Samenvatting - Transport Policy 2024-25

Contents
Transport policy as part of general economic policy .............................................................................. 3
Transport policy as a favoured tool ..................................................................................................... 3
First best approach: exclusively direct measures ................................................................................ 5
Second best: indirect measures .......................................................................................................... 6
Charging for external costs ..................................................................................................................... 7
Defini ons ........................................................................................................................................... 7
External costs ...................................................................................................................................... 7
Jus fica on of charges for external costs ........................................................................................... 7
Components of marginal external costs ........................................................................................... 10
Marginal conges on costs................................................................................................................. 11
Marginal infrastructure costs ............................................................................................................ 12
Marginal environmental costs........................................................................................................... 12
Marginal accident costs .................................................................................................................... 14
Second-best solu ons ....................................................................................................................... 14
Taxa on methods and alterna ve measures ........................................................................................ 18
Charging for external costs ............................................................................................................... 18
Costs & benefits of a levy .................................................................................................................. 19
Example ............................................................................................................................................. 20
Measures besides taxa on................................................................................................................ 21
Cost reduc on measures .................................................................................................................. 21
The path to equilibrium .................................................................................................................... 22
Second-best solu ons ....................................................................................................................... 23
Pricing policy ......................................................................................................................................... 24
Pricing policy ..................................................................................................................................... 24
Short-term or long-term?.................................................................................................................. 24
Capacity restric ons.......................................................................................................................... 25
Stochas c fluctua ons in demand .................................................................................................... 26
Joint supply ....................................................................................................................................... 26
Decreasing costs................................................................................................................................ 26
Second-best solu ons ....................................................................................................................... 27
Employment ...................................................................................................................................... 30
Infrastructure policy .............................................................................................................................. 32
Infrastructure policy .......................................................................................................................... 32
Direct costs and benefits................................................................................................................... 33

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, Benefits ......................................................................................................................................... 33
Costs .............................................................................................................................................. 35
Indirect costs & benefits ................................................................................................................... 35
Measuring willingness to pay ............................................................................................................ 38
Methods of measurement ............................................................................................................ 38
Discoun ng ....................................................................................................................................... 40
Project selec on................................................................................................................................ 42
Misleading rules of thumb (ones that lack jus fica on) .................................................................. 42
Payback period .............................................................................................................................. 42
Internal rate of return (IRR) .......................................................................................................... 43
Benefit to cost ra o....................................................................................................................... 43
Correct criteria (ones that are ok to use) .......................................................................................... 43
Sta c criterion for interdependent projects ................................................................................. 43
Sta c criterion for mutually exclusive projects ............................................................................. 44
Sta c criterion for fully interdependent projects ......................................................................... 45
Dynamic criterion .......................................................................................................................... 45
Mul criteria analysis ......................................................................................................................... 46




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,Transport policy
Book: Transport Economics, not necessary

Exam: prefers short answers that show you understand the contents, ‘should be a simple exam’

Classes ‘in prac ce’ are not extra, not needed for the exam

Transport policy as part of general economic policy
 Defini ons
o Transport = the movement of people or goods from one place to another
o Policy = a set of ideas or a plan of what to do in par cular situa ons that has been
agreed to officially by a group of people, a business organisa on, a government, or a
poli cal party
 Transport policy deals with developing a set of constructs and proposi ons that are
established to achieve specific objec ves rela ng to social, economic, and environmental
condi ons, and the func oning and performance of the transport system.
 Approaches in transport policy




Transport policy as a favoured tool
 Transport as the favoured tool - cause
o Habit in Western Europe  e.g. grant social assistance to the needy (+65…) while
they are not the people who need it
o Objec ves beyond transport are realised
 Regional development  poli cians o en use it as an approach to boost
employment.
 Support of certain industries
 Social assistance to the needy
 Boost employment
 Achieve other general (vote-winning) goals
o Fragmenta on of poli cal power, e.g.: social tariffs
 Minister of transport mo vated to promote social policy insists on including
social measures in transport policy (while they might be easier achieved if
subsidies were direct in healthcare, educa on or income allowance)
 Abolishing this sub-op mal plan would not look good for the minister…




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,  Other areas of policy: same issue
o e.g.: Finance minister, in wish to please his voters, ins tutes measures influencing
the cost of transporta on. In 2022 Belgium gave €6,542 of subsidies per corporate
vehicle, which means that every Belgium taxpayer has to pay to subsidise company
cars every year.
o Belgian government implements a sub-op mal policy for company cars.
 Explana ons for use of transport as a favoured tool
o Transport requires infrastructure  impossible to build without government
interven on
 Land expropria on
 Planning of rail, road and inland waterway (IWW) infrastructure
o Historical monopolies
 Poli cians have learned from the past, that transport policies can be used to
help them.
 There was a monopoly of rail when road transport had li le significance =>
the power of railways had to be restricted through government interven on.
 Use of transport as a favoured tool: regional development
o Reason: loca on of economic ac vity is largely determined by availability of
transport infrastructure and transport costs
o Example:
 Degressive railway rates in Italy => first 50km of rail are more expensive than
the next 50km etc.
 Argument: cost reduc on would benefit poorer south regions to sell
products in northern Italy and export => more use of the rail system was
encouraged by the low prices
 In prac ce: raw materials were exported, while value-added products were
imported  e.g.: agricultural products were transported from south to
north, developed in the north & sent back to the south, preven ng the south
from developing.
 Result: less compe ve local industry lost protec on from high transport
costs => bankruptcies in the south & benefit to more developed region
o Transport policy might not be the op mal tool for regional policies or urban
development => subsidizing might be a be er policy than building a transporta on
system
o Efficiency (ROI) of transport measures might not be the best
 e.g.: a rac ng companies to a region. Instead of making transport cheaper,
one could provide subsidies based on created jobs, business volume or a
star ng grant
 Use of transport as a favoured tool: social objec ves
o Lower transport rates for special groups (students, workers, unemployed, 65+, etc.)
o Is transport policy the best way to support those vulnerable groups of society?
o Are the users of mobility (usually have a job or somewhere to go) the best target
group?




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