Transportation Costs & Benefits
Resources for Measuring Transportation Costs and Benefits
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Victoria Transport Policy
Institute
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Updated
22 July 2008
This chapter describes transport costs and benefits, with information on methods for measuring them, and data sources. It includes costs related to vehicle ownership and use, travel time, road and parking facilities, traffic congestion, traffic crashes, environmental impacts, fuel externalities, land use impacts and equity impacts. This information can be used for evaluating transportation policies and programs. For more information see the Transportation Cost and Benefit Analysis Guidebook at www.vtpi.org/tca.
Index
Road and Parking Facility Costs
Impacts on Non-motorized Travel
How Travel Changes Affect Costs
Related Chapters and Resources
References And Resources For More Information
Unless indicated otherwise, monetary values are in 2000 U.S. dollars. Other denominations and years are indicated. For example, CA$1997 = 1997 Canadian dollars.
Economic Impacts refer to costs and benefits. Costs (benefits) reduce (increase) scarce resources such as money, time, land, health, environmental quality, or any other item of value. Costs and benefits have a mirror image relationship: a cost can be defined as a reduction in benefits and a benefit can be defined as a reduction in costs. Transportation benefits are often measured in terms reduced transportation costs. For example, congestion reduction benefits consist of reductions in travel time and vehicle operating costs. Calculating costs is therefore the basis for calculating benefits.
Economists have developed estimates of many transportation costs for use in economic analysis, including vehicle expenses, travel time costs, road and parking facility costs, crash costs and environmental costs. This chapter summarizes these cost estimates and describes how to obtain additional information on individual costs.
This Encyclopedia evaluates TDM strategies based on effectiveness in achieving various transportation improvement objectives (i.e., benefits), including congestion reduction, road and parking facility savings, consumer savings, road safety, and environmental protection (Evaluating TDM). These benefits are usually measured in terms of cost reductions, so this chapter primarily describes transportation costs. However, focusing on costs does not ignore transportation benefits.
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Costs
and Benefits Some
people are uncomfortable with the idea that motorized transportation imposes
“costs” on society, because it seems arbitrary and judgmental. Virtually any
human activity can be considered to impose costs when viewed from some
perspectives. What, they ask, is the reference case for transportation that
imposes no costs? Doesn’t this focus on costs ignore the benefits of
motorized transportation? But,
as this chapter shows, certain types of transportation activity impose higher
costs on society than others. Although motor vehicle travel provide benefits,
these benefits are largely internal, enjoyed directly by users. It is
particularly important to identify external impacts (benefits and costs your
neighbors have on you). Rather
than focusing on costs, some people may be more comfortable focusing on
benefits. The information in this chapter can be used to identify the
benefits to society of a more efficient and diverse transportation system. In
some situations you would probably prefer that your neighbors reduce their
automobile use and rely more on alternative forms of transportation, and all
else being equal, you would prefer public policies that encourage more
efficient and balanced transportation, and help reduce the transportation
costs you bear. |
Transportation costs can be categorized by the following attributes:
1. Distribution (Internal and External
Impacts)
Internal (also called user) costs and benefits are borne or accrue directly by a good’s consumer. External costs and benefits are borne or accrue by others. Social costs are the total of both internal and external impacts. External impacts do not directly affect consumers’ decisions, and so are a form of market failure (Market Principles).
2. Variable
and Fixed
Variable (also called marginal) costs increase with consumption. Fixed costs do not. For example, fuel, travel time and crash risk are variable vehicle costs because they increase directly with vehicle mileage, while depreciation, insurance, and residential parking are considered fixed, because vehicle owners pay the same, regardless of how much a vehicle is used. The distinction between fixed and variable often depends on perspective. For example, depreciation is often considered a fixed cost because car owners make the same payments no matter how many miles a year they drive, but a car’s operating life and resale value are affected by how much it is driven, so depreciation is partly variable over the long term.
3. Market
or Non-Market
Market costs involve goods that are traded in a competitive market, such as vehicles, land and fuel. Non-market costs involve goods that are not regularly traded in markets such as clean air, crash injuries, and quiet. A number of techniques can be used to determine the value that consumers place on non-market goods.
4. Perceived or Actual
There is often a difference between perceived and actual automobile costs. Motorists tend to perceive immediate costs such as travel time, stress, parking fees, fuel, and transit fares, while costs that are paid infrequently, such as insurance, depreciation, maintenance, repairs and residential parking, are often underestimated.
5. Price
Price refers to what a consumer pays in exchange for a particular good, or perceived-internal-variable cost. In general, a market is most efficient if prices reflect marginal costs (Market Principles).
Transportation provides tremendous benefits, and various techniques can be used to measure these benefits (Goodwin and Persson, 1999). These are so large that it is difficult to calculate the total benefits of all transportation activities. However, even if such a number could be calculated it would have little practical use. In most planning situations the important factor is the marginal (incremental) benefits provided by a particular policy or project compared with a Base Case (TDM Evaluation). Marginal transportation benefits can be divided into these two major categories:
Mobility and Access Benefits
Mobility benefits result from increased travel, such as increased automobile mileage, increased transit or aviation trips, increased walking and cycling, and increased freight transport. Access benefits are similar to mobility benefits, but also include the benefits from access improvements that reduce the need for physical travel, such as more efficient land use, delivery services and telework. These reflect the incremental benefits compared with a reduced level of mobility or access, such as the benefits individuals and society gains from access to school, employment, shopping, friends and recreation activities.
