1. Transport externalities: overview
John F. Odgers
November 2010
NTC Externalities overview
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2. AIMS
To summarise existing works that focus on transport externalities. Emphasis on detailing  key assumptions made  methodologies used, challenges encountered, best practices  key data input requirements  empirical results with specific attention on specifying default values. To compare and contrast the cumulative knowledge and practices in Australia against international experience. To identify gaps in current Australian processes or practices. To suggest areas for future enhancement of processes and practices in respect of identifying and quantifying transport externalities based on this review.
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3. What’s been drafted 1. Introduction: defining externalities
2. Overall methods to place values on externalities
3. Methods used to value specific externalities
Noise pollution
Air pollution externalities
CO2 emissions (Greenhouse gases)
Water pollution
Nature and landscape
Urban separation costs
Accidents involving injury or fatality
Traffic congestion
Upstream and downstream costs
Costs of Physical inactivity
Summary of default values for selected transport externalities
4. Empirical values derived for transport externalities in total: a brief review
Wider economic benefits (agglomeration effects)
Gaps in current recommended Australian processes or practices
7. Suggested areas for future enhancement of processes and practices
8. References
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4. Internal, external and social cost
External costs
Costs not borne by those responsible for their creation
Internal (private) costs
Costs borne by those responsible for their creation
Social costs
= Internal costs + External costs
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5. Transport externality defined
Socio-economic costs (or benefits received) that are the direct result of the use of transport services and systems, but that are not directly paid for or borne by (or received) by those users.
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6. Transport externality explained
A transport externality is either:
a subsidy paid by a society to users of transport services within that society, or
a benefit received by a society from users of transport services.
Whether society loses (i.e. subsidises private users) or gains (i.e. is paid more by users than it cost a society to make the service available to them) depends on how much of the total costs that a society incurs in making transport services and systems available is actually recouped from those that directly use these systems and services.
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7. Cost of damage versus cost of avoidance approach
The cost of damage approach attempts to measure ‘the damage or opportunity costs for the society that is suffering from environmental impacts or that is repairing these impacts’ The cost of control or avoidance (abatement) approach ‘reflects the cost of prevention or mitigation, i.e. the costs of measures to avoid a specific environmental damage referring to specific environmental targets (e.g. the costs of special windows for the prevention of noise above 55Db (A)).
Source: Austroads (2003) Valuing Environmental and other Externalities, Sydney., p. 6
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8. Cost of damage approach = preferred method
‘Individual preferences are the most important indicator to value costs imposed on society (externalities). The first best solution is to estimate damage costs. For some externalities, like long term risks also collective preferences have to be considered.’ (Maibach et al 2008). Of these two the cost of damage approach ‘is the most appropriate from an economic viewpoint since it aims at a Pareto optimal resource allocation, whereas the cost control method is a second best approach, and should only be used where estimating the cost of damage is difficult to accurately estimate’ (Austroads, 2003, p. 6).
Source: (i) Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector’ Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft.
(ii) Austroads (2003) Valuing Environmental and other Externalities, Sydney., p. 6
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9. Many challenges exist in valuing externalities
Externalities are difficult to value in that (i) 'externality impacts can vary with location and time; (ii) the total cost of an externality may not be proportional to the intensity of the externality (non-linear response relationship) (ATC, 2006) (iii) (…..) there are limitations in transferring these externalities from other countries to the Australian context. (ATC, 2006) (iv) among other things 'externality cost estimates depend on assumptions relating to discount rate, methodology (e.g. damage cost or avoidance cost approach) and the treatment of equity issues ’ Austroads (2003)
Sources: ATC (2006) National Guidelines for Transport System Management in Australia: Volume 5 Background Material. Canberra, ACT, Australian Transport Council, pp ;
(ii) Austroads (2003) Valuing Environmental and other Externalities, Sydney, p. iii
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10. Externalities investigated
noise
air pollution
CO2 emissions
accidents involving injury or fatality
water pollution
nature and landscape
urban separation costs
traffic congestion
upstream and downstream costs
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11. NTC Externalities overview
Method to value health external costs of transport noise
(III) Number of persons
Disturbed by > 65dB(A)B
from transport
(II) Number of cardiac
infarctions
Number of acute cardiac infarctions due to transport noise
(I) Number of persons disturbed by transport noise .
