December 1, 2000

Mobility and welfare; economic impacts of the National Traffic and Transport Plan; 2001-2020 (NVVP)

The Dutch government has announced a new long-term transport policy for the period up to 2020. This National Traffic and Transport Plan (NVVP) tries to ensure that growth of transport will contribute to (economic) welfare through reducing negative side effects such as congestion, traffic accidents and environmental damage.

The new plan has a strong focus on road pricing providing an important incentive for a better usage of the present infrastructure, thus reducing the need for new infrastructure. The road pricing plans of the new NVVP seem to increase welfare, although they are not actually inspired by a welfare motive but by other aims such as total cost recovery and keeping present tax revenues constant. NVVP's road pricing plans after 2010 (kilometre charge and congestion tax) lead to a welfare gain of up to 2 billion Euros per year (about 0.3% of GDP) depending on system costs. The welfare gains can be increased by gearing the price of road use more to the external effects caused. From a welfare point of view congestion taxes are mostly preferable to pay-lanes.

For specific categories of road users the NVVP-charges can have negative consequences, such as people who drive many kilometres (for their jobs) and often drive in highly congested areas. However, these effects strongly depend on the way the revenues are recycled. The more the recycling is concentrated on categories who pay the charges, the smaller are the negative consequences. Given the positive effects of road pricing for society as a whole, the challenge for policy makers is to control system costs and to reduce negative distributional effects. Infrastructural investments in public transport hardly influence private car mobility and congestion. The new plan expects important effects of public transport investment on spatial economic developments. However, these effects have not been proven yet.

Many people are killed or injured in traffic. This leads to substantial (welfare) economic costs. Therefore, it would be advisable to look into safety measures from an economic point of view.

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