Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

- the benefits for the existing traffic (for example a time and cost reduction as a result of a speeding upprocess);- the benefits for the traffic diverted from other modes (variations in costs, times and externalities as aresult of the shift from one mode to another);- the benefits for the generated traffic (social surplus variation), as gauged by the ‘rule of the half’ (seebox below).If the transport demand is fixed and total demand stays the same even when travel time and travel costschange (i.e. in the absence of generated traffic), the analysis will be restricted to the variations in theeconomic costs net of any transfer.Some goods that have no market will be given great importance in the economic evaluation of transportinfrastructure projects, i.e. the value of time, the environmental effects, the value of avoided accidents 10 .The value of time: time benefits often represent the most important element of a transport projectbenefits. Some European countries provide the evaluators with national estimates of the time value bypurpose and sometimes by mode, in particular for passengers. In the absence of these reference estimates,it is possible to derive the values of time from the users’ actual choices, or to re-adjust and to re-weightthe estimates from other studies on the basis of income levels.With a few exceptions, the time value of goods transport is generally low and it should be calculated onthe basis of the capital lock-up.In general, since the values attributed to time are critical, the recommendation is to clearly report thevalues of time adopted and to check for consistency between the values used in the demand estimate andthe ones used in the evaluation.The passengers’ value of time generally distinguishes between trip purposes, and in some cases transportmodes, and is largely dependent on income. The value of non-working travel time (including homeworkcommuting) vary, in most countries, from 10% to 42% of the working time value. Savings in non-workingtravel time typically account for a large proportion of the benefits from transport investments.Environmental externalities generally depend upon the travel distances and exposure to pollutingemissions (except for CO 2 , which is a ‘global’ pollutant). In order to monetise the environmental effects,in the absence of local values, it is possible to apply the shadow prices inferred from the scientificliterature (‘benefit transfer approach’, see Annex F) to the physical estimates of pollutants. The methods,which are intended to evaluate the external costs related to the prevention of accidents, will be referred tothe average danger levels according to transport mode. For example, with respect to road traffic, theaverage cost by vehicle-km or by passenger-km is generally calculated on the basis of the costs of all roadaccidents.10Reference values for all the EU 25 countries can be found in the HEATCO project (URL: http://heatco.ier.uni-stuttgart.de/).76