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The effect of complex models of externalities on estimated optimal tolls

Shepherd, SP (2008) The effect of complex models of externalities on estimated optimal tolls. Transportation, 35 (4). 559 - 577 . ISSN 0049-4488

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Abstract

Transport externalities such as costs of emissions and accidents are increasingly being used within appraisal and optimisation frameworks alongside the more traditional congestion analysis to set optimal transport policies. Models of externalities and costs of externalities may be implemented by a simple constant cost per vehicle-km approach or by more complex flow and speed dependent approaches. This paper investigates the impact of using both simple and more complex models of CO2 emissions and cost of accidents on the optimal toll for car use and upon resulting welfare levels. The approach adopted is to use a single link model with a technical approach to the representation of the speed-flow relationship as this reflects common modelling practice. It is shown that using a more complex model of CO2 emitted increases the optimal toll significantly compared to using a fixed cost approach while reducing CO2 emitted only marginally. A number of accident models are used and the impact on tolls is shown to depend upon the assumptions made. Where speed effects are included in the accident model, accident costs can increase compared to the no toll equilibrium and so tolls should in this case be reduced compared to the congestion optimal toll. Finally it is shown that the effect of adding variable CO2 emission models along with a fixed cost per vehicle-km for accidents can increase the optimal toll by 44% while increasing the true welfare gained by only 8%. The results clearly demonstrate that model assumptions for externalities can have a significant impact on the resulting policies and in the case of accidents the policies can be reversed.

Item Type: Article
Keywords: externalities, complex models, optimal tolls
Institution: The University of Leeds
Academic Units: The University of Leeds > Faculty of Environment (Leeds) > Institute for Transport Studies (Leeds)
Depositing User: Symplectic Publications
Date Deposited: 30 Jan 2012 11:01
Last Modified: 15 Sep 2014 03:44
Published Version: http://dx.doi.org/10.1007/s11116-007-9157-1
Status: Published
Publisher: Springer Verlag
Identification Number: 10.1007/s11116-007-9157-1
URI: http://eprints.whiterose.ac.uk/id/eprint/43641

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