Efficiency Benefits
Efficiency benefits result from more efficient travel, such as when travelers shift from driving to transit or ridesharing under urban-peak travel conditions, or when a consumer avoids a trip by telecommuting or teleshopping. These reflect the cost savings to individuals and society when transportation becomes more efficient (fewer total resources are consumed to provide a given benefit).
These different types of benefits require different approaches to evaluate. Mobility benefits are usually measured in terms off increased travel (Evaluating Transportation Choice). Efficiency benefits are often measured in terms of reduced vehicle travel. A transportation evaluation process that only considers one category of benefits may overlook significant benefits or costs, and may result in solutions to one problem that exacerbates others. For example, the benefits of a road capacity expansion program are measured in terms of mobility benefits. The analysis assumes that more vehicle traffic speed and volume is necessarily better. The benefits of a TDM program intended to reduce congestion and pollution are measured in terms of efficiency benefits. The analysis assumes that less vehicle traffic volume is better. A planning process that is only concerned with environmental protection could reduce mobility benefits, while a planning process that is only concerned with increasing mobility benefits could reduce environmental quality. Comprehensive Evaluation considers both types of benefits.
This section describes specific categories of transportation costs, with information on how they are measured and data sources. For more information see the appropriate chapters in the Transportation Cost and Benefit Analysis Guidebook at www.vtpi.org/tca.
Vehicle costs are direct user financial expenses for vehicles. These are often divided into vehicle ownership (fixed) and vehicle operating (variable) costs (Costs of Driving).
Several organizations publish typical vehicle purchase, ownership and operating cost estimates:
·
The American
Automobile Association’s Your Driving
Costs booklet (available through the Public Affairs office at www.aaapublicaffairs.com), provides
estimates of typical annualized ownership and operating costs for several types
of vehicles during their first five years of operation.
· The
Canadian Automobile
Association’s Driving Costs (www.caa.ca/PDF/3708-EN-2005.pdf),
provides estimates of typical annualized vehicle ownership and operating costs
for several types of vehicles during their first four years of operation.
· Runzheimer International (www.runzheimer.com), sells estimates of
typical annualized ownership and operating costs for several types of vehicles,
which is the basis for cost values published by automobile associations.
· The Black Book,
National Auto Research Division of Hearst Business Media Corporation (www.blackbookusa.com and www.canadianblackbook.com),
provides wholesale and retail price estimates for new and used vehicles, taking
into account model, age, condition, mileage, accessories and geographic
location; also available at (www.cars.com).
· Intellichoice (www.intellichoice.com), provides price
estimates for new and used vehicles
· UK Automobile Association (www.theaa.co.uk),
provides estimates of typical annualized ownership and operating costs for
several types of vehicles.
· The Way To Go Seattle Car
Cost Worksheet (www.cityofseattle.net/carsmart/carcostworksheet.htm)
calculates your car cost and compares it to other transportation options.
Table 1 summarizes one example of this information.
Table 1 American Automobile Association
Vehicle Cost Estimates (AAA, 2006)
|
|
Small |
Medium |
Large |
SUV |
Minivan |
|
Gas & oil |
8.0˘ |
9.8˘ |
10.7˘ |
13.7˘ |
11.4˘ |
|
Maintenance |
4.5˘ |
4.9˘ |
5.4˘ |
5.6˘ |
5.0˘ |
|
Tires |
0.5˘ |
0.8˘ |
0.7˘ |
0.8˘ |
0.6˘ |
|
Operating
costs/mile |
13.3˘ |
15.5˘ |
16.8˘ |
20.1˘ |
17.0˘ |
|
Insurance |
$892 |
$902 |
$982 |
$918 |
$843 |
|
License & registration |
$397 |
$551 |
$658 |
$683 |
$612 |
|
Depreciation |
$2,503 |
$3,449 |
$4,224 |
$4,254 |
$4,043 |
|
Financing |
$511 |
$739 |
$899 |
$935 |
$830 |
|
Ownership
costs/year |
$4,303 |
$5,642 |
$6,763 |
$6,790 |
$6,328 |
|
Total for 15,000 annual
miles |
$6,253 |
$7,967 |
$9,283 |
$9,805 |
$8,878 |
|
Average cost per mile |
41.7˘ |
53.1˘ |
61.9˘ |
65.4˘ |
59.2˘ |
This table summarizes vehicle cost estimates published by the American Automobile Association. It represents typical costs during the first five years of vehicle operation, and so tends to overestimate depreciation and financing costs and underestimate repair costs. It also ignores incidental costs, such as user paid parking and tolls.
These estimates tend to overstate depreciation and insurance, and understate maintenance and repair costs compared to the overall vehicle fleet because they assume a relatively new car (the first five years of vehicle life). Lifecycle cost analysis (Table 2) and consumer expenditure surveys (Table 3) indicate somewhat lower average costs per vehicle-year.
Table 2 Lifecycle Costs for Selected
Vehicles (1991 ˘/mile)
|
|
Sub-Compact |
Intermediate |
Full-size Van |
Full-size Pickup |
|
Fuel and oil |
3.5 |
4.6 |
8.1 |
6.2 |
|
Fuel Taxes |
1.3 |
1.7 |
3 |
2.3 |
|
Tolls and Parking |
1.3 |
1.3 |
1.3 |
1.3 |
|
Tires |
0.7 |
1 |
1.4 |
1.2 |
|
Total Variable Costs |
6.8 (24%) |
8.6 (26%) |
13.8 (31%) |
11 (31%) |
|
Depreciation* |
8.6 |
10.7 |
14.2 |
9.5 |