The economic impact of the Marco Polo II Programme on the EU economy

Road congestion is a huge burden for the EU economy. According to a White Paper released by European Commission in 2011, road congestion costs Europe about 1% of total GDP annually. This number is enormous – especially in a (post) crisis-time where money is scarce, and thus, the European Commission has launched a series of plans in order to ease the congestion rates and also reduce emissions caused by congestion. The Marco Polo II Programme is one of these plans that focuses on easing road congestion and reducing emissions caused by road congestion. It is an important EU policy that should lead to more economic growth and have positive effects for the environment at the same time. This warrants further impact research. Therefore, this thesis looks at the potential impact of the Marco Polo II Programme on the EU economy (GDP and trade) following from the effect on road congestion. To analyze the impact on the EU economy, for the EU as a whole, but also at EU Member State level, the Global Simulation (GSIM) Model is applied to evaluate the policy effects. We find that in both scenarios, the Marco Polo II programme has a positive impact on the EU economy. In terms of output, we find a very small increase in GDP of 0.02% because of the Marco Polo II programme. This is not large compared to the 1% congestion cost estimate it aims to address. However, 0.02% of GDP is still Euro 2 billion in estimated gains, compared to the Euro 450 million investment through Marco Polo II – which is a significant return on public investment. When we look at welfare, output, trade, and price effects, the impact of Marco Polo II is also visible. Welfare goes up because prices for consumers drop and some producers also gain. Output increases for all EU Member States, and consumer prices drop. Mostly in Belgium, the most congested country in the EU. Although international trade between the EU and the Rest of World and US decreases, intra-EU trade increases a lot because of the Marco Polo II Programme. This means that the Marco Polo II Programme has a positive effect on the EU internal market and the economy’s degree of integration. In addition, the output of two scenarios reveals that the actual achievement rate of the Marco Polo II Programme is the dominant factor. Because the Marco Polo II Programme has a much better performance under the scenario with a higher achievement rate. That implies for policy makers it is important – for the EU to benefit – that Marco Polo II has the highest achievement rate possible.