A Social Cost Benefit Analysis of Road Pricing Schemes in the Netherlands



A Social Cost Benefit Analysis of Road Pricing Schemes in the Netherlands

Authors

Jordy Van Meerkerk, PBL Netherlands Environmental Assessment Agency, Annemiek Verrips, CPB Netherlands Bureau for Economic Policy Analysis, Hans Hilbers, PBL Netherlands Environmental Assessment Agency

Description

In order to reevaluate the costs and benefits of road pricing schemes in the Netherlands, the Bureau for Economic Policy Analysis (CPB) and the Environmental Assessment Agency (PBL) conducted a new Social Cost-Benefit Analysis (SCBA).

Abstract

In the Netherlands, many political parties see pricing as an important instrument to improve accessibility. In 2012 six of the ten parties had included a form of a pricing policy in their election program. The last SCBA of road pricing in the Netherlands dates from 2007. Since then, much has changed. For example, the congestion has decreased and new pricing systems have entered the market. Furthermore a new version of the Dutch National Model System (LMS) has been developed. In order to reevaluate the costs and benefits of road pricing schemes in the Netherlands, the Bureau for Economic Policy Analysis (CPB) and the Environmental Assessment Agency (PBL) conducted a new Social Cost-Benefit Analysis (SCBA).
The key benefits associated with road pricing are reduced travel time, increased travel reliability, reduced travel accidents and reduced emissions. On the other hand, road pricing leads to a loss of welfare due to a reduction of demand, a reduction of revenues from excise duties and both direct and indirect financing costs. Furthermore, the charge may increase the overall cost of a ride. This has a negative effect on the accessibility of people and companies. A decrease in accessibility can lead to negative agglomeration effects. On the other hand the average total cost of a ride can also decrease as a result of road pricing, which improves accessibility, leading to positive agglomeration effects.

We focus on four road pricing schemes for passenger cars. A flat charge on all roads, a congestion charge during rush hours on highly congested roads, a combination of these two, and a flat charge during rush hours on the main roads in western and central Netherlands. For the traffic implications of these pricing schemes we use the Dutch National Model System (LMS).

The SCBA uses the socio-economic scenarios Global Economy (GE) and Regional Communities (RC) from the study Welfare, Prosperity and Quality of the Living Environment (WLO). The differences between the two scenarios are substantial. In the GE scenario the Netherlands is more prosperous than in the RC scenario and it also has more inhabitants.

Whether pricing is socially profitable, strongly depends on the chosen form and scenario (congestion level). When the population and economy grow stronger, we expect more traffic and congestion. In that case road pricing is expected to be more profitable. A large part of the social benefits are travel time benefits caused by reduced traffic congestion. Pricing policies specifically aimed at congested roads during peak hours are therefore efficient if the costs remain limited. The congestion charge has a small impact on total car use, but reduces congestion more efficiently compared to a flat charge. Because the car is becoming safer and more energy efficient, the reduction of external effects of road pricing is limited. The welfare loss, due to reduced demand, and the system costs outweigh the benefits of reduced congestion in case of a general flat pricing scheme unless the congestion level is very high as is the case in the GE scenario.

Publisher

Association for European Transport