Fillable Printable Cost-Benefit Analysis Sample
Fillable Printable Cost-Benefit Analysis Sample
Cost-Benefit Analysis Sample
www.vtpi.org
250-360-1560
Transportation Cost and Benefit Analysis
Techniques, Estimates and Implications
Second Edition (2009)
Executive Summary
Full report available at www.vtpi.org/tca
16 March 2011
By
Todd Alexander Litman
Victoria Transport Policy Institute
With Eric Doherty
Abstract
This 500+ page document is a comprehensive study of transportation benefit and
costing, and a guidebook for applying this information. It includes detailed analysis of
various transport costs and benefits. These impacts are described in detail and
categorized by various attributes: whether they are internal or external, fixed or variable,
market or nonmarket. Using the best available data, it provides monetized estimates of
twenty three costs for eleven travel modes under three travel conditions.
This document is unique in several important ways. It is one of the most comprehensive
studies of its kind, including many often-overlooked impacts. It is the only transport cost
study regularly updated as new information becomes available. It explains economic
concepts and evaluation techniques. It provides costs values in a format designed to
help users easily apply this information to policy analysis and planning situations. It
includes a spreadsheet that automates cost analysis. It discusses the implications and
applications of analysis results. It provides extensive references, many available through
the Internet, so users can obtain more detailed information as needed.
This study indicates that on average about a third of automobile costs are external and
about a quarter are internal but fixed. Fuel efficient and alternative fuel vehicles tend to
have somewhat lower external costs. Transit tends to have lower total costs under
urban-peak conditions. Ridesharing tends to have the lowest marginal costs.
Motorcycles tend to have relatively high costs due to their high crash risk. Nonmotorized
modes (walking and cycling) have minimal external costs. This study describes various
policy and planning reforms that can help increase economic efficiency and equity.
Transportation Cost and Benefit Analysis II – Executive Summary
Victoria Transport Policy Institute (www.vtpi.org)
16 March 2011 www.vtpi.org/tca/tca00.pdf
Page ES-2
Introduction
Smart consumers investigate all costs and benefits before making major purchase
decisions. Prior to buying a car you want accurate information on its fuel, maintenance,
repair and insurance costs. Similarly, before buying a train or airline ticket you want to
know about all fees and taxes, and the ease of schedule changes. You also want
information on each option’s reliability, comfort and safety. Just as consumers need
accurate and comprehensive information when making personal travel decisions,
communities need accurate and comprehensive information on all significant impacts
when making transport policy and planning decisions.
Transportation policy and planning decisions often involve tradeoffs between conflicting
objectives. For example, strategies to increase vehicle travel speeds can increase crash
risk and degrade walking conditions. This guidebook provides a framework for
evaluating and rationalizing such decisions. It examines how benefits and costs vary for
different travel modes and conditions. It supports more comprehensive planning analysis
by providing benefit and cost information in a convenient and flexible format.
Cost Analysis Framework
Table 1 lists the twenty-three transportation costs evaluated in this report.
Table 1
Transport Cost Categories
Cost Description
Vehicle Ownership Fixed costs of owning a vehicle.
Vehicle Operation Variable vehicle costs, including fuel, oil, tires, tolls and short-term parking fees.
Operating Subsidies Financial subsidies for public transit services.
Travel Time The value of time used for travel.
Internal Crash Crash costs borne directly by travelers.
External Crash Crash costs a traveler imposes on others.
Internal Activity Benefits Health benefits of active transportation to travelers (a cost where foregone).
External Activity Benefits Health benefits of active transportation to society (a cost where foregone).
Internal Parking Off-street residential parking and long-term leased parking paid by users.
External Parking Off-street parking costs not borne directly by users.
Congestion Congestion costs imposed on other road users.
Road Facilities Roadway facility construction and operating expenses not paid by user fees.
Land Value The value of land used in public road rights-of-way.
Traffic Services Costs of providing traffic services such as traffic policing, and emergency services.
Transport Diversity The value to society of a diverse transport system, particularly for non-drivers.
Air Pollution Costs of vehicle air pollution emissions.
