Land use/transport models and economic assessment

This paper discusses the economic assessment of policies using land use/transport models. It argues that conventional forms of assessment focussing only on transport changes can underestimate the economic benefits of a policy. The paper argues that the benefits need to be measured by the changes of prices at the end of a trip and not just by the changes in travel costs. Models that do not estimate the changes of prices at the end of a trip cannot properly assess the impact of a policy.The model used in this paper is based on the MEPLAN software and estimates the location of households and employment and the interaction between them. It also estimates the cost of living for households and the production costs for employment. With these costs, it is possible to calculate the wider economic benefits beyond transport.The paper illustrates the assessment of policies for the Cambridge sub-region involving investment in public transport, orbital highway and congestion charging policies. The results forecast by the model are assessed in terms of the conventional cost-benefit using traveller’s surplus as benefits and compared with a wider assessment measure of compensation variation. It demonstrates that the last measure encompasses the wider benefits associated with transport policies which are not taken into account in conventional cost-benefit analysis.     

Financial and environmental impacts of hypothetical Finnish dry port structure

One main theme of European Union’s in transport policy statements has been the increased role of railways in the reducing environmental impacts and costs of transport activity. One option to increase the modal share of rail transport is to utilize the dry port concept, particularly applicable to general cargo. At the Port of Gothenburg (Sweden) use of this concept in combination with rail transport has led to a reduction of CO₂ emissions, and lower transport energy costs. The main objective and motivation of this research work are to examine through analytical models, how this same dry port concept could be implemented in the Finnish transportation network, with estimates of the benefits being gained.The research method of this study is macro gravitational models of distribution. Main input data for the models are distances and population in the area. The approach aims to research, how relative transport costs behave by increasing the number of dry port distribution locations. For the actual computation work the authors apply linear integer programming. Based on the results, the authors argue that relative transport costs can decrease considerably by increasing the number of dry ports, up to the level of six locations. This is considerably less than what is the current situation in Sweden. The found solution also differs from Sweden as the fragmented Finnish seaport system enables using numerous seaports instead of one, which further decreases inland transportation distances and volumes considerably. At the same time forthcoming sulphur emission reduction regulation (for sea transports) might impact the transportation network structure by decreasing sea transport and the number of seaports used. This might lead to a further increase in land-based hinterland transport.     

Sustainable procurement and environmental life-cycle costing in maritime transport

Transportation sector, including maritime transport, exerts significant environmental impact. Public procurement as a policy strategy instrument which applies to the purchase of transport means, construction of infrastructure and the provision logistic services in supplying the goods, services and executing of works must integrate environmental considerations in the contract award procedures. While conventional life-cycle costing (LCC) is based on four categories to be assessed e.g. investment, operation, maintenance and end-of-life disposal expenses, the environmental LCC method also takes into account the external environmental costs. The paper is focused on sustainable public procurement and environmental life-cycle costing aspects of EU 2014 Directive. Analysis is made of the real cost of procurement, the externalities and the impact of maritime transport sector on the environment. The purpose of this research is to propose the framework for assessment of integral impact on the environment which combines environmental LCC approach with TBL concept using non-monetary units for measuring externalities. The authors advocate clean and energy-efficient maritime transport ensuring effective implementation of environmental policy objectives and targets and emphasize the role of public authorities and entities in fostering the inclusion of environmental externalities in calculation of LCC.     

Public transport policy for central-city travel in the light of recent experiences of congestion charging

Excellent public transport which makes the private car a minority mode of central-city travel is a necessary condition for a political process towards the introduction of congestion charges. However, the charging system costs in London and Stockholm have proved to be unexpectedly high. Therefore, before these costs come down to an affordable level, zero-fares for central-city travel and stricter parking policy would be a first-best combination in many cities, always provided that the public transport is really competitive. A bold venture in public transport development is consequently the top priority irrespective of the transport pricing policy direction.     

