Annex 4 analytical methods

The model consists of two main modules: the transport demand allocation module and the technology choice and equipment operation module (or supply module). The two modules interact with each other and are solved simultaneously.

The transport demand allocation module simulates mobility decisions driven by macroeconomic drivers which distribute the transport activity over different transport modes and trip types, so as to calculate transport services by mode for both individuals and firms. The decision process is simulated as a utility maximisation problem under budget and other constraints for individual private passengers and as a cost minimisation problem for firms.

The technology choice and equipment operation module determines the mix of vehicle technologies (generally the transportation means), the operation of transport means by the trip type and fuel mix such as to meet the modal transport demand at the least cost. In the case of supply by transportation companies, the module calculates transportation tariffs (ticket prices). Consumer or firm choices at various levels of the supply module use total costs, inclusive of capital costs, or only variable costs, as appropriate. For example, purchasing a new car involves total cost comparisons among alternative solutions, but the choice of the fuel type for an existing car, if that is possible, or determining the rate of use of an existing car naturally involves only variable costs. The choice of technology is generally the result of a discrete choice problem which considers relative costs which optionally include factors indicating impacts on externalities and the impacts of intangible costs (e.g. market acceptance, range anxiety).

Part of the supply of transport services is carried out by the same agent who is consuming such services; in other words, supply is split between self-supply of transport services and the purchasing of transport services from transportation companies. To self-supply the service, the consumer (individual or firm) faces both capital and variable costs, where capital costs correspond to the purchase of transportation means, whereas when purchasing transport services from transport suppliers the consumer faces only variable costs (corresponding to ticket prices). Transportation companies also face capital and variable costs. They sell their services at transport tariffs (ticket prices, etc.). Further, there is no capital rent for the self-supply of transport services and the consumer chooses between alternative self-supply solutions by comparing total costs, assuming the average cost pricing of alternative solutions.

Both the transport demand allocation and technology choice and equipment operation modules are dynamic over time, simulate capital turnover with possibility of premature replacement of equipment and keep track of equipment technology vintages.

Prices – as set by transportation companies – are based on marginal costs, which may allow for capital rents (e.g. aviation). Other transportation companies – owned by the state and subject to a strong price regulation – apply average (instead of marginal) cost pricing rules to determine transportation tariffs. To include external costs, such as congestion, the model includes additional components in the equilibrium prices which is termed the “generalised price of transportation” and is calculated both for the self-production and for the business supply of transport services.

Computationally, the model is solved as a non-linear mixed complementarity problem. Optionally, policy targets related to externalities (or the overall efficiency or overall emissions) may be included as binding constraints; through the mixed complementarity formulation of the model, such overall constraints influence all choices in the demand and supply transport modules.

Formally, the model solves an equilibrium problem with equilibrium constraints (EPEC) simultaneously for multiple transport services and for multiple agents, some of which are individual consumers and firms, which consume or produce transport services. The EPEC formulation also includes overall constraints which represent policy targets, e.g. emissions, energy, etc., which influence both demand and supply. Solving for equilibrium also involves the computation of energy consumption, emissions of pollutants and externality impacts related to the use of transportation means.

The PRIMES-TREMOVE transport model is calibrated to 2005, 2010, 2015 and 2020 historical data.

Projections for 2025 take into account activity data for 2021. The main data (such as activity and energy consumption) comes from EUROSTAT database and from the Statistical Pocketbook "EU transport in figures" (DG MOVE). Excise taxes are derived from DG TAXUD excise duty tables (https://ec.europa.eu/taxation_customs/tedb/splSearchForm.html;jsessionid=gDc40clH3ufxfoKOdXcM1t26oFiV84od01egfLest4uUPKZdXGiM!530641174). Other data comes from different sources such as research projects (e.g. NMP project, TRACCS project, European Alternative Fuels Observatory) and reports. Technology cost assumptions for most transport modes have been validated by a large group of stakeholders in the process of the development of the Reference scenario 2020. For the heavy duty vehicles segment, aviation and for selected maritime technologies, technology cost assumptions were revisited.

The PRIMES-TREMOVE model produces projections of transport activity, stock turnover of transport means, technology choice, energy consumption by fuel, greenhouse gas and air pollution emissions, and costs (including impacts on external costs of air pollution, congestion, noise and accidents). The projection includes details for a large number of transport means, technologies and fuels, including conventional and alternative types, and their penetration in various transport market segments.

