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CAPEX Bias and Adverse Incentives in Incentive Regulation

Issues and Solutions

Most privately financed transport infrastructure is delivered through Public-Private Partnerships. An alternative approach is the Regulatory Asset Base model, but this can be biased towards capital expenditure to the detriment of operating expenditure. This report investigates whether economic regulators can hold “CAPEX bias” in check. The paper is part of a series of 19 papers and a synthesis report produced by the International Transport Forum’s Working Group on Private Investment in Transport Infrastructure.

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