Valuation of fatalities with Risk value + .
WTP value per person disturbed
Total external cost of transport noise
Total transport
movements
Distribution of total noise costs by transport modes
Average cost per unit of travel (e.g. per kmt, per tkm, per ntkm
Source: Adapted from Austroads (2003): Figure B. 3 – Methodology used for the estimation of external noise costs, p. 51.
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12. Best practice: valuing noise pollution
Maibach et al (2008, p. 16) conclude that best practice is evidenced by the use of
‘ WTP approach based on hedonic pricing (loss of rents -- this reflects WTA) or the use of stated preference (SP) for noise reduction; and
an Impact pathway approach (i.e. a bottom-up approach) for human health using WTP for human life.'
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector’ Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft.
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13. Impact-pathway approach to quantifying marginal external costs
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14. 2005 default values for noise pollution
Type of vehicle
Unit of value
Location of travel
Urban
Rural
Passenger vehicles
c/ vkm
0.78
0.00 1
Freight vehicles - Light
c/ ntkm
2.56
Freight Vehicles – Medium 1
Freight Vehicles - Heavy
0.26
0.026
Rail 2
0.14
Source: ATC (2006) Volume 3 Tables C.1 to C.5, pp
Notes:
1. For noise pollution in rural towns, ATC (2006) recommends that the urban value be used.
2. Value was based on Laird (2005).
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15. Cars, trucks, emissions and health
Source: BTRE (2005) Health Impacts of Transport Emissions in Australia, Working Paper 63, DOTARS, July, Canberra, Figure 3.1, p 24.
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16. Sequence of health impacts
Premature
mortality
Severity of
health effect
Hospital admission
Emergency room visits
Visits to Doctor
Restricted activity /
Reduced performance
Use of medication
Symptoms
Impaired pulmonary function
Sub clinical (subtle) affects
Proportion of population affected
Source: World Health Organisation 2000 Quantification of the health effects of exposure to air pollution, report of a
World Health Organization working group, Bilthoven, Netherlands, November.
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17. Air pollution : other key points
‘The specific characteristics of the pollutant, and
the circumstances in which exposure occurs, are
crucial for assessing the health effects of
pollutants’ (BTRE, 2005, p.8).
The nature of air pollution in Australia is quite
different from that in other countries’ (BTRE, 2005,
p.18).’
‘The air pollutants of current concern in Australia
are particles — PM10 and PM2.5, ozone, nitrogen
dioxide, benzene, air toxics, and, to a lesser extent,
carbon monoxide (BTRE, 2005, p.18).’
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18. Method for valuing health costs of transport originating air pollution
Transport volume
Vehicle emissions
Exposure-cost
function
Exposure-cost
function
Concentration/exposure
Effects on human health
Morbidity
Mortality
Health costs
Resource costs (medical costs,
production/consumption loss)
Loss of quality of life
Source: WHO (modified version) cited in Austroads (2003) Figure 2.3, Chain of interaction between air pollution and health costs
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19. Alternative model for valuing transport air pollution
Cost basis
Total transport PM10
emissions (exhaust, abrasion and re-suspension)
Transport NOx –e emissions
Weighted mean of
PM10 and NOx
Estimation of PM10
exposure
PM10 exposure for
all countries
Calculation of cases
Additional cases
Total health costs
Source: Infras /IWW (2000), p. 36, re-presented in Austroads (2003), Figure B.1 – Methodology used for the estimation of health costs, p. 45
Total health costs
per transport mode
Allocation to transport modes
Average cost per
transport mode
Source: Infras/IWW (2000), p. 36, re-presented in Austroads (2003) Valuing environmental and other externalities, Report AP-R229, Sydney, Figure B.1 – Methodology used for the estimation of health costs, p. 45.
