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Calculating Costs and Measuring Benefits of Pricing Schemes Erna Schol, AVV Transport Research Center, Netherlands Christopher Nash, Institute for Transport Studies, University of Leeds Jeffrey Zupan and Alexis Perrotta, Regional Plan Association Andrea Ricci, ISIS, Italy COSTS AND BENEFITS OF PRICING SCHEMES FOR In a 1997 study the Economic Institute of the THE NETHERLANDS Netherlands applied costbenefit analysis to two vari- ants of road pricing: cordon-based area fees and fees Erna Schol levied on highways anticipated to be congested by 2001. Regardless of the variant, it was assumed that The Netherlands is currently dealing with the problem the tariff would be 2.25 and levied on both passenger of growing traffic congestion. Economic growth, an and freight transport. The study concluded that given increase in the number of smaller households, increased the assumptions, the cordon-based approach would participation in the labor market, and limits on funding yield greater net benefits. and physical space for new infrastructure all contribute In a Central Planning Bureau costbenefit analysis to the growth of traffic congestion. While we have not conducted in 2001, two other scenarios were identified: yet implemented road pricing largely because of lack of (a) a variabilization of fixed costs through a per kilome- public acceptance, road pricing is back on the national ter charge--essentially a flat rate based on the "pay as discussion agenda. In my view, it is all but inevitable you drive" principle; and (b) a flat rate that included a that by 2010 the Netherlands will have some form of congestion component--a surcharge of 0.10 per kilo- road pricing in effect. meter at times and locations of congestion. Both scenar- As we renew our investigation into the long-term ios make use of an onboard unit and global positioning, advisability of various road pricing schemes, a close look so no toll collection points are needed. The total effect of at pricing's benefits and costs is interesting. The benefits the flat rate scenario is around zero, meaning that the to be examined include direct benefits for road users, costs are comparable with the benefits. The total effect avoidance of external costs, and indirect benefits. Direct of the congestion charge is positive and comes to about benefits include travel time savings due to reduced con- 10 billion by 2020, on the assumption of nationwide gestion, less welfare due to reduction of car mobility for implementation of road charges for both passenger and system dropouts, and a shift of motorists to urban public freight traffic. This provides strong evidence that a con- transport. External benefits are realized through the gestion charge is effective in lowering transport demand avoidance of various external costs, including those and thus congestion. However, even the flat rate can imposed by emissions, noise, and traffic accidents and decrease congestion (though to a lesser extent) if simpler, other threats to safety. Indirect benefits can be realized less expensive technology is used. through impacts on the labor, housing, and automobile The broader lessons learned were that costs markets. Costs of a pricing system include the capital cost inevitably increase during the course of a project and of the initial investment as well as ongoing operating and that benefits can vary markedly depending on the struc- maintenance expense. ture of the pricing scheme, including the tariff level, the 28