Part I: Externalities and economic policies in road transport

Road transport imposes negative externalities on society. These externalities include environmental and road damage, accidents, congestion, and oil dependence. The cost of these externalities to society is in general not reflected in the current market prices in the road transport sector.An efficient mobility model for the future must take into account the true costs of transport and its regulatory framework will need to create incentives for people to make sustainable transport choices. This paper discusses the use of economic instruments to correct road transport externalities, but gives relatively more weight to the problem of carbon emissions from road transport, as this is particularly challenging, given its global and long-term nature.Economics offers two types of instruments for addressing the problem of transport externalities: command-and-control and incentive-based policies.Command-and-control policies are government regulations which force consumers and producers to change their behaviour. They are the most widely used policy instruments. Examples include vehicle emission and fuel standards in the US as well as driving or parking restrictions in Singapore. The implementation cost of these instruments to the government is small. Although from an economic perspective these policies often fail to achieve an efficient market outcome, the presence of political constraints often make them the preferred option, in terms of feasibility and effectiveness.Economic theory shows how policies, which affect consumption and production incentives, can be used to achieve the optimal outcome in the presence of externalities. Incentive-based policies function within a new or an altered market. We first examine incentive-based policies, which cap the aggregate amount of the externality, such as carbon emissions, by allocating permits or rights to the emitters. The emitters are then free to trade their permits amongst them. The permit allocation mechanism is important-although market efficiency would be satisfied by an auction, political influences usually favour a proportional allocation based on historic emissions. We discuss EU ETS as an example of a cap-and-trade system, however, no such policy for CO₂ emissions in road transport has been implemented anywhere in the world to date.Fiscal instruments are, like command-and-control, widely used in road transport, because they are relatively cheap and simple to implement. They include the use of taxes and charges in order to bridge the gap between private and the social costs and, in principle, can lead to an efficient market solution. Registration, ownership, fuel, emissions, usage taxes, and parking and congestion charges have been implemented in many countries around the world. On the other side of the spectrum, subsidies can be given to those scrapping old cars and buying fuel-efficient vehicles. Some cities, such as London, have implemented congestion charges and many states in the United States have introduced high occupancy lanes. Other interesting possibilities include pay-as-you-drive insurance and other usage charges. However, the size and scope of taxes and subsidies are determined by governments, and because of their imperfect knowledge of the market the outcome is still likely to be inefficient.Governments have many effective economic instruments to create a sustainable road transport model. These instruments can be used separately or together, but their implementation will be necessary in the nearest future.     

Social marginal cost pricing and second best alternatives in partnerships for transport infrastructures

According to the economic theory, if all the first-best conditions are met, social optimality involves the prices to be set equal to social marginal costs. When it is not possible to set prices equal to social marginal costs, due to the presence of constraints within the transport sector or distortions elsewhere in the economy, the theory suggests corrections to the SMC principle (second-best alternatives). But the implementation of second best alternatives can give rise to serious problems when transferred from theory to practice. This chapter will discuss in particular the problems that might rise when investment cost are included (totally or partially) in the social marginal costs rules, and in particular when private operators are involved.     

Computing airfare elasticities or opening Pandora's box

Airfare elasticities are crucial for policy instruments for the stakeholders of tourism industry. Modellers attempting to estimate these elasticities face several challenges in the absence of microeconomic data on consumer preferences. The aim of this paper is to offer a critical analysis of the practice of computing airfare elasticities from tourism demand studies. It identifies and discusses potential sources of measurement errors in the data and drawbacks that investigators face and assesses their implications for the estimated parameters in the respective models. The use of price of crude oil and distance between origin and destination as proxies for transportation costs are evaluated. It is recommended that authors be more systematic in reporting their results. They need to comment on the limitations of their elasticity estimates since these have repercussions on policy recommendations made based on their results.     

Global Fish Trade,Prices, and Food Security in an African Coral Reef Fishery

This study evaluated the potential impact of global fish trade on local food prices by analyzing a 16-year locally collected time series of disaggregated coral reef fish products and prices that differed in their market chain linkages—ranging from local to international markets. We were primarily interested in evaluating how local and global markets interacted with the local prices of beef, fish, and maize. There was no cointegration between the prices of exported octopus and that of maize and beef over this study period. Further, the three types of fish and associated markets responded in different ways to various price changes. For internationally traded octopus, we found a positive association between price and catch rates but no evidence that the global trade in octopus markets created local inflation, particularly the prices of the fish eaten by the poor. In general, there was no evidence for price transmission from export to nonexport fish products even though fishers appeared to focus on octopus when prices were high. Consequently, fishers' behaviors and trade policies that promote adjusting fishing effort to internationally traded fish did not appear to promote poverty or food insecurity in this fishery.     

