A framework for assessing the marginal external accident cost of road use and its implications for insurance ratemaking

The external accident cost of road use is a function of the marginal relationship between road use and accidents, as expressed, for instance, by the elasticity. This elasticity is, however, not necessarily constant, but may be assumed to depend on the traffic volume as seen in relation to road capacity. Dense or congested traffic may force speed levels down, decreasing the risk of accidents or at least the average loss incurred given that an accident takes place. Relying on a large econometric accident model based on monthly cross-section/time-series data for all provinces of Norway, we derive non-linear empirical functions describing the relationship between road use and accidents and discuss their implications in terms of accident costs and externalities. The analysis reveals that there is probably a large accident externality generated by heavy vehicle road use, but that the marginal external accident cost of private car use is quite small, perhaps even negative. To the extent that it is positive, it is so in large part on account of public and private insurance. Contrary to what is frequently believed and maintained, auto insurance does not serve to internalise the cost of accidents. In fact, its primary purpose and effect is exactly the opposite. The adverse incentives created by insurance could, however, be mitigated by certain innovative approaches to ratemaking. Such schemes would ideally involve more decision variables than just the decision to drive. Incentives could, in principle, be attached to speeding, route choice, vehicle choice, safety equipment, or time of day/week/year

Who will bell the cat? On the environmental and sustainability risks of electric vehicles: A comment

In Transportation Research A 133:79–81, Francisco Bahamonde-Birke (B-B) asks “Who will bell the cat? ... [and presumably discloses] … the fact that, under current conditions and with flat energy prices, a substantial increase in the number of EVs [electric vehicles] in many countries would necessarily result in an increase of CO2 emissions”. B-B wants to … “raise awareness among authors and reviewers regarding the risks associated with replacing conventional vehicles – especially those highly efficient in terms of CO2 emissions, such as Diesel and LPG vehicles – by electric vehicles”.publishedVersio

The Revealed Preference for Battery Electric Vehicle Range

Fridstrøm, Lasse, and Vegard Østli. 2022. “The Revealed Preference for Battery Electric Vehicle Range.” Findings, January. https://doi.org/10.32866/001c.31635. Authors must agree that the following will be binding upon article acceptance when submitting a manuscript to a Findings sections for consideration: I hereby grant to the journal the nonexclusive, royalty-free right to distribute, display, and archive this work in a digital and/or print format during the full term of copyright. I warrant that I have the copyright to make this grant to the journal unencumbered and complete. Authors are responsible for obtaining permission to reproduce copyrighted material from other sources. Following publication, the author’s rights will be protected under Creative Commons License Attribution-Share Alike 4.0 International license CC BY-SA 4.0.Exploiting a disaggregate discrete choice model of automobile purchase, we reveal the willingness-to-pay for extended all-electric range in battery and plug-in hybrid electric cars in Norway. We find diminishing returns to range. By integration under the marginal willingness-to-pay curve, we calculate and plot the value of 100 km extended range. From an initial range of 150 km, the revealed willingness-to-pay for 100 km longer range in a battery electric vehicle is around € 24000. When starting from an initial range of 500 km, the value of another 100 km range drops to around € 5100.publishedVersio

Policy strategies for vehicle electrification

An increase in the market share of electric vehicles is one possible policy strategy for greenhouse gas (GHG) abatement. Many governments have introduced schemes to increase the market uptake - fiscal incentives, subsidies and various regulatory policies such as support for charging stations, free parking facilities or access to restricted road lanes as well as R&D funding. A number of partial studies do exist, but the comprehensive comparative study on the effect of these different incentives has yet to be done. Based on the experience until today it is, however, possible to explore the policy options

Comparing the Scandinavian automobile taxation systems and their CO2 mitigation effects

Despite their similarities, Scandinavian countries have adopted starkly different automobile tax regimes. The Danish system entails very high and convex tax rates with moderate CO2 differentiation. In Norway, tax rates are high and convex with strong CO2 differentiation and total exemptions for zero emission vehicles, even from value added tax. Sweden practices feebates – CO2 dependent subsidization along with moderate taxation. Relying on a disaggregate discrete choice model of automobile purchase, we simulate the demand for passenger cars as of 2016 in Norway under a set of conditions resembling, respectively, the Danish, Norwegian or Swedish fiscal incentives before and after recent reforms. In all cases, implications are derived in terms of energy technology market shares, average type approval CO2 emission rates, and aggregate fiscal revenue. The automobile taxation system is seen to have remarkable impacts on all three accounts. In essence, among the three jurisdictions examined, the Norwegian fiscal regime has by far the strongest CO2 abatement effect. The Danish system is less effective in terms of CO2 abatement, but provides twice as much government revenue. The Swedish feebate strategy is by far the least effective in terms of both CO2 mitigation and revenue collection.publishedVersio