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20. Sommers’ Kunzli et al model of air pollution and disease
Attributed number of cases
Epidemiology based
exposure—response function
Number of cases ∆
“Without”
With
Pollutant load µg/m3
Air pollution (PM10)
Sommer, H, Kunzli, N., Seethaler, O. et al., (2000) Economic evaluation of health impacts due to road traffic-related air pollution: An impact assessment project of Austria, France and Switzerland, Report; Figure 3 p. 6
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21. PM10 traffic emissions and respiratory impacts – Brisbane study
Magnitude of the association (…) varied across different geographic areas in Brisbane.
This relationship appeared to be stronger in areas with heavy traffic.
Overall increase of 4.0% (95% confidence interval [CI]: %) in respiratory emergency hospital admissions associated with an increase of 10µg /m3 in PM10 in the single pollutant model.
The association became weaker (an increase of 2.6%; 95% CI: 1.05.5%) after adjusting for O3, but did not appear to be confounded by NO2.
Chen, L., Mengersen, K. L., Tong, S., (2007) Spatiotemporal relationship between particle air pollution and respiratory emergency hospital admissions in Brisbane, Australia, Science of The Total Environment, 373(1). pp  
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22. Best practice: valuing health impacts of air pollution
The use of an impact pathway approach which follows the dose-response function considering several impact patterns on human health and nature.
Use of a resource cost and WTP for human life (life years lost) approach rather than a human capital approach .
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft.
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23. Default values for air pollution (primarily diesel) – all values in 2005 $A
Type of vehicle
Unit of value
Location of travel
Urban
Rural
Passenger vehicles
c/ vkm
2.45 2
0.02 1, 2
Freight vehicles - Light
c/ ntkm
0.00 1, 2
Freight Vehicles – Medium 1
4.68 2
0.05
Freight Vehicles - Heavy
0.97 2
0.01
Public transport (buses only)
19.1 2
0.00
Rail 2
0.33 2
Source: ATC (2006) Volume 3 Tables C.1 to C.5, pp
Notes:
1. For air pollution in rural towns, ATC (2006) recommends that the urban value be used.
2. ‘Total air pollution [default] values (...) are higher than other sources because the values include larger
health costs for each chemical type; for example health costs associated with particulate matter are
higher than other [value of default] sources’. (ATC, 2006, Volume V, p. 78).
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24. Default values: pollutants
Source: McAuley, J. (2010) ‘ External costs of inter-capital freight in Australia’ Australasian Transport Research Forum 2010 Proceedings, Canberra ACT, September 29 –October 1, p. 6.
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25. Greenhouse gas emissions
Greenhouse gases include water vapour, carbon dioxide (CO2) methane (CH4) nitrous oxide (N20) and ozone (O3).
Beer et al. (2004, p. 17) note that each time a vehicle is filled up with 60 litres of fuel, ‘about 135 kg of carbon dioxide’ is released into the atmosphere.
BTRE (2005) estimated that transport accounts for 15% of total Australian greenhouse gas emissions.
Sources: Beer, T. et al. (2004) Life-Cycle Emissions Analysis of Fuels for Light Vehicles, Report (HA93A-C837/1/F5.2E) to the Australian Greenhouse Office, May;
Bureau of Transport and Regional Economics (BTRE) (2005), Health Impacts of Transport Emissions in Australia, Working Paper 63, DOTARS, July, Canberra.
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26. Many challenges in valuing greenhouse gas emissions externalities
Among the challenges are:
‘there is a general lack of knowledge about the physical impacts caused by global warming.’
Secondary impacts such as socially contingent damages (e.g. regional conflicts) are even more difficult to assess (Maibach et al 2008, p. 74).