The impact of low sulphur fuel requirements in shipping on the competitiveness of roro shipping in Northern Europe

Annex VI of the MARPOL Convention aims for a reduction in sulphur oxide emissions from ships. The limits applicable at sea in Emission Control Areas (ECAs) were reduced from 1.5% to 1% in 2010 and are planned to be further reduced to 0.1%, effective from 1 January 2015. This paper analyses the impact of the International Maritime Organization’s Tier II/III standards introduced by Annex VI amendments adopted in October 2008 on costs and prices of roro (roll on/roll off) traffic in the ECAs in North Europe and on the competitiveness of roro shipping in the ECAs compared to trucking. We demonstrate that the new Annex VI agreement may be quite costly for the participants in the shipping industry and will result in higher freight rates. Based on a detailed price analysis on modal competition between the roro/truck option and the ‘truck only’ option on thirty origin–destination routes linked to the ECAs, we conclude that the use of low sulphur fuel is expected to increase the transport prices particularly on the origin–destination relations with a medium or long short sea section. The paper also presents the results of a survey among leading short sea operators in the ECAs in view of providing more insight on expected modal shifts and price elasticity in the short sea market.     

Part II: Policy instruments for sustainable road transport

Without questioning the fact that to achieve efficiency emitters should pay for the true costs of their actions (a core principle of economic policies such as pollution taxes), we find sufficient evidence in the literature to demonstrate that many other policy instruments can be used in combination with taxes and permits to ensure that the transport needs of the present generation can be met without compromising the ability of future generations to meet any needs of their own.The policies and policy aspects considered in this paper broadly fall into three categories: physical policies, soft policies, and knowledge policies. All three aim to bring about changes in consumers’ and firms’ behaviour, but in different ways. The first category includes policies with a physical infrastructure element: public transport, land use, walking and cycling, road construction, and freight transport. We also consider the particular challenges for mobility in developing countries, and how these may be addressed. Soft policies, on the other hand, are non-tangible aiming to bring about behavioural change by informing actors about the consequences of their transport choices, and potentially persuading them to change their behaviour. These measures include car sharing and car pooling, teleworking and teleshopping, eco-driving, as well as general information and advertising campaigns. Finally, knowledge policies emphasise the important role of investment in research and development for a sustainable model of mobility for the future.The main findings can be summarised as follows.

Physical policies

An increase in the use of public transport, combined with a decrease in the use of private cars, can reduce traffic congestion and, more importantly, carbon dioxide (CO₂) emissions, as public transport generally causes lower CO₂ emissions per passenger kilometre than private cars. Public transport fares are subsidised in most places, which can be justified by economies of scale and by the fact that public transport can reduce total road transport externalities. London, Singapore, Portland and Curitiba are all examples of good practice at government level, having achieved reliable, frequent and integrated public transport.Policies to increase public transport use must be part of an integrated policy. Integrated policy refers to integration across different modes of transport, different government objectives (such as the economy, health and the environment), considering the needs of different social groups, and coordinating action between the relevant government institutions. There is evidence that a lack of coordination can jeopardise the achievement of policy objectives.A sustainable model for transport policy also requires integration with land-use policies. These may be somewhat limited within the bounds of existing cities, but as cities grow and new cities are built, urban planners must put more emphasis on land use for sustainable transport in order to reduce congestion and CO₂ emissions. Sustainable land-use policy can direct urban development towards a form that allows public transport as well as walking and cycling to be at the core of urban mobility.Walking and cycling, which improve general health and produce no tailpipe emissions, constitute an excellent alternative to motorised transport on short-distance trips within towns and cities. The policies which can incentivise walking and cycling include crime reduction to make streets safer, well-maintained and clean pavements, attractive street furniture, safe crossings with shorter waiting times, dedicated cycle paths, showers in offices, and lower speed limits, to name but a few.Road construction and expansion used to be seen as one of the most promising ways to reduce traffic congestion. However, in the mid-1990s, the issue was reassessed and it was found that building and expanding roads, increased, rather than decreased, congestion, and ultimately induced higher levels of travel demand. The reason for this is that the extra capacity reduces the general cost of travelling and the less expensive the travel, the more it will be demanded. Regarding freight modal shift, road transport is much more polluting than rail per tonne-km of goods transported and therefore a shift towards greater use of rail in freight transport is desirable. Inadequate infrastructure is the main obstacle preventing this modal shift taking place.Developing countries face great mobility challenges: rural areas are often extremely poorly connected to transport infrastructure, such that, in contrast to the situation in developed countries, the benefits of road construction can strongly outweigh the total costs (including environmental ones). The main challenge, however, is to develop a solution to the problems arising from the combination of urbanisation and motorisation. Integration of transport and land-use policy will be key to rising to this challenge.

