Total Costs of Highways

In addition to the interest in estimating marginal costs of highway use for pricing purposes, there is considerable interest in estimating total costs and benefits of highway transportation.

This information is useful for several purposes including (1) estimating the relative magnitude of various costs associated with highway transportation; (2) estimating how costs are changing over time, particularly in response to programs aimed at reducing those costs; and (3) evaluating overall costs and benefits of alternative public policies including investment, regulatory, and pricing policies. A number of recent studies in the United States and other countries have attempted to calculate the full public and private costs of transportation. In addition to air pollution, noise, congestion, and crash costs, other costs included in various studies have been (1) parking; (2) energy security, solid waste, and water pollution, but these other costs are more difficult to quantify. While there is significant controversy concerning the association between highway use and these various costs and how information on these costs should be used, there is a general recognition that this information is useful. There also is a recognition among most analysts that highways benefits must be considered along with costs in making investment, regulatory, and pricing decisions. In July 1995, the Bureau of Transportation Statistics (BTS) sponsored a conference on measuring the full social costs and benefits of transportation. Proceedings of that Conference are summarized in the BTS' 1996 Transportation Statistics Annual Report.

Table 16. 2000 High, Mid-Range, and Low Estimates for Social Costs of Motor Vehicle Use ($ Millions)

 

High

Mid-Range (millions)

Low (millions)

Congestion

$181,635

$61,761

$16,352

Crash Costs

$839,463

$339,886

$120,580

Air Pollution

TBD

TBD

TBD

Noise

$11,446

$4,336

$1,214

Total

$1,032,544

$405,983

$138,146

Tables 16 and 17 show high, middle, and low estimates of noise, congestion, and crashes along with estimates of the responsibility for each cost by different vehicle classes. Crash costs included in this analysis are more comprehensive than those considered by the National Highway Traffic Safety Administration (NHTSA) in its report, "The Economic Costs of Motor Vehicle Crashes, 1994," in that they include costs of pain and suffering and other social costs that do not meet

Table 17. 2000 Responsibility for Social Costs of Highway Use ($ Millions)

Vehicle Class

Air Pollution

Noise

Congestion
(borne by user)

Crashes

Total

User

Non-User

Automobiles

TBD

$1,397

$39,717

$201,445

$30,348

$272,907

Pickup and Vans

TBD

$420

$13,061

$77,195

$12,155

$102,831

Buses

TBD

$77

$304

$1,263

$197

$1,841

Single Unit Trucks

TBD

$582

$3,698

$4,769

$805

$9,854

Combination Trucks

TBD

$1,860

$4,981

$9,968

$1,741

$18,550

All Venhicles

TBD

$4,336

$61,761

$294,640

$45,246

$405,983

NOTE: Costs reflect use of middle range estimates. TBD - To Be Determined. Air pollution and revised total cost estimates will be included in an addendum to this report.

the strict "economic cost" criteria used by NHTSA for its report. The costs included, however, are consistent with general DOT policy regarding estimating crash costs.

Table 17 shows the estimated responsibility of different vehicle classes for major social costs of highways in 2000 and also indicates those costs that are borne in the first instance by highway users and those that are borne by others. Excluding air pollution costs, almost 90 percent of the total estimated social costs of $406 billion in 2000 are borne in the first instance by highway users, including almost $300 billion in crash costs and over $60 billion of congestion costs. Air pollution, noise, global warming, and some crash costs are not borne by highway users but by others in society.

Figure 11 summarizes the cost responsibility of different vehicle classes for noise, congestion, and crash costs. Passenger vehicles are responsible for about 93 percent of total costs in these three areas, but cost responsibilities vary significantly across the various impact areas. Combination trucks are responsible for approximately the same percentage of noise-related costs as automobiles.

As noted above, there are considerable uncertainties surrounding valuation of these various social costs. The magnitude of even the low range of these social costs, however, suggests the importance for decision makers at every level of government and the private sector to find ways to reduce those costs. A tremendous amount has already been done on many fronts. Initiatives to reduce air pollution associated with highway travel are good examples. Automobiles are much less polluting now than they were 10 years ago. Manufacturers are making automobiles cleaner, inspection and maintenance programs in our most polluted metropolitan areas are keeping the cars cleaner, and highway fuels are less polluting as well. Significant efforts are underway in many metropolitan areas to provide alternatives to the single occupant automobile and to implement other programs to reduce highway-related emissions in recognition that they cannot rely solely on further improvements in vehicle technology to solve future air pollution problems. Highway users pay for these air quality improvement programs either through higher prices for cars and fuel or through their Federal, State, and local highway user fees. Likewise, crash rates have been significantly reduced in recent years through a variety of programs focused on improving the safety of vehicles, drivers, and the roadways upon which they operate. Vehicle technology, aggressive improvements to reduce alcohol-related crashes, and improved highway design have had major impacts on crash and fatality rates. Highway users have paid for technological advances in safety built into the automobile and have also paid for improvements in highway design that have made our highways safer over the years. The magnitude of the remaining crash costs, however, suggests that much more remains to be done to reduce highway crash costs.