An equally pressing challenge is the decision as to what value per tonne is to be put on CO2
Assigning to transport its fair share of that monetary value (Parry, Walls and Harrington 2006, pp. 5-6)
Sources: (i) Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft; (ii) Parry, I. W. H., Walls, M. and Harrington, W. (2006) Automobile Externalities and Policies, Resources for the Future, Discussion Paper DP 06-26, June, Washington, DC.
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27. What price CO2 for externality purposes?
New Zealand adopted a price of NZ$40 per tonne for CO2 in respect of cost-benefit analyses / economic evaluations of transport projects
The ‘monetary value adopted to reflect the damage costs of carbon dioxide emissions in activity evaluations has no relationship to the level of carbon tax that the government might consider as a policy instrument to restrain carbon dioxide emissions’.
Source: New Zealand Transport Agency (2006) Economic evaluation manual, Volume 1. p. A9-8: emphasis added).
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28. Recommended EU values (2008)
Source: Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector’ Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, Figure 34, p. 265.
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29. Best practice: valuing climate change
‘From a welfare economics perspective the best practice approach to valuing climate change costs is to compute the damage costs of CO2 and other emissions. the avoidance cost approach should only be used in combination with reduction targets that are laid down in existing and binding policies or legislation. Long term goals such as the 50% target expressed by IPCC, or ambitions expressed in national or EU policy documents do not qualify as socially desired.’
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, p. 241
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30. Default values : greenhouse gas emissions – all values in $2005
Type of vehicle
Unit of
value
Location of travel l
Urban
Rural
Passenger vehicles
c/ vkm
0.30
Freight vehicles -
Light
c/ ntkm
1.73
Freight Vehicles –
Medium
0.20
Heavy
0.07
Public transport (buses only) 2
0.83
Rail
c/ ntkm
0.03
Source: ATC (2006)
Volume 3 Tables C.1 to C.5, pp. 101 -
102
Notes:
1. Greenhouse costs are based on $10 / tonne carbon dioxide equivalent. 2.
‘Further work on these values is required and they should be treated with caution
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31. Aviation industry forced to pay in Europe
“From 2012, airlines flying in to and out of Europe will be forced to pay for every tonne of carbon dioxide emitted over 2005 levels to comply with the European Union's carbon trading scheme.
Source: Danny Fortson (The Sunday Times), The Australian, 20/7/10 reprinted in Transport Newsletter: Researching into and commenting on sustainable transport #175, October 5, p. 4
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32. Transport and water pollution
Traffic volumes influence the quality of water run off, with pollution loading increasing ‘as traffic volumes increase’ and where there is acceleration and/or braking. Divided arterials and freeways, while possibly representing only ‘a minor portion of catchment imperviousness’ may constitute a significant source of pollutants’ into catchment areas (Aldersen 2006, p. 206).
Alderson, A. (2006) The collection and discharge of stormwater from the road infrastructure, Australian Road Research Board Group Ltd, Research Report ARR 368, May.
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33. Best practice: European approach to water pollution
A repair cost approach based on heavy metal emissions from transport vehicles. On the basis of the amount of emissions and the critical soil or water concentration of these pollutants, it can be calculated which volume of soil or water would be polluted up to the critical concentration. To quantify the cost of this pollution, the volume is multiplied by a repair cost factor for the disposal and replacement of the polluted soil or the treatment/cleaning of the polluted water.
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, p. 279
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34. Transport and Water pollution
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35. Transport infrastructure's impacts on nature and landscape
The specific nature and landscape impacts comprise three types:
spatial separation effects or barrier effects (habitat fragmentation) that are also partly influenced by the use of the infrastructure;
reduction in the quality of landscapes; and
loss of natural habitats (loss of bio-topes).
