction. The major share of environmental gains arises from modal shift, however, modal shift related to the TMC is expected to be rather limited. The overall environmental gains of the TMC amount to M 3.6 in alternative A1b and M 2.7 in alternative B (see Table 7.2). Table 7.2: Environmental benefits (M ) Alternative A1b Alternative B Emission 2.0 1.5 Safety 1.3 1.0 Noise 0.3 0.2 Total environmental gains 3.6 2.7 7.3 TMC and development within corridor 2 TMC and Euregio are located within TEN-T corridor 2. Developments along the corridor could stimulate traffic beyond the figures expected in this Quick Scan. Initiatives have started to strengthen the infrastructure and optimise the connections considering all modes. The corridor is regarded as offering good infrastructure for multimodal connections including the modes road, railway and inland waterway. However, due to the missing TMC link, waterway connection along the corridor is interrupted in Euregio. As the Quick Scan shows, alternative routes are available and the benefits from route shift do not justify TMC construction, however, the benefits may increase beyond the level expected from today s point of view. Developments along the corridor might also contribute to a higher than expected transport growth. For instance, Eastern European economies could benefit more than expected from corridor development. Considering already the utilisation of road and railway infrastructure today and the extensive spare capacities in the waterway network, the need for TMC might increase in the future. In case the expected growth is significantly higher, the R20120248.doc 48

canal could be required to provide sufficient capacity along the corridor for the accomodation of traffic. The corridor approach could be an opportunity to combine the TMC project with other waterway projects along the corridor. This broader perspective would make modal shift to waterway more likely. Moreover, the modal shift would refer to transport over longer distances. In particular, characteristics towards the Eastern part of the corridor waterway are weak and are a barrier for modal shift. By realising a joint upgrade of these waterway sections, more benefits could arise. However, this would require a large volume of additional investment, which gives rise to doubts on the feasibility. R20120248.doc 49

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