Greenhouse Gas Pollution Lifecycle costs of greenhouse gases that contribute to climate change.
Noise Costs of vehicle noise pollution emissions.
Resource Externalities External costs of resource consumption, particularly petroleum.
Barrier Effect Delays that roads and traffic cause to nonmotorized travel.
Land Use Impacts Increased costs of sprawled, automobile-oriented land use.
Water Pollution Water pollution and hydrologic impacts caused by transport facilities and vehicles.
Waste External costs associated with disposal of vehicle wastes.
This table defines the 23 transport cost categories evaluated in this study.
Transportation Cost and Benefit Analysis II – Executive Summary
Victoria Transport Policy Institute (www.vtpi.org)
16 March 2011 www.vtpi.org/tca/tca00.pdf
Page ES-3
Table 2 categorizes these costs according to whether they are internal (users bear them
directly) or external (imposed on non-users), variable (related to the amount of travel) or
fixed, and market (involve goods regularly traded in competitive markets) or non-market.
Table 2
Transportation Cost Categories
Cost Internal/
External
Variable/
Fixed
Market/
Non-Market
Cost Internal/
External
Variable/
Fixed
Market/
Non-Market
1. Vehicle ownership Internal Fixed Market 13. Roadway land value External Fixed Market
2. Vehicle operation Internal Variable Market 14. Municipal services External Variable Market
3. Operating subsidies External Fixed Market 15. Equity & option value External Variable N-M
4. Travel time Internal Variable N-M 16. Air pollution External Variable N-M
5. Internal crash Internal Variable N-M 17. Greenhouse gas External Variable Mixed
6. External crash External Variable Mixed 18. Noise External Variable N-M
7. Internal activity* Internal Variable Mixed 19. Resource consumption External Variable Mixed
8. External activity* External Variable Mixed 20. Barrier effect External Variable N-M
9. Internal parking Internal Fixed Market 21. Land use impacts External Fixed Mixed
10. External parking External Variable Market 22. Water pollution External Variable N-M
11. Congestion External Variable Mixed 23. Waste disposal External Variable N-M
12. Road facilities External Variable Market
This table lists the 23 costs identified in the study and indicates how they are distributed.
Table 3 describes the eleven transport modes evaluated in this study. Monetized
(measured in monetary values) estimates are developed of each cost for each mode under
three travel conditions (urban-peak, urban off-peak and rural) in 2007 U.S. dollars per
vehicle-mile. These cost estimates are based on extensive research, including the results
of previous studies updated to reflect inflation and other changes, and some original
analysis. This guidebook includes a chapter concerning each cost category, with detailed
analysis and extensive references.
Table 3
Transport Modes
Mode Description
Average Automobile A medium sized car that averages 21 mpg overall (16 mpg city driving, 24 mph
highway driving), averaging 1.5 overall and 1.1 Urban-Peak occupancy.
Compact (Fuel
Efficient) Car
A small four passenger car that averages 40 mpg overall (34 mpg city driving, 46 mpg
highway driving).
Electric Car A medium size electric car that averages 0.5 kWh per mile fuel efficiency.
Van or Light Truck
A 14 passenger van or light truck that averages 15 mpg overall (14 mpg city and 20
mph highway driving). Occupancy is same as an automobile.
Rideshare Passenger. The incremental cost of an additional passenger.
Diesel Bus A 40 foot bus with 25 peak and 8 Off-Peak passengers, averaging 4.0 mpg.
Electric Bus/Trolley
A 65 passenger bus or trolley with 30 peak and 10 off-peak passengers, averaging 6.5
mpg energy consumption equivalent.
Motorcycle A medium size motorcycle 45 mpg urban and 55 mph rural average fuel efficiency.
Bicycle A moderate priced bicycle ridden an average of 10 mph.
Walk A person walking an average of 3 mph.
Telework Two 11 mile commute trips avoided when employees work from home.
This table describes the eleven transport modes evaluated in this study.