Infras/IWW (2000) External Costs of Transport -- Accidents, Environmental and Congestion Costs in Western Europe Zurich/ Karlsruhe, p. 44
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36. Repair and cost compensation approach for valuing nature and landscape externalities
Network data (km, m, km2
Data
Input by
Mode
Road
- road lengths (by road
type)
Assumptions on
roads
Rail
- length of singe tracks
length of double tracks
assumptions on track widths
Air
Number of airports (by size)
assumption on average
airport
% of traffic which is relevant
(‘Neutral’/ acceptable starting point: state of natural
environment at 1950)
Expert determined environmentally neutral or acceptable
state of natural environment
Sealed area (km2) caused by transport infrastructure that needs repairing +
Additional impaired area (km2)
caused by transport infrastructure
Cost determination per module (Euro /m2
Methodology:
Bio-centric based on expert knowledge on requirements of natural systems and costs of repair /restoration
Cost of restoring target
biotopes
Costs of repairing soil/water
pollution
Cost of mitigating other impacts
Cost of
unsealing
Country aggregation (corrected for PPP)
Consideration of time period ( )
Total external costs (million Euro/ year)
Source: Expanded from Infras/IWW (2000) External Costs of Transport -- Accidents, Environmental and Congestion Costs in Western Europe Zurich/ Karlsruhe, p.46
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37. Best practice : nature and landscape
Use of a two stage compensation cost approach: Stage a. Compensation costs for habitat loss due to transport Infrastructure (creating compensatory ecosystem) and Stage b. Compensation cost approach for habitat fragmentation (OSD, 2003).
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, p. 275
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38. Transport, nature and landscape
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39. Best practice: valuing urban separation
Comprises a ‘two-stage approach with two cost categories’:
Damage costs due to separation effects of transport Infrastructure in urban areas (waiting time for pedestrians) and
Compensation cost approach for scarcity problems due to transport Infrastructure (construction of bicycle lanes) (INFRAS/IWW, 2000/2004a; OSD, 2006)’.
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, p. 282.
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40. Transport and urban separation
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41. Traffic congestion: only some costs externalised
The Productivity Commission (2006, p. 183) notes that that traffic congestion ‘can be distinguished from some other externalities in that its costs largely are borne by infrastructure users themselves and that it is partly a function of the level of infrastructure provided.’ The external congestion cost component comprises ‘the additional delay costs imposed on all other road users by an additional vehicle (light or heavy) joining the [already congested] traffic stream’ (Maunsell Australia, 208, p. 22).
Sources: (i) Productivity Commission (2006), Road and Rail Freight Infrastructure Pricing, Inquiry Report No. 41, Canberra; (ii) Maunsell Australia (2008), Review of policy relevant heavy vehicle externalities, Final Report to National Transport Commission, Melbourne, Victoria, July 22.
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42. Estimated marginal social congestion costs vary widely
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43. Projected national congestion cost
Source: ‘Estimating Urban Traffic and Congestion Cost Trends for Australian Cities,’ Working Paper 71, Bureau of Transport and Regional Economics, Canberra, April 2007 (BTRE, April 2007).
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44. One method for calculating external congestion costs
Source: Maibach et al (2008) p. 25
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45. Key determinants of road accidents
‘The most important cost drivers in road transport are, besides vehicle kilometres
vehicle speed,
type of road,
drivers' characteristics (such as driving behaviour, experience, speeding),
traffic speed and volume,
time of day (day/night) and
interaction with weather conditions.
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, p. 36
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46. Approaches to computing the Value Of A Statistical Life (VSL)
The restitution cost approach
‘values diminished health status in terms of the resources required to restore a victim and relatives to the earlier state’ (UK DH 2004).
The human capital approach
‘essentially involves estimating the value of productive output of people over their remaining lifetime’ (Tooth, 2010, p. 1)
The willingness to pay (WTP) approach
based on the underlying premise that what a consumer is willing to pay for a good or service represents its economic value (Productivity Commission, 2006, Box C.1, p. C. 2.).
