The economic rationale for high-speed rail

Abstract

High-speed rail (HSR) is a mass transport technology for medium distance intercity mobility. It requires an expensive and dedicated infrastructure only compatible, to be economically sustainable, with high volumes of demand to compensate the sunk costs of its construction. Practically, all the HSR lines in the world are far from breaking even, absorbing a significant amount of public funds. As the development of a HSR network is not determined by market forces, the importance of the economic appraisal of new projects is paramount. The benefits of this transport option are mainly timesavings for existing rail users and for those shifting from air and road, the willingness to pay of new users and the release of capacity for freight. The environmental impact of HSR is also alleged as one of its main benefits. Nevertheless, the benefits derived from the deviation of passengers from less environmental friendly transport modes have to be compared with the negative externalities during the construction and operation of this new mode of transport. As any other transport technology, the economic rationale of a HSR line requires the delivery of social benefits to compensate its social costs, and unfortunately many projects around the world do not fulfill this basic condition.