The model can be used for policy formulation. Model projections include the transport demand by the transport mean, technologies and fuels, including conventional and alternative types, and their penetration in various transport market segments. It also includes details about greenhouse gases and air pollution emissions, as well as impacts on transport system costs, external costs of congestion, noise and accidents.

In the transport field, PRIMES-TREMOVE is suitable for modelling soft measures (e.g. eco-driving, deployment of Intelligent Transport Systems, labelling) economic measures (e.g. subsidies and taxes on fuels, vehicles, emissions; ETS for transport (road transport, aviation and maritime) when linked with PRIMES; pricing of congestion and other externalities such as air pollution, accidents and noise; measures supporting R&D), regulatory measures (e.g. CO2 emission performance standards for new passenger cars, new light commercial vehicles, heavy duty vehicles); EURO standards on road transport vehicles; technology standards for non-road transport technologies), infrastructure policies for alternative fuels (e.g. deployment of refuelling/recharging infrastructure for electricity, hydrogen, LNG, CNG). Used as a module which contributes to a broader PRIMES scenario, PRIMES-TREMOVE can show how policies and trends in the field of transport contribute to economy wide trends in energy use and emissions. Using data disaggregated per Member State, it can show differentiated trends across Member States.

The PRIMES-TREMOVE model has been used for the Impact Assessments accompanying the 2011 Transport White Paper , “Roadmap to a Single European Transport Area – Towards a competitive and resource efficient transport system” (COM(2011) 144 final); for the “A European Strategy for low-emission mobility” (COM(2016) 501), for the 2050 Long-term Strategy (A Clean Planet for all - A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy; COM (2018) 773) and for many other policy documents and Impact Assessments. In 2020 and 2021, the model also provided quantitative input in various IA of the Fit for 55 policy package and in evaluation studies of existing directives (e.g. AFID) and initiatives (e.g. White Paper in transport).

PRIMES-TREMOVE can help to assess: 

Pricing

• Infrastructure charging (e.g. Eurovignette) through: 
  • Changing travel cost associated to specific infrastructures
• External costs charges (for all modes) through:
  • Changing travel costs of transport modes 
• Public funding of transport (subsidies) through:
  • Changing travel cost of bus and rail

Taxation

• Energy taxation (identify energy and CO2 component) through: Changing fuel tax values by fuel type
• Vehicle taxation Changing through: cost of new vehicles 

Regulation

• Standard - Transport safety through: 
  • Reduction of accident factors
• Regulation on CO2 from road vehicles through: 
  • Assumptions on CO2 emissions limits of new cars, light commercial vehicles and heavy goods vehicles are implemented
• Regulation on polluting emission from road vehicles (EURO standards) through:
  • Assumptions on polluting emissions limits of new cars and heavy goods vehicles are implemented
• Emissions standards for non-road modes (e.g. ICAO chapter 3 on aircraft emissions, Energy Efficiency Design Index for maritime, sulphur limits of marine fuels, etc.) through:
  • Assumptions on emissions limits of new trains/aircrafts, etc. are implemented; reduction of emissions factors for vessels
• Emissions Trading Scheme through:
  • Inclusion of aviation in EU ETS starting with 2012 – Changing transport costs of air transport; similar examples for road and maritime transport
• Fuel quality through:
  • Changing fuel cost by fuel type, fuel blends, maximum blending percentages, air pollutant emission factors
• Renewable energy directive through:
  • Mandatory fuels blending
• Clean Power for Transport andAvailability of refuelling/recharging Infrastructure through:
  • Changing parameters interpreting availability of refuelling/recharging infrastructures leading to faster penetration of alternative technologies

Note: the model contributions indicated in this section focus on the assessment for policy options. In addition, this model is extensively used for the construction of the baseline in the EU Reference Scenario. This is indicated under the ‘additional information’ section for the related impact assessments. To learn more please see the following publications:

EU reference scenario 2016. Energy, transport and GHG emissions: trends to 2050, Luxembourg: Publications Office of the European Union, 2016, https://doi.org/10.2833/9127

EU Reference Scenario 2020. Energy, Transport and GHG Emissions: Trends to 2050, Publications Office, Luxembourg, 2021, https://doi.org/10.2833/35750

• Climate action 
• Energy 
• Transport