GE 541
November 4, 2008
Experience with TransportExternalities
• Accidents
• Congestion
• Air pollution
Motor Vehicle Accidents
Miller’s (1993) study in U.S
Motor Vehicle Accidents Cost $333 Billion in 1988 -
average $0.164 /vehicle mile
Newbury (UK)
1984 Accident costs £26 Billion (1986 prices or US$0.22/veh.mile)
Approximate 7 and 5% of GDP in US & UK
-other studies Quinet (1994) report lower values of 1.5 - 2% ofGDP (some of these include rural areas)
Note: The cost estimates are relative to a world with no accidents
US
(Miller)
UK
(Newbury*)
Fatalities
34%
49%
Nonfatal Injuries
53%
PropertyDamage & TimeDelays
13%
51%
*Newbury uses value of life (VOL) value 50% higher than Miller.
Also neither study uses insurance Admin. Costs (perhaps 2/3 of property damage)
US 60%
Canada 65%
Japan 72%
Europe 60%
Road improvementsreduce drunk drivingvehicle safety.
Traffic Fatalities Fell 1970 - 72 sharply
Issues in Valuation
Aggregate of individuals’ willingness to pay toreduce risk of injury or death from accidents(as contrasted with the abandoned practice ofmeasuring “market value” of lost production)
Valuing Health Consequences
Reduction in Risk of Death
For industrialized countries, these values are:
$1.5 - 9.0 million for statistical life
(i.e. $1.50 - 9.00 for a marginal increment of 1 permillion in risk of death)
[Literature on valuing statistical lives for use inCBA]
How Does Value of Life (VOL) VaryAcross Population Groups?
Not a settled question
If VOL varies inversely with age, that variation would
further increase the relative cost of motor vehicleaccidents (which kill people of all ages)
Contrast this with air pollution which proportionallykills more older people with cancer and respiratoryillnesses.
In addition to individual’s WTP, an additionalamount to reflect concerns of family andfriends?
WTP surveys in UK based on ‘contingentevaluation’. From such surveys of WTP, theaverage valuation of a “serious” non-fatalinjury is about 9.5% of that of a fatal injury.
The Demand for Safety in Vehicles
WTP for safety improvements for models with highsafety ranking or models with good records of actualsafety worthiness.
Related Issue of Driver Behavior
~ changing because of improved safety
Peltzman’s effect of rash driving offsettingtechnologically mandated safety benefits. Studies showstill residual benefits from safety improvement.
~ Unintended consequences.
Variations of Accident Costs withTraffic Values
What is the elasticity of total accident cost on aroad with respect to traffic volume? If Ecv is > 1,there is a negative externality, since each userimposes costs on the other users, causing socialmarginal cost to exceed private marginal cost.
In studies in Detroit and Norway, accident ratesdecline with volume - however, on evenings andweekends, poor visibility and alcohol use may havecounter effects
Accident Costs Borne by NonMotorists
Pedestrians and cyclists account for 50% ofdeaths in the UK (but a higher portion in theless developed counties).
Public sector in the US pays for uninsuredexpenses.
Insurance and Accident Costs
How do people perceive insurance costs?
Insurance firms set premiums based on driver performance(age, sex, residual location, prior accident record)
How does this affect driver behavior?
In a tort system with strict liability, user responsible for payingfull costs.
Efficiency requires that the user must be faced with theexpected social costs of his/her decisions.
Effect of Tort and Criminal Law
Some analysis of liability damages suggestthat allowing such damages to be recordedmay reduce welfare by forcing drivers as agroup to buy insurance they do not reallywant.
Risk taking behavior of young drivers
Their behavior is probably an outlet for psychologicalmotivations which would need another outlet anyway?
More or less costly alternative?
Do People Seek Out a CertainLevel of Risk Taking?
Summing Up
• Accidents entail externalities, although their exactnature and magnitude unknown.
• Valuation of accident costs require sophisticatedconcepts and tough empirical challenges
• Also the behavior and technology that produce accidentsinteract strongly with insurance and legal institutions,increasing the challenge of accurate analysis of incentiveand policy effects
• Some regulatory approaches to combat disruptive socialbehavior - drunk driving.
Motor Vehicle Air Pollution
Second Major Externality
Damage
Health and material damage effects in urban regions
(i) Quinet (for U.S., Australia & Europe)
(Aggregate Social Costs)
for noise 0.3% of GDP
for air pollution 0.4% of GDP
(ii) Small-Kazimi Auto emissions in LA Region
(1992) $0.03 per vehicle mile
Truck Emission Damages
- are more damaging by a factor of 16 (Small-Kazimi)
- are more damaging by a factor of 10 (Deluchi)
Most of the damages stem from health costs frominhaling PMs, SUX, VOC and NOX
US ambient air quality levels much improved
CO2 emission reduction proposal limited yet
Relationship BetweenCongestion and Pollution
Congestion is specific to location and time while
Pollution emission specific to vehicle attributes anddriver behavior.
Congestion pricing can reduce air pollution but notenough to serve environmental goals.
High congestion charges in LA/SF would lower VOCby 5.5% and 8.2% and CO2 emission by 6.5 and 9.2% -primary effects is to shift traffic from peak to nonpeak.
Technological Controls
Most effects from mandated reductions inemission results per vehicle mile
1993 Cars emitting 95% less VOC and CO
and 75% less NOX
(as compared to 1968)
Remaining emissions due to:
(i) Gross emitters
(ii) Large emissions during brief periods (as whenaccelerating and entering a freeway)
(iii) Inspection and maintenance
• Measuring roadside emissions by lightabsorption from a roadside laser beam
• Reformulation of fuels (1990 Clean Air Act)
• Alternative Fuel Vehicles
• Zero Emissions
Strategy
Cost Effectiveness
(costs per ton of VOCs removed)
ReformulatedGasoline and
I & M
$1,800 - 6,000/Ton VOC
Alternative FuelVehicles Electric
$29,000 - $108,000
Transport Cost and Measures
Pricing Policy
Pollution fees ($110/yr/car(LA))
small effect
Employee Parking
($3/day)
(small # work trips)
1.4-2% reduction
Gasoline Tax
($2/gallon)
Tax Equation of $670
VMT & Emission reductionby 81%
(Not emission based and ineffective)
36% reduction of CO2
Marketable Permits
Summing Up
Marginal social costs of motor use due to air pollutionis a small fraction of marginal cost of urban driving. Iflevies on emissions damages (caused by vehicles) areenforced and vehicle traffic would not be affectedmuch. So the most efficient approach is to reduce theemissions per vehicle mile.
The major method for lowering emissions/mile hasbeen Clean Air Act. Must be complemented by I & M.
CO2 pollution is quite different. Incentives for fuelconservation - a technical solution?
Per Capita Passenger Car Ownership,Passenger Travel, and Road Network:The US and 17 European Nations
Average Motor Fuel Tax Rates: US