Transportation Cost and Benefit Analysis II – Executive Summary
Victoria Transport Policy Institute (www.vtpi.org)
16 March 2011 www.vtpi.org/tca/tca00.pdf
Page ES-4
Figure 1 illustrates the costs for an Average Car ranked by magnitude, with internal and
external components combined. This shows that the largest categories of costs tend to be
internal, including vehicle ownership, travel time, vehicle operation and crash risk borne
directly by individual motorists. External costs tend to be smaller, and so are easy to
overlook, but numerous, so their aggregate value tends to be significant.
Figure 1 Average Automobile Costs
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
Vehicle Ownership
Crash
V
eh
i
cle
Oper
at
ion
T
ravel Time
Parki
ng
Roa
d
Facilities
Land Use Impacts
Congest
i
on
Res
our
ces
Air Pollut ion
Land
Va
lue
G
reenhouse Gas
W
at er
Bar
r
i
er E
ffe
ct
Traffic Serv
i
ces
Noise
Tran
s
por
t
Diversi
t
y
Was
t
e
Dollars Per Vehicle Mile
External Costs
Internal Fixed
Internal Variable
This figure shows Average Car costs per vehicle mile, ranked by magnitude. External costs tend
to be small but are numerous.
Figure 2 shows the distribution of costs aggregated. About a third of total costs are
External and about a quarter are Internal-Fixed, leaving less than half Internal-Variable,
indicating significant underpricing (prices are significantly below total costs).
Figure 2 Average Car Cost Distribution
Internal
Variable
37%
External
35%
Internal Fixed
28%
This figure illustrates the aggregate distribution of costs for an average car. About 60% of total
vehicle costs are either External or Internal-Fixed.
Transportation Cost and Benefit Analysis II – Executive Summary
Victoria Transport Policy Institute
(www.vtpi.org)
16 March 2011 www.vtpi.org/tca/tca00.pdf
Page ES-5
Figure 3 shows the distribution of costs per passenger-mile, calculated by dividing costs
per vehicle-mile by average vehicle occupancy. Urban-peak travel has relatively high
costs because peak-period vehicle occupancy tends to be lower than average (1.1
passengers per vehicle compared with 1.42 for other travel conditions).
Figure 3
Average Car Costs Per Passenger-Mile
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
Urban Peak Urban Off-Peak Rural Average
Dollars Per Passenger-Mile
External
Internal Variable
Internal Fixed
This figure illustrates how aggregate costs per passenger-mile vary by travel conditions, taking
into account differences in vehicle occupancy. Urban-peak vehicle occupancy is low; therefore
urban peak passenger mile costs are high compared to the other categories.
Figure 4 compares costs per passenger-mile for each of the eleven modes. Both the
magnitude and the distribution of costs vary significantly between modes.
Figure 4
Cost Distribution by Mode
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
Average Automobi
l
e
C
o
mpact Car
Electric Car
Van/ Light Truck
Rideshare
Pa
ssenger
Diesel Bus
Ele
ctric Bu
s
/ Trolley
M
otorcyc le
Bike
Walk
Tel
ework
Dollars Per Passenger-Mile
External
Internal Fixed
Internal Variable
This graph shows the cost distribution of each mode. Transit costs are based on average U.S.
ridership levels and would be lower in areas with higher ridership rates.
Transportation Cost and Benefit Analysis II – Executive Summary
Victoria Transport Policy Institute
(www.vtpi.org)
16 March 2011 www.vtpi.org/tca/tca00.pdf
Page ES-6
Implications
This analysis indicates that a major portion of transportation costs are external, fixed and
non-market. On average, each dollar spent on vehicle operating expenses imposes about
$2.55 in total costs to society. External and fixed costs represent underpricing. This cost
profile is inequitable and leads to economically excessive motor vehicle travel that
exacerbates various economic, environmental and social problems.
Non-market costs tend to be undervalued in transportation planning. These costs are
significant in magnitude compared with impacts normally considered. Failure to consider
these costs can lead to decisions that result in negative net benefits. For example, society
is overall worse off if a roadway expansion saves motorists 5¢ per mile in average travel
time costs but imposes 10¢ per mile on average in additional economic and
environmental costs.
