The valuation of environmental externalities and travel time. A citizen perspective

Niek Mouter, Manuel Ojeda Cabral, Sander van Cranenburgh

Research output: Contribution to conferenceAbstractScientific

Abstract

1. Introduction
Cost-Benefit Analysis (CBA) is a widely applied tool for the appraisal of transport projects. Although the environmental impacts of transport infrastructure are recognized as items to be internalized in a CBA, their consideration has been hampered by difficulties in establishing the monetary value of a unit of environmental impact. A key criticism on CBA is that while non-monetized effects of a project are considered in the CBA in a qualitative way, these effects are not included in the indicators that are often decisive in the political process and the media: the benefit-cost ratio and/or the net present value. The fundamental problem here has been the difficulty of inferring valuations from ‘consumer-type’ choices where individuals trade-off their personal income (private good) against environmental impacts (public good). We suggest that this problem can be alleviated through conducting so-called ‘citizen stated-choice experiments’ (hereafter: CSCEs) in which respondents trade-off different effects accruing from transport projects in their role of citizen. Hence, the central goal of our study is gaining empirical insight into how individuals, as citizens, trade-off travel time savings and environmental externalities through conducting a CSCE.

2. Methodology
Following the definition of Mouter and Chorus (2016) we conceptualize citizen preferences as: individual preferences towards the allocation of (expected) taxes. The key distinction between citizen preferences and consumer preferences is that they involve individual preferences inferred from choices within different budget constraints. Namely, while consumer preferences involve an individual’s preferences within his/her personal budget constraint (after tax income), citizen preferences involve an individual’s preferences regarding the allocation of the government’s budget. Citizen preferences can be inferred from CSCEs in which individuals make choices when faced with effects accruing from alternative allocations of taxes. Based on discussions with experts and various pilot surveys we designed a CSCE in which respondents were asked to choose between different alternatives for a new road connecting two municipalities which differ in: 1) Travel time between the two municipalities; 2) Number of households experiencing noise pollution from traffic (63 Decibel on their façade); 3) Remaining useable recreational area for 10,000 citizens; 4) Number of hedgehogs living in national park in 2026. Respondents were asked to assume that the alternatives did not differ in other aspects (e.g. construction costs, traffic safety). In the experiment, it is not made clear to the respondents whether or not they would experience the effects that accrue from the project themselves. A survey company recruited 169 respondents, each of which completed 10 choice tasks.

3. Results
We find that respondents participating in the CSCEs assigned a significant value to all the four attributes in their choices. Since respondents also assigned a significant value to variables that are not (or only qualitatively) considered in CBAs – remaining useable recreational area for 10,000 citizens and the number of hedgehogs living in national park in 2026 – we contend that CSCEs provide a good opportunity to give such effects a better position in the evaluation of transport projects. Additionally, we derived marginal rates of substitution between the four attributes discussed above from the CSCE. That is, we can infer to which extent citizens support allocation of taxes towards a government project affecting travel time between two municipalities and environmental externalities. We observe that there is a substantial deviation between value respondents assign to the four attributes in the CSCE and the ‘willingness to pay based’ (i.e. consumer perspective) standard numbers that are currently applied in the Netherlands to monetize environmental externalities in a CBA. For instance, based on the marginal rates of substitution we derived from the CSCE, we can infer that citizens prefer a project preventing that 300 households experience 63 Decibel on their façade over a project saving 5 minutes of travel time for 10,000 trips per day, all else being equal. This drastically contrasts with the current Dutch practice in which a project saving 10 seconds travel time for 10,000 trips per day performs better in a CBA than a project preventing that 300 households experience 63 Decibel on their façade. Hence, from this study it can be inferred that if (Dutch) policy makers decide to evaluate the societal value of transport projects from a citizen perspective less investments in projects saving a few minutes of travel time with severe noise pollution will be recommended in the Netherlands when compared to the current practice in which effects accruing from transport projects are valued using willingness to pay-based money metrics.
Original languageEnglish
Number of pages1
Publication statusPublished - 2017
Event45th European Transport Conference 2017 - Casa Convalescencia, Barcelona, Spain
Duration: 4 Oct 20176 Oct 2017
Conference number: 45

Conference

Conference45th European Transport Conference 2017
Abbreviated titleETC 2017
CountrySpain
CityBarcelona
Period4/10/176/10/17

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