Transport taxes with multiple trip purposes

I consider an urban transport system in which passenger cars and buses are used for commuting trips and for leisure trips, where both transport modes contribute to congestion, and where commuting is a strict complement to taxable labour supply. The optimal tax structure for raising a given amount of government revenue is discussed for the cases where differentiation of the transport tax between trip purposes is and is not possible. Using a stylised dataset for Belgian urban enviroments, the optimal tax structure is computed. When differentiation of transport taxes between trip purposes is possible, a shift to the taxation of relative complements to leisure is observed. When differentiation is not possible, reforming transport taxes generates substantial welfare gains only when the labour tax can be simultaneously reduced.transport; externalities; congestion taxes; general equilibrium welfare effects

Market Structure and Internalization of Congestion in Air Transportation

We use a simple analytical framework to derive pricing rules for oligpolistic airlines at airports that are served by competitive airlines as well. The pricing rules show how the degree of internalization of marginal congestion costs depends on market structure. The analysis illustrates the importance of selecting an accurate representation of market structure, when making recommendations about the desirability of congestion pricing mechanisms.Airports; Airline; Congestion; Congestion tolls; Oligopoly

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.congestion; road transport; pricing; networks

Optimal urban transport pricing with congestion and economies of density

The paper analyses the impact of economies of density on the characteristics of an urban transport system under optimal pricing conditions. Optimal pricing rules are derived for a transport system where bus and car modes are available for peak and offpeak trips. Both modes contribute to congestion. Each demand level for bus trips requires a minimal supply of bus-kilometres. Optimal bus supply exceeds this minimum only when waiting time reductions due to increased service frequency, outweigh congestion costs and bus supply costs (measured at the marginal cost of public funds). An empirical analysis for Brussels and London shows that taking account of economies of density modestly increases the welfare gain from optimising transport prices. Optimal public transport prices are lower when economies of density are taken into account, while optimal car prices are not strongly affected. In case car prices are fixed at the reference level, very low or zero public transport prices produce small welfare gains in some cases.transport; congestion; public transport

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.Transport pricing, optimal taxes, externalities, transport budget constraints

Effectiveness and welfare impacts of alternative polices to address atmospheric pollution in urban road transport.

n 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. 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 do not necessarily lead to welfare gains, whereas transport pricing policies yield substantial gains for the urban area under study.

Effectiveness and Welfare Impacts of Alternative Policies to Address Atmospheric Pollution in Urban Road Transport

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. 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 do not necessarily lead to welfare gains, whereas transport pricing policies yield substantial gains for the urban area under study.

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.tax reform; congestion; value of time

Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect

We estimate the rebound effect for motor vehicles, by which improved fuel efficiency causes additional travel, using a pooled cross section of US states for 1966-2001. Our model accounts for endogenous changes in fuel efficiency, distinguishes between autocorrelation and lagged effects, includes a measure of the stringency of fuel-economy standards, and allows the rebound effect to vary with income, urbanization, and the fuel cost of driving. At sample averages of variables, our simultaneous-equations estimates of the short- and long-run rebound effect are 4.5% and 22.2%. But rising real income caused it to diminish substantially over the period, aided by falling fuel prices. With variables at 1997-2001 levels, our estimates are only 2.2% and 10.7%, considerably smaller than values typically assumed for policy analysis. With income at the 1997 – 2001 level and fuel prices at the sample average, the estimates are 3.1% and 15.3%, respectively.Carbon dioxide; Fuel economy; Travel demand; Motor vehicle use; Rebound effect

Atomistic Congestion Tolls at Concentrated Airports? Seeking a Unified View in the Internalization Debate

The goal of this paper is to bring some unity to the theoretical side of the debate on internalization of airport congestion by showing that all the literature’s theoretical results can be derived within one simple and unified framework. The analysis starts by replicating the results of Brueckner (2002), who showed that, because airlines behaving in Cournot fashion internalize congestion, they should be charged low congestion tolls. The analysis then validates the findings of Daniel (1995), who argued that larger atomistic tolls are required in a model where a Stackelberg leader interacts with competitive fringe airlines. However, it is shown that this result only holds approximately when the carriers’ outputs are imperfect substitutes.