HOW LARGE IS THE GAP BETWEEN PRESENT AND EFFICIENT TRANSPORT PRICES IN EUROPE?

A common optimal pricing model methodology is used to estimate the gap between present transport prices and efficient transport prices in six European zones. Efficient transport prices are those prices that maximize economic welfare, including external costs such as congestion, air pollution and accidents. The methodology is applied to six urban and interregional case studies, covering all modes and both passenger and freight transport. Results suggest that prices need to be raised most for peak urban passenger car transport and to a lesser extent, for interregional road transport. Optimal pricing results for public transport are more complex, with both too low and too high subsidies on variable costs, depending on the case study. Efficient prices need to be computed such that the price level corresponds to the marginal social cost at the efficient level of traffic, meaning that optimal taxes are much lower than the marginal external costs measured in the reference equilibrium.