Applications
Comprehensive economic analysis can be used in many planning applications:
• Transportation policy analysis. Establish strategic goals and objectives taking into
account all impacts, including those that are indirect and long-term.
• Transportation pricing. Develop more efficient prices that reflect the full costs.
• Investment policies. Account for all impacts when determining which transport
investments are overall optimal.
•
Transportation equity analysis. Consider all impacts, including those that are indirect and
non-market, when evaluating equity.
•
Transportation Demand Management analysis. Consider all impacts when evaluating
strategies that reduce total vehicle travel and encourage use of alternative modes.
Conclusions
If you ask people what it costs to drive they typically mention vehicle operating
expenses, which average approximately 16¢ per mile for a typical car. Some may also
include a portion of vehicle ownership costs, which average about 27¢ per mile. A few
may also mention the value of their travel time and accident risk. These, however, are
only a portion of total costs. The full cost of driving includes these internal costs plus
several external costs. Total costs range from about $0.94 per vehicle mile for rural
driving to $1.64 for urban peak driving. Of course there is considerable variation in the
cost of any specific trip, but these estimates, and variations for different travel modes and
specific conditions, provide a reasonable basis for analyzing true transport costs.
This price structure is inefficient. Vehicle owners have little incentive to limit driving to
trips in which benefits exceed total costs, resulting in economically excessive vehicle
travel that reduces transport system performance. Problems such as traffic congestion,
traffic risk, and pollution are virtually unavoidable with current pricing.
Transportation Cost and Benefit Analysis II – Executive Summary
Victoria Transport Policy Institute
(www.vtpi.org)
16 March 2011 www.vtpi.org/tca/tca00.pdf
Page ES-7
This price structure is horizontally inequitable because people must bear significant costs
imposed by others. It is vertically inequitable because it tends to benefit the wealthy and
reduces travel options for non-drivers. Whether price increases are regressive depends on
how revenues are used. Actions that increase travel options for non-drivers, such as better
transit service, improvements to the pedestrian and bicycling environment, and reduced
urban sprawl, tend to be overall progressive because they benefit disadvantaged people.
There is no single solution to our current transportation problems. Neither, improved
bicycling and walking facilities, increased public transit service, “smart” highways, nor
less polluting vehicles alone can solve our transport problems while driving is so
underpriced. More efficient pricing is essential to solving transportation problems.
Changes in planning, land use, and infrastructure investments are also needed. An
efficient and equitable transportation system offers users efficient mobility options and
incentives to use each mode for what it does best.
Conventional planning tends to evaluate transportation performance based on travel
distance, which favors mobility over accessibility, faster modes over slower modes, and
speed over comfort. For example, conventional transport economic analysis can calculate
the monetized value of travel time savings from highway expansion that increases travel
speeds, but cannot provide monetized benefits from increasing local services, improving
children’s ability to walk and cycle to schools, or from increasing the convenience and
comfort of public transit travel, for example, by providing real-time bus arrival
information or more comfortable transit stop waiting conditions.
Since most urban trips are relatively short (less than 5 miles), there is a “transportation
gap” caused by overemphasis on long-distance travel and too little attention to bicycling,
local transit, and low powered vehicles. This creates a self-fulfilling prophecy of
increased driving, automobile dependency, inequity and sprawl. Electric cars and other
alternative fuels reduce some external costs, particularly urban air pollution, noise, and
petroleum externalities, but do little to reduce other problems such as accident risk,
congestion, and parking subsidies.
Traffic impacts on community livability deserve special attention. The road system is a
valuable public asset. In addition to accommodating vehicle travel streets define a
community’s character, accommodate walking and cycling, and allow community
interactions. Motor vehicle traffic tends to degrade these functions. New urban
neighborhood design and traffic calming programs can reduce traffic impacts and return
streets to multi-function use. Implementing these improvements requires changes to
transport planning and funding practices.
More research is needed to better estimate transportation costs under various conditions
and locations. Transport equity and diversity appear to be significant values which
deserve more research. Decision-makers need better information on consumer demands,
such as the value people place on improved travel convenience and comfort. Research is
also needed to evaluate the synergistic effects of combined planning decisions.