Sources: Tooth, R. (2010) The cost of road crashes: A review of key issues, LECQ, Sydney;(ii) Productivity Commission (2006), Road and Rail Freight Infrastructure Pricing, Inquiry Report No. 41, Canberra.
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47. Valuing a statistical life with Willingness to pay approach
Access Economics (2007, p.51) ‘
The cost of a fatal crash is $4.54 Million per fatality, a serious injury crash is $474,500 per person involved, a minor injury crash is $15,600 per person involved.’
Tooth (2010, p. 2) opts for a figure of around $6 million ─ considerably higher than the $3.7 million derived by Pollard (2006).
Sources: (i) Access Economics (2007) The Costs of Road and Rail Freight—Neutrality and efficiency in the farm-to-port logistics chain, Rural Industries Research and Development Corporation, RIRDC Publication No 07/185, November 2007; (ii) Tooth, R. (2010) The cost of road crashes: A review of key issues, LECQ, Sydney; (iii) Pollard, R. 2006, ‘The Price of a Life’, Sydney Morning Herald, 2 March, p. 11
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48. Best practice approach: allocating road accident costs to different modes
An allocation approach that takes into account the responsibility is to be preferred from a methodological point of view. However, allocation based on number of victims or vehicle kilometres is easier to apply, whereas the causer perspective must be based on detailed analysis of police reports and even allocation based on involvement requires data which is usually not available (Maibach et al 2008, p. 43)
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, p. 43
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49. Unit costs of freight transport accidents in Australia
Item Measured
Unit of measure
Mode
Unit value
Source
Australian accident costs
cents/ntk
Road
0.32
BTE 1999 as cited in ATC 2006, V5, p. 209
Rail
0.03
Land freight accident costs in Queensland
0.07
Laird 2001
0.0024
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50. Calculating up-stream and down-stream transport externalities
The most important cost categories to be covered are the
climate change costs and
the air pollution costs (health costs, crop losses) of up- and down-stream processes.
Calculations are based ‘on all other emissions in up - and downstream processes of transport (life cycle emissions):
energy production,
vehicle and Infrastructure production,
maintenance and
disposal.
Maibach, M. et al. (2008) Handbook on estimation of external costs in the transport sector Produced within the study Internalisation Measures and Policies for All external Cost of Transport (IMPACT), CE Delft, February, Delft, p. 285
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51. Calibrated values of upstream and downstream unit costs in constant 2001 A$
Parameter
$A /000 vkt Car
$A/000 vkt Bus
$A / 000 tkm LDV
$A /000 tkm HDV
Average 1 29
150
140 16
Range
25-33
14-18
Unadjusted 2 19
108
143
Source: Extracted from Austroads 2003, Table 3.8 p. 18: based on Infras/IWW 2000.
Notes:
1. Infras/IWW value adjusted for vehicle occupancy rate.
2. Currency and year conversion only applied to Infras/IWW value
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52. Externality values for freight vehicles $A / 000 net tonne kilometres from ATC (2006)
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53. NTC Externalities overview
Social and environmental costs of passenger traffic (A$/0001 passenger kms)
NTC Externalities overview
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54. Australian freight social and environmental unit costs (A$1 /1000 tkm)
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55. More recent unit values freight transport
Source: McAuley, J. (2010) ‘ External costs of inter-capital freight in Australia’ Australasian Transport Research Forum 2010 Proceedings, Canberra ACT, September 29 –October 1, p. 6.
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56. Wider economic benefits: are they created by transport activities?
Presently there is no overall consensus that transport does generate such wider economic benefits; this is despite a number of studies and national transport departments claiming and quantifying wider benefits.
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57. What types of Wider Economic benefits are there?
WB1 or ‘agglomeration effects’
DfT (2005, p. 7) argue ‘reflect increased productivity amongst firms and therefore contribute to GDP to the same extent as they do to welfare.’
