Financing Methods for High-Speed Rail with Application to Portugal

Abstract

High-Speed Rail (HSR) is of substantial and growing interest around the world. The European Union (EU) sees it as an integrating force; China is investing at an extraordinary level and even the U.S. is trying to move forward. Although HSR is expected to shrink the temporal distance between cities, reshape the travel patterns of people toward—we hope—environmentally-friendly ones, create an image effect for the country building it, promote regional economics, etc., HSR is an expensive alternative. It is more capital intensive than other transportation projects in both unit cost (the cost per lane or track km) and total cost. On the other hand, HSR can aid in the formations of megaregions with the potential for economic growth. This paper discusses the cost characteristics of HSR, analyzes HSR’s potential economic influence on megaregions, and identifies megaregion-related revenues that can make HSR more financially viable: specifically, we discuss the use of value capture mechanisms to capture the megaregion economic benefits of HSR in order to finance such systems.