Soft policies

Car sharing and car clubs can also potentially reduce CO₂ emissions, although the aggregate reduction in congestion and emissions has not been measured with an adequate degree of precision in the literature. Teleworking and teleshopping can potentially reduce congestion and also CO₂ emissions. However, the evidence for this reduction is rather mixed, as it is unclear whether these measures lead to overall reductions in road transport.Eco-driving campaigns aim to inform and educate drivers in order to induce them to drive in a fuel-efficient and thus environmentally friendly way. There seems to be some consensus in the literature that eco-driving could lead to reductions in CO₂ emissions of around 10 per cent.Information and education policies have often been advocated as instruments which may affect behavioural change. We find in this paper that these types of measures are necessary, but not sufficient for behavioural change. Advertising and marketing may go a long way in changing peoples’ behaviour. In California, for example, Kahn (2007) finds the “Prius” effect: the Toyota Prius is preferred by consumers relative to other similarly green vehicles, probably due to extensive marketing and celebrity endorsements. Family life changes are also found to trigger changes in behaviour ( [Goodwin, 1989] and [106]). People whose lives are being changed by some important development (birth of a child, retirement, etc) tend to respond more to changes in the relative attractiveness of different transport modes. Advertising campaigns promoting a modal shift towards public transport, for instance, may thus be more successful if targeted at people in the process of important life transitions.

Knowledge policies

Research and Development is crucial for developing sustainable and low-carbon transport for the future, and it is essential that governments provide incentives to undertake R&D, so that new low-carbon technologies in the transport sector can be demonstrated and applied at a large scale.Finally, we consider the issue of policy combination and integration. There is evidence that the combination and integration of policies can lead to positive side-effects and synergies. Policy integration is crucial in order to rise to the challenges we face in moving towards a sustainable mobility model. We conclude that classical economic policies may be successfully combined with a number of policy measures discussed in this paper in order to achieve sustainability in transport.     

Maritime economics in a Post-Expansion Panama Canal Era

Government recently introduced the Transport Law Reform Bill, which if passed by Parliament, will allow foreign vessels to uplift and discharge cargoes and passengers along the coast of New Zealand. Coastal shipping is part of the domestic transport industry, which has benefitted from deregulation and considerable restructuring over the last decade. This paper provides a brief review of the coastal shipping industry in New Zealand and an overview of international cabotage laws. An alternative open coast shipping policy proposed by the New Zealand Shipping Federation, which is based on ‘level playing fields’ principles, is presented. The scope of cost benefit analysis is outlined and the potential costs and the potential costs and benefits of the Government's open coast shipping policy are summarized. Despite the potential costs to New Zealand of an open coast policy appearing to be considerably greater than the potential benefits. Government officials have not undertaken an empirical cost benefit analysis. The paperr concludes that hte clauses of the Transport Law Reform Bill relating to an open coast policy should be withdrawn and a full empirical cost benefit analysis should be undertaken to determine the best coastal shipping policy for New Zealand.     

What’s so funny about peace, love and transport integration?

The 1998 White Paper proposed integration as the solution to Great Britain’s land transport problems. Most commentators agree that this much vaunted New Deal for Transport has been a failure. Yet some ten years later policy papers from bodies such as the Institution of Civil Engineers and the Centre for Cities are still proposing integration as a possible panacea.There are a number of reasons for the failure of integrated transport over the last decade. The first is the failure to define the concept. The second is the failure to operationalise the concept. The third is the lack of an evidence base on the success of integrated transport policies. Evidence is now emerging in Britain on the benefits (and indeed the costs) of some aspects of integrated transport policies. The fourth, and perhaps the most crucial, is the lack of will in terms of politicians, civil servants and the public at large, to adopt the behavioural changes necessary for an integrated transport policy to be successful. A series of organisational and funding changes are proposed that could advance the prospects for integration.     