Explaining low economic return on road investments. New evidence from Norway

Is regional policy to blame for the negative economic return on many road projects, or can road investments give value for money also in remote areas? In Norway, a large majority of planned road projects have negative net benefits according to cost-benefit analysis (CBA). In this paper, we point at geographic characteristics that can explain this, comparing Norway with its neighbors Sweden and Denmark. We then show econometric evidence that such factors also explain a substantial part of the variation in the benefit-cost ratio within Norway. Projects in areas that are far from the largest cities or have difficult topography have lower net benefits. This implies that there is a trade-off between economic efficiency and investing in roads in rural areas with difficult topography. We also discuss the role of road design requirements, decision-making processes and the electoral system for road investment policy

Estimating stocks and flows of electric passenger vehicle batteries in the Norwegian fleet from 2011 to 2030

Retired passenger battery electric vehicles (BEVs) are expected to generate significant volumes of lithium-ion batteries (LIBs), opening business opportunities for second life and recycling. In order to evaluate these, robust estimates of the future quantity and composition of LIBs are imperative. Here, we analyzed BEV fate in the Norwegian passenger vehicle fleet and estimated the corresponding battery capacity in retired vehicles from 2011 to 2030, using a stock-flow vehicle cohort model linked to analysis of the battery types and sizes contained in different BEVs. Results based on this combination of modeled and highly disaggregated technical data show that (i) the LIB energy capacity available for second use or recycling from end-of-life vehicles is expected to reach 0.6 GWh in 2025 and 2.1 GWh in 2030 (not accounting for any losses); (ii) most LIBs are currently contained within the weight segment 1500–1599 kg followed by 2000+ kg; (iii) highest sales currently exist for BEVs containing lithium nickel manganese cobalt oxide (NMC) batteries; and (iv) lithium nickel cobalt aluminum oxide batteries initially constitute the largest overall capacity in retired vehicles, but will later be surpassed by NMCs. The results demonstrate rapidly growing opportunities for businesses to make use of retired batteries and a necessity to adapt to changing battery types and sizes.publishedVersio

Modelling the interaction between the energy system and road freight in Norway

By soft-linking models for transport demand, vehicle turnover and energy generation and use, we show how such models can complement each other and become more relevant and reliable policy support tools. A freight demand model is used to project commodity flows onto the 2050 horizon. An energy system model is used to map the relationships between energy prices, fiscal incentives, and optimal vehicle technologies. A stock-flow vehicle fleet model is used to calculate the time lag between innovation affecting new vehicles and the penetration of novel technology into the fleet. By running the latter two models in an iterative loop, we predict the flow of new vehicles with more or less decarbonized powertrains, contingent upon energy prices and fiscal incentives, while also obtaining a well-founded and more realistic assessment of the time needed for radical CO2 mitigation. The methodology is illustrated through a scenario developed for Norway.Modelling the interaction between the energy system and road freight in NorwaypublishedVersio

A stock-flow cohort model of the national car fleet

Purpose Various regulatory and fiscal policy instruments are in force to reduce the amount of greenhouse gases and local pollutants emitted by private cars. The incentives operate primarily—or exclusively—on the newest generation of cars. But how fast will technological developments affecting new vehicle models penetrate into the car fleet? The speed at which the adverse effects of private car use will be mitigated through the normal vehicle renewal process, or through an accelerated one, carries considerable interest. Suitable modelling tools are needed. This paper aims to demonstrate the usefulness and flexibility of a bottom-up stock-flow modelling approach to private car fleet forecasting and policy analysis. Methods In the BIG model of the Norwegian automobile fleet, the annual stocks and flows characterising the car fleet are specified as matrices of 682 mutually exclusive and exhaustive cells, formed by cross-tabulations between 22 vehicle segments and 31 age classes. New car registrations follow from a disaggregate generic discrete choice model based on two decades of complete sales data for individual passenger car models. Results Example projections are presented onto the 2050 horizon under a low carbon fiscal policy scenario as well as a business-as-usual scenario. The fiscal policy is seen to make a large difference in terms of long term fuel consumption and CO2 emissions. Conclusions Stock-flow cohort modelling of the automobile fleet is a powerful and handy tool for policy analysis. Even quite simple and straightforward accounting relations may provide important insights into the dynamics of fleet development. It is possible to incorporate, into the stock-flow modelling framework, interesting and useful behavioural relations, explaining aggregate automobile ownership and travel demand, scrapping and survival rates, or consumer choice in the market for new cars

The vehicle purchase tax as a climate policy instrument

Since 2007, the Norwegian vehicle purchase tax includes a large CO2 emission component. At the same time, generous tax exemptions and privileges are granted to battery electric vehicles. Continued application of the purchase tax instrument may induce large-scale penetration of electric cars into the passenger car stock, thus halving the fleet’s fossil fuel consumption and greenhouse gas emissions within two or three decades. The main tangible cost of this low carbon policy is the extra cost of acquiring novel products with currently small economies of scale. This cost difference will decline over time. The main benefits consist in reduced energy consumption and greenhouse gas emissions. We calculate the gross and net tangible cost of the low carbon policy in a long-term perspective, i.e. towards the 2050 horizon. A crucial cost determinant is the speed at which the manufacturing costs of battery and plug-in hybrid electric vehicles will fall. Under moderately optimistic assumptions about impending economies of scale, net tangible costs by 2050 come out in the range €48 to 278 per tonne CO2, depending on the discount rate and on battery replacement costs.acceptedVersio