Kurt Van Dender

The external costs of transport

This timely book deals with the problem of pricing passenger and freight transportation within Europe. The contributors argue that current legislation affecting pricing and regulation is increasingly less successful in dealing with market failures and externalities such as congestion, air pollution, noise and accidents. Technological progress and greater European co-operation has brought increased scope for the reform of transport policies.

Parking policies and road pricing

There are two main sources of inefficiency in urban transport markets. First, transport prices fail to reflect the external costs of travel, notably peak-period external congestion costs. Secondly, a large percentage of drivers park for free, particularly at the workplace. Economic theory suggests, in the absence of other market distortions, that efficiency can be restored with a perfectly differentiated external cost charge in conjunction with resource-cost pricing of all parking spots. In practice, urban transport authorities can try various combinations of imperfect road-pricing systems and imperfect parking charges. One example might be the use of a single cordon charge to enter a city, together with a tax on workplace parking. In this paper, we use a numerical simulation model of an urban transport market to examine the efficiency gains from various parking policies with and without a simple cordon system. As would be expected, we show that pricing of parking and road use need to be simultaneously determined. As the level of the parking fee becomes more efficient, or as the number of free parkers is reduced, so the level of optimally determined cordon charge falls. Additionally, by introducing a cordon charge, the level of the optimally determined parking fee falls. The model results show that the second-best pricing of all parking spaces produces higher welfare gains than the use of a single-ring cordon scheme, though marginally lower than the combination of a cordon charge with resource-cost pricing of parking spots.

The welfare impacts of alternative policies to address atmospheric pollution in urban road transport

Abstract In this paper we compare the effectiveness and welfare effects of alternative fuel efficiency, environmental and transport policies for a given urban area. The urban transport activities are represented as a set of interrelated markets, one for each mode of transport and type of vehicle, in peak and in off-peak hours. For each market, four different marginal external costs are computed in the present equilibrium: air pollution, accidents, noise and congestion. The gap between marginal social costs and prices shows that congestion and unpaid parking are the dominant sources of inefficiencies. Air pollution costs are significant as well. The effects of a typical air quality policy (regulation of car emission technology) and two typical fuel-based policies (minimum fuel efficiency policy and fuel taxes) are compared with the effects of three alternative transport policies (full external cost pricing, cordon pricing, parking charges). Regulation of emission technology and of fuel efficiency beyond the 2005 levels do not lead to welfare gains, whereas transport pricing policies yield substantial gains for the urban area under study.

Congestion and Tax Competition in a Parallel Network

The purpose of this paper is to study the effects of tolling road use on a parallel road network where each link can be tolled by a different government. Using both theoretical and numerical models, the paper analyses the potential tax competition between countries that each maximise the surplus of local users plus tax revenues in controlling local and transit transport. Three types of tolling systems are considered: (i) toll discrimination between local traffic and transit, (ii) only uniform tolls on local and transit transport are acceptable, (iii)tolls on local users only. The results suggest that the welfare effects of introducing transit tolls are large, but that differentiation of tolls between local and transit transport as compared to uniform tolls does not yield large welfare differences. Also, the welfare effects of toll cooperation between countries are relatively small in comparison with the welfare gains of non-cooperative tolling of transit. The numerical model further illustrates the effects of different transit shares and explicitly considers the role of asymmetries between countries. Higher transit shares strongly raise the transit toll and slightly decrease local tolls. With asymmetric demands, the welfare gains of introducing differentiated tolling rise strongly for the country with lower local demand.

Transport taxes with multiple trip purposes

A congestible urban transport system is considered in which cars and buses are used for commuting and non-commuting trips. Commuting is a strict complement to taxable labour supply. The optimal tax structure for raising a given amount of government revenue is examined for the cases where differentiation of transport tolls between trip purposes is and is not possible. An application to Belgian urban environments shows that optimal toll differentiation produces significant efficiency improvements. Without differentiation, reforming transport taxes generates substantial gains only when the labour tax can be reduced.

Transport tax reform, commuting and endogenous values of time

Previous studies of transport tax reform have typically assumed that the reform itself does not affect the marginal value of time. In this paper we consider a model of urban transport with two trip purposes, commuting and non-commuting, to analyse the effects of transport tax reform on the value of time and marginal external congestion costs. The theoretical results suggest that the assumption of multiple trip purposes implies that these effects are non-trivial. Consequently, assuming exogenous time values may lead to inaccurate estimates of optimal congestion taxes and of the welfare effects of transport tax reform. Empirical work using Belgian data illustrates the potentially large effect of transport tax reform on time values. In fact, the majority of the tax reform exercises studied reduce traffic levels but raise time values and marginal external congestion costs.

Pricing transport networks with fixed residential location

We consider a congestible static traffic network which is used by different households and analyse the conditions for optimal congestion taxes on network links, when not all links in the network can be taxed (partial network pricing). This is done under two assumptions about the toll revenues. First, lump sum transfers are assumed to be available. It is shown that social welfare maximisation leads to unequal treatment of equal households, because of differences in transport costs, and that constraints on network pricing imply complex deviations from marginal social cost pricing, because of network interactions. The second assumption is that the congestion tax revenue is redistributed to households according to predetermined shares. In that case, the optimal link taxes consist of a Pigouvian component, a Ramsey-Mirrlees component and a network interaction component. The taxes will deviate from marginal external congestion costs, even in the absence of network pricing constraints. This result is qualitatively different from the partial equilibrium analysis. Stylised examples of two networks are used to illustrate (a) the impact of unequal treatment of equals and of tax redistribution rules on optimal link taxes and on their effectiveness in terms of social welfare, and (b) the effect of network pricing constraints. The results suggest that (1) the effectiveness of congestion taxes is strongly reduced when not all links in the network can be taxed, (2) assignment inefficiencies are of less importance than excess demand levels when no taxes are present, and (3) that optimal parking charges may outperform partial pricing schemes when the assignment inefficiencies are small.

Methodology and structure of the urban model

This timely book deals with the problem of pricing passenger and freight transportation within Europe. The contributors argue that current legislation affecting pricing and regulation is increasingly less successful in dealing with market failures and externalities such as congestion, air pollution, noise and accidents. Technological progress and greater European co-operation has brought increased scope for the reform of transport policies.

Marginal Social Cost Pricing for all Transport modes and the effects of modal budget constraints

This paper studies the order of magnitude of the pricing corrections that are needed to implement marginal social cost pricing for all transport modes. With the TRENEN model we study this question for 6 areas in the EU. As marginal social cost pricing may generate important surpluses and deficits for the different modes, we also study the effects of two alternative pricing rules that satisfy budget constraints. We examine the effects of average cost pricing that guarantees a budget balance per mode. The second alternative pricing rule we study is social Ramsey pricing (or marginal social cost pricing with a budget constraint) where we impose a budget constraint at the level of the transport sector. We estimate transport effects and welfare effects of the three pricing rules. We show that average pricing rules may actually do worse than the present pricing rules and that social Ramsey pricing may achieve 50% or more of the maximal welfare gain.