Environmental Engineering Reference
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4 A comparison of Funding Strategies
In this section, we present a comparison among four funding strategies. To do this,
we will follow a classic cost-benefit analysis (CBA) method after defining each
scenario. All the scenarios are defined on the same basis, i.e. a deployment project
arising on implementing and making operational a network of delivery space
booking (DSB) systems.
4.1 A Note on Cost Benefit Analysis
Generally, a CBA method consists on listing on one side all investment and
operational costs, year after year, for a given time horizon (in general 10 years for
infrastructure projects, i.e. DG REGIO 2008 ). Then benefits are also listed in the
same time horizon. After that, for each year, benefits are confronted to costs and
their difference is updated using an update rate in order to take into account the
money updating year after year. Finally, an Investment Return Rate (IRR) after the
project's time horizon is calculated. In order to take into account the pluri-annual
time horizon, it is important to define an updating rate ''a'' which allows com-
paring two quantities of money at two different periods. Taking the value of a
quantity of money V t at time t, and V n the value of this quantity at horizon n, they
are related by the following equation: V t = Vn/(1 ? a)n.
Then, year by year, benefits are confronted to costs and their difference is
updated using an update rate of 4 %. Finally, an Investment Return Rate (IRR) is
calculated, in a 10-year horizon.
To simulate the scenarios, we need to have a unique basis on which only
parameters related to who invests would change. We assume a hypothetic city,
making abstraction of the country. All simulations are then made on the same city,
a virtual 2.000.000 inhabitant urban area created from real data (the details on how
the virtual city is constructed and how the freight demand is forecast, see
MODUM 2011 ). Using the tools of evaluation in this context, i.e. generalising
local effects to a city point of view, we estimate the costs and the benefits for the
two main stakeholders: the city (or the collective community) and the transport
carriers (or individuals).
We assume a VAT of 20 % and, for each system personnel fees equal to those
of employees working during the pilot implementation, operation and evaluation
phases (in case of pilots in different cities, the retained costs will be précised in the
corresponding section). Another important assumption concerns the time period
where investments are made. Oppositely to public transport infrastructures
(tramways, subways, urban-suburban trains), investments are not made in the first
two years, but the systems are introduced gradually. This assumption enforces that
of money availability.
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