Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

4.1 Case Study: investment in a motorway4.1.1 IntroductionRecent developments in a Convergence region has been accompanied by fast growth in the volume oftraffic along the corridor between two medium size urban areas. The existing local road network wasdesigned to accommodate lower volumes of traffic and it is now reaching its full capacity. Congestionproblems are expected to increase in the future due to the foreseen growth in both passengers and freighttransport demand. Furthermore, the existing network runs across the most densely populated areas of theregion thus causing serious environmental and safety problems for the people living in the area. For thesereasons, the planning authority has proposed to assess the feasibility of a new motorway link by-passingthe more densely urbanised areas. The main objectives of the project are therefore to reduce futurecongestion and to limit the population exposure to transport emissions. In addition, the project shouldalso contribute to a reduction in accidents by diverting traffic, particularly by diverting the freight from theexisting network to the new infrastructure. As well as the traffic diversion from the existing roads, the newmotorway is expected to induce some newly generated traffic, but as the area is already densely populated,and congestion is highly localised, the additional traffic will be limited.The benefits of the new 72 km motorway are to be found mainly in time savings, abatement of emissionsexposure and a reduction in accidents. The reduction in kms travelled and consequently the ‘vehicleoperating costs’ (VOC) savings made by the flow of traffic running through the whole motorway areoutweighed by the additional kms travelled in order to access and egress the motorway by the traffic usingonly some stretches of the new infrastructure. The new motorway link will generate some additionaltraffic which in turn, will produce additional external costs, which would not have been produced withoutthe new link.The options considered were a free motorway or a tolled motorway.4.1.2 Traffic forecastTraffic forecast is based on the expected growth of GDP and population in the area and builds on thepast trends re-adjusted by the most recent national forecast. The study area covers all the area directlyaffected by the project. The network considered is the entire road network of the area. Consequently, theflows considered are the ones using this network.Different growth rates were applied for passengers and freight flows. Passenger demand has beendisaggregated according to the trip purpose, in order to apply the appropriate ‘values of time’ (VOT).Future demand with and without the project has been estimated with the support of a road traffic model 55 .To assess the benefits of the new connection, total traffic on the new motorway has been sub-divided intothree different components:- the first is the diverted traffic, consisting of the freight and passengers who will be switching from theold route to the new motorway. This traffic will benefit from the reduced travel time due to the higherspeeds and the absence of congestion and, at least partly, due to reduced distance;- the second component is the traffic ‘generated’ by the new link: this traffic, consisting of new roadusers, is induced by the increased accessibility to the area. The benefits of the newly generated traffic isrepresented by the changes in consumer’s surplus, defined as the excess of consumer’s willingness-topayover the actual generalised costs of travel (travel time, vehicle operating costs and, for the optionof the tolled motorway, toll fees). The generated traffic will also be responsible for additional externalcosts in terms of environmental emissions, noise and global warming;55The details of the traffic model forecasts are not reported in this illustrative case study.130