Welfare Effects of Transport Policies an analysis of congestion pricing and infrastructure investments

University dissertation from Stockholm : KTH Royal Institute of Technology

Abstract: Interactions between the transport market and other distorted markets, such as the labor market, can have a large impact on the overall welfare effect of a road pricing policy or a congestion charge. Many road pricing studies therefore try to incorporate effects from other distorted markets in the analysis. A difficulty when assessing the welfare effect of a future transport policy is also that many factors and parameters needed for the analysis is uncertain.This thesis contains three papers all studying different methodological approaches to analyzing the welfare effects of transport policies. The first two papers analyze the welfare effect of congestion pricing in distorted economies. The main contribution of the first paper is to analyze how the welfare effect of a congestion charge in a distorted economy depends on what assumptions we make regarding the tax system in the initial no-toll situation. A critical assumption in many cost-benefit analyses of congestion charges is that the whole population has a single value of time. The second paper studies the effect of a congestion charge in a population of commuters with a continuously distributed value of time. The main contribution of the paper, compared to previous literature, is that it studies the welfare effect and distributional impact of a congestion charge in a population with endogenous labor supply and heterogeneous value of time where mode-choice self-selection plays an important role.The third paper studies the climate benefit of an investment in high speed rail by calculating the magnitude of annual traffic emission reduction required to compensate for the annualized embedded emissions from the construction of the line. To account for uncertainties in underlying assumptions, a Monte Carlo simulation framework is used in the analysis. The paper finds that to be able to balance the annualized emissions from the construction, traffic volumes of more than 10 million annual one-way trips are usually required, and most of the traffic diverted from other transport modes must come from aviation.