The Indian dry ports sector, pricing policies and opportunities for public-private partnerships

At the time of writing (2010), the world is witnessing the aftermath of the most severe financial sector meltdown in modern economic history caused by the real estate bubble in the United States. Its consequences on the real economy, especially in Europe, are yet to be fathomed, and this of course includes the longer-term impacts on international ocean transportation, ports and the distribution of global production.The economic recession has left the international shipping and port sectors with substantial overcapacity. This has resulted in drastic cost cutting measures on the one hand, and voluntary, often consensual, and coordinated reduction of supply on the other. These measures, together with a noticeable recovery in demand, are gradually leading again to improvement in prices charged by carriers and other transport service providers.In view of the country’s expanse; size of population; and regional inequalities, India’s dry ports (inland cargo consolidation and distribution centres) are seen by the government as a pivot of export-led growth and economic development (Haralambides & Gujar, 2011). Moreover, public and private sectors alike see the coordinated development of dry ports as the only way forward in terms of easing pressures at congested coastal ports, thus improving supply chain efficiency. In spite of this, dry port development and operations are still dominated by the public sector, under prices, capacity, land acquisition policies and other conditions that make private sector participation risky and comparatively unattractive. In order to rationalize dry port capacity and prices, this paper argues in favour of greater devolution through competition-enhancing Public-Private Partnerships (PPPs). The paper puts forward recommendations for the necessary legal, regulatory and general economic policy interventions based on international best practice, while keeping Indian specificities in the right perspective.     

Road pricing and parking policy

The starting point of this paper is that the collection costs of urban road pricing have turned out to be unexpectedly high. A comparative cost analysis of the congestion charging system of London, Stockholm, Oslo and Singapore also shows that there are large collection cost differences. The most striking difference is between Oslo and London. Oslo, like Stockholm has the necessary, natural, qualities for a central city toll ring with a limited number of entrances; just 18 and 19 tollgates are required. For large historic cities like London with hundreds of inlets to the central city, tollgates at every entrance would involve high investment costs and be very obtrusive in the street scene. The problem is, however, that the present London charging system, with no tollgates, shows high running costs, ten times higher than in Oslo, in spite of the fact that the charged number of vehicles is the same in the two cities. This is a formidable obstacle to alleviating urban traffic congestion in many big cities.The charging technology could hopefully be developed, however, another approach is to develop and combine other measures including traffic regulation, parking policy and public transport subsidisation, which would be only second-best in a hypothetical situation where road pricing is without costs. This paper focuses on parking policy. Two strands of parking policy reform are discussed; fringe benefit taxation of free workplace parking which has recently been introduced in Sweden and a two-part tariff at parking meters, which is suggested as an extension of congestion charging to all day traffic within the central city.     

The effect of governmental subsidies and the contractual model on the publicly-owned bus sector in Japan

The publicly-owned municipal bus sector that provides local transport in Japan is in a difficult situation because of operating deficits, inefficient operations and management, and budgetary constraints of expanding subsidies, and thus, it needs to be restructured to improve efficiency. This paper investigates the impact of subsidies and contractual settings on the cost structure of the publicly-owned bus sector in Japan. A trans-log cost function has been estimated by pooling cross-sectional data of 527 observations over the time period of 1990-2006 for a cross-section of 31 publicly-owned transport companies in Japan. Our analytical results confirm that governmental subsidies to this sector negatively affect the cost structure, while the contractual model may have a positive impact. We also discuss the implications of these results for Japan’s public transport policy.     

The impact of muddy bottoms in ports

Ports are drivers of regional and of countries’ economic development. Most ports are built close to coastlines, where waters are shallower and tend to suffer from deposit sedimentation processes, which reduce depths in operational areas. In presence of shallow waters and sedimentation, ports must decide whether to dredge or not, where both decisions have significant impacts on ports’ annual incomes. Nevertheless, there are seabeds, namely muddy bottoms, in which vessels can navigate with a safety degree. This paper aims at investigating the extent to which the theoretical knowledge of vessel’s control in muddy waters is valid at a certain nautical bottom, as defined by the Permanent International Association of Navigation Congresses (since 2009 the World Association for Waterborne Transport Infrastructure but the acronym stays PIANC) and its impact on port economics. To achieve the proposed objective, an email survey was sent to worldwide pilots that manoeuvre ships in muddy waters. The survey validated the theoretical knowledge, showed that navigation in muddy waters is possible, that it can contribute to reduce ports’ operational costs, and that the subject can be rather controversial.     