Congestion is a tremendous burden on the Nation's productivity and everyone has a stake in reducing congestion, especially highway users who bear congestion costs in the first instance. Like other social costs, congestion is being addressed on many fronts by all levels of government and the private sector. Congestion, air pollution, and safety are interrelated, and highway improvements to address one category of costs may also reduce other costs as well. Intelligent Transportation Systems hold great potential for reducing congestion, air pollution, and crash costs. The Department, in partnerships with State and local governments and the private sector, is aggressively pursuing deployment of near-term ITS technologies and services while continuing research, development and testing of longer term strategies that hold even greater potential for improving the efficiency of the highway transportation system..

Significant efforts thus are already underway to mitigate air pollution, crash, noise, congestion, and other costs associated with highway transportation. Personal and commercial users have paid a large share of the cost to reduce social costs associated with their use of the highway system, but more remains to be done to reduce those costs further.

Despite the extensive efforts mentioned above to reduce social costs through new technology, TSM, improved highway design, and other initiatives, a recurring question is whether Federal or State highway user fees should be increased as a form of pricing to help reduce highway travel and thereby reduce environmental, congestion, and other social costs. Fuel tax increases to reduce environmental costs have been proposed in the past, and several European countries justify high fuel taxes in part on the basis that they offset social costs of highway transportation. However, an important question that has an ambiguous answer is whether such user fee increases would improve overall economic efficiency. Given the fairly large swings in fuel prices that motorists have come to expect as a part of normal market conditions, the relative inelasticity of demand for travel with respect to the price of fuel, and the lack of alternative modes in many parts of the country, large increases in fuel taxes would be needed to realize significant changes in travel behavior. If imposed uniformly at the national level, such increases would fall equally on all travel, whether or not that travel was causing social costs, and as noted above, a relatively small amount of travel is responsible for a large share of some social costs. Furthermore, such general user fee increases could have substantial adverse impacts on productivity that could outweigh reductions in social costs that are actually achieved.

Clearly the more directly focused that user charges are on both the costs they are intended to reduce and on the highway users occasioning those costs, the more likely that fee increases could improve economic efficiency. Thus a weight distance tax (WDT) aimed at more closely matching the pavement damage caused by trucks operating at different weights would be expected to improve efficiency more than an increase in fuel taxes or any other user fees that do not vary by both weight and distance traveled. Likewise, a locally imposed congestion toll that varies by time of day and traffic volume would be a more efficient way to reduce congestion costs than a general Federal or State fuel tax increase that is invariant with respect to time, traffic, or environmental conditions. Questions of the overall impacts of user fees on economic efficiency are beyond the scope of this study, and much more work would be needed to evaluate the many complex interactions at play that would affect answers to such questions. This study can evaluate, however, the types of user fee changes that could improve the overall equity of the highway user fee structure considering both agency and social costs.

Figure 12 compares highway agency costs with social costs of highway use. Social costs are broken into costs borne by highway users (congestion costs and most crash costs) and costs borne by non-users (noise and a small share of crash costs). While most social costs of highways included in Figure 12 are borne by highway users, the $50 billion that is not borne by highway users is a significant cost. In the report addendum, air pollution costs will be added to costs borne by non-users and can be expected to increase those costs considerably.

Figure 13 shows that passenger vehicles have a relatively greater responsibility for social costs than for highway agency costs. Shares of cost responsibility for autos, pickups, and vans are higher for State and local highway programs than for the Federal highway program. Conversely, shares of cost responsibility of single unit and combination trucks are higher for the Federal program than for State and local programs.

Figure 14 compares shares of agency costs plus non-user social costs for each broad class of vehicles with that class' share of user fee payments at both the Federal level and for all levels of government. Total costs in Figure 14 include only social costs imposed on non-users, whereas Figure 13 also includes congestion and safety-related costs that users impose on other users of the highway system. Shares of agency and non-user social costs (excluding air pollution and global warming) attributable to auto, pickups and vans exceed the share of HURs those vehicle classes pay at both the Federal level and at all levels of government. Shares of agency and non-user social costs attributable to single unit and combination trucks on the other hand are less than the shares of HURs those vehicle classes pay at the Federal level and at all levels of government.


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