WB 2 : the impact of transport in improving competition
WB3: the impact of imperfect competition
These arise since in imperfect markets ‘the welfare impact of the time saving can be more ( …) or potentially less (…) than its value to businesses or travellers’.
‘These effects lead to (positive or negative) wider economic benefits’ (DfT, 2005, p. 15).
WB4 is wider economic benefits from improved labour supply that in turn lead to the exchequer consequences of increased GDP in the form of higher government taxation revenue.
Source: DfT (2005), Transport, Wider Economic Benefits and Impacts on GDP, Discussion Paper, Department for Transport, July, London.
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58. Links between social welfare, wider economic benefits and GDP
Business time & reliability savings
Competition effects
Leisure and
commuting
time savings
Labour market effects which do not add to social
welfare
Agglomeration impacts
Environmental
impacts
Economic welfare benefits from improved labour supply (commuting time savings, Exchequer benefits)
Safety
impacts
Social impacts
Source: DfT (2005), Transport, Wider Economic Benefits and Impacts on GDP, Discussion Paper, Department for Transport, July, London.
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59. What causes Wider Economic Benefits?
These wider benefits … are caused by the existence of market imperfections in transport-using industries. These imperfections mean that the values individuals place on impacts may differ from those placed on it by society. Appraisal seeks to include all benefits and costs, and so should in principle include the best estimates of all wider benefits (or costs) including those arising because markets are imperfect (DfT 205, p.3)
Source: DfT (2005), Transport, Wider Economic Benefits and Impacts on GDP, Discussion Paper, Department for Transport, July, London.
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60. UK’s new approach to ‘value for money assessment’
Qualitative/ quantitative assessment
Monetised values
(New Approach To Appraisals Benefit Cost Ratio)
Areas for development
Some valuation evidence
Townscape
Wider economic benefits *
Risk of death or injury
Time savings
Water environment
Landscape
Noise
Operating costs
Accessibility
Reliability *
Carbon
Private sector impacts
Social inclusion
Air quality
Physical fitness
Cost to the Exchequer
Integration
Journey ambience
Biodiversity
Regeneration
Heritage
* Wider economic benefits and reliability are monetised in some appraisals.
Source: Dft (2009) New Approach to Appraisal (NATA) Refresh: Appraisal for a Sustainable Transport System , London, Table 5.1 Levels of evidence available for transport impacts: Impacts included in value for money assessment, P. 52

61. Another framework
Source: Weisbrod, G. and B. Weisbrod (1997). Assessing the Economic Impact of Transportation Projects: How to Choose the Appropriate Technique for Your Project. Transportation Research Circular No 477, October, p. 7
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62. Incorporating wider economic benefits
Total value of
Business user
Direct Benefits
$ 11.6 m /yr
Total GDP expansion effect
= $11. 6 m m
$41.1 m / yr
Total value
of work based travel time + cost
Saved
$ 7.4 m / yr
Value of
additional business
growth & attraction
$29.5m / yr
Logistics-related
User cost savings
$4.2 m /yr
Total value of non-work travel time saved
$5.5 m/ year
Individual
Traveller
Benefit
Total value
= $7.4m + 5.5m = 12.9 m/ yr
Total economic benefit / year
= Non work travel time saved + total GDP expansion effect
= $5.5 m m
= $46.6m
Source: Adapted from Weisbrod, G. and Grovak, M. (1998) ‘Comparing Approaches for Valuing Economic Development Benefits of Transportation Projects’ Transportation Research Record #1649
NTC Externalities overview

63. Economic value of active transport
NTC Externalities overview

64. Possible NTC led projects
Updating ATC 2005 default value for the six externalities
Investigating status of further work recommended in ATC (2006)
Undertaking Australian research to generate default values and an on-going data base.
Adding specific externalities and establishing default values for each
Researching incidence and value of wider economic benefits in Australian transport projects
NTC Externalities overview 64 64