Violation or strengthening of the self-financing doctrine at international airports by SMCP funded PPP schemes?

International airports are among the few examples of transport infrastructures which can well achieve self-financing. The growing interest of private companies in airport construction and operation is the visible testimony to this fact. However, the financing structures of airports are complex, involving not only traffic, passenger and goods handling, but also non-aviation services, such as retail, car parking or intermodal facilities. The integration of social marginal cost pricing schemes into this organizational structure according to the strategic plans of the European Commission, however, is challenging. This paper investigates whether they comply with a second strategic policy objective at European and national level, which is to foster public-private partnerships (PPPs) in transport financing in terms of full cost coverage, risks and incentives.The cases analysed in this paper deal with two sites with very different characteristics: Munich Airport which has been publicly operated since 1991 and the Bulgarian airports Varna and Burgas, which have been managed since 2007 by one concessionaire and whose planning and future development is being accomplished with private capital. The results of both cases showed that self-financing is possible in case congestion costs are considered in the SMCP schemes, and given that air traffic growth rates return to the significant levels prior to the economic crisis. The chapter will discuss the legal implications of congestion pricing at European airports which are violating current EC legislation, as well as the impact of alternative pricing schemes on the environmental performance and technological innovation in aviation.     

Impacts of increased rail infrastructure charges in Sweden

The impacts of the already decided increase in rail infrastructure charges in Sweden are described for various market segments within the rail transport system and on the aggregate level for society as a whole. The need for complementary measures in the road transport system is also discussed. Likewise, the paper also mentions the impact of increased rail infrastructure charges on certain significant industrial sectors. An increase in rail charges may reduce social welfare even though the reduction in rail transport mileage is small. This is mainly due to large non-internalised absolute externalities for road freight. For commuter trains, the infrastructure charges' share of the costs of rail transport is expected to rise to 13 percent, which in an international perspective still will be small.     

Economic appraisal of universal design in transport: Experiences from Norway

Economic assessment of universally designed transport projects has not been studied in depth in the transport planning literature. Universal Design (UD) refers to the design of transport systems in a way that they are accessible to all users, irrespective of the users’ abilities. This definition of UD has not yet gained roots in the transport economic literature. The conventional thinking is that UD is for the few, i.e., the impaired, and given that they are few in numbers, UD projects will generally be unprofitable from a socioeconomic point of view because benefits will be low while investment costs will be too high. The objective of this paper is to prove the opposite: UD projects benefit all users of the facility, whether impaired or not, and the additional costs of implementing them are generally low; hence, their net present values are high and positive. We build on collaborative work between the Norwegian Public Roads Administration (NPRA) and the Institute of Transport Economics (TOI) aimed at creating guidelines for assessing the economic merits of UD projects. Therefore, in this paper, we: (1) define how UD is to be understood in the context of road and public transport; (2) describe the types of benefits and costs that accrue to users if UD projects are implemented; (3) address how the benefits and cost can be valued in monetary terms; and (4) using three different types of projects, demonstrate that UD projects are surprisingly profitable from a socioeconomic point of view. Finally, we address the implications of our findings and explain why governments need to be concerned with UD of transport systems.     

Multimodal route choice in maritime transportation: the case of Korean auto-parts exporters

Global offshoring has increased the need for transport of half-finished goods and components, along with finished goods. The auto-parts industry in Korea has also entered the global market as Korean car manufacturers have started to build overseas factories. Maintaining cost competitiveness by minimising total logistics costs will thus be a critical strategy for the industry. This research compares the total annual costs of four feasible transport routes from Korea to the US using the inventory-theoretic model, which encompasses direct transport costs, in-transit carrying costs, and warehouse inventory costs. We apply this model to real transport data collected from a Korean auto-parts company. A static analysis shows that inventory costs can play a decisive role in altering the cost competitiveness of different routes. In addition, sensitivity and scenario analyses with changes in variables and the market situations reveal that the cost structure of each route plays an important role in determining their relative cost competitiveness in varying market conditions.