By Stef Proost and Kurt Van Dender of Centre for Economic Studies, Naamsestraat 69, K.U. Leuven B-3000, Belgium; Available online 12 November 2001; Published in Regional Science and Urban Economics, Volume 31, Issue 4, July 2001, Pages 383-411.
In this paper we compare the effectiveness and welfare effects of alternative fuel efficiency, environmental and transport policies for a given urban area. The urban transport activities are represented as a set of interrelated markets, one for each mode of transport and type of vehicle, in peak and in off-peak hours. For each market, four different marginal external costs are computed in the present equilibrium: air pollution, accidents, noise and congestion. The gap between marginal social costs and prices shows that congestion and unpaid parking are the dominant sources of inefficiencies. Air pollution costs are significant as well. The effects of a typical air quality policy (regulation of car emission technology) and two typical fuel-based policies (minimum fuel efficiency policy and fuel taxes) are compared with the effects of three alternative transport policies (full external cost pricing, cordon pricing, parking charges). Regulation of emission technology and of fuel efficiency beyond the 2005 levels do not lead to welfare gains, whereas transport pricing policies yield substantial gains for the urban area under study.
Corresponding Author: Kurt Van Dender
Tel.: +32-16-326-655; fax: +32-16-326-796; email: kurt.vandender (at) econ.kuleuven.ac.be