The cost of traffic congestion in Belgium [ Working Paper 09-19 - 06/09/2019]

This paper seeks to quantify the cost of the most important inefficiencies in Belgian transport taxation. To this end we calculate the welfare gain of an ideal, optimal tax/subsidy system across the transport market as a whole (i.e. considering private road traffic in conjunction with public transport). We found the total welfare gain to be 2.3 billion euros, of which 1.3 billion are due to time gains of remaining road users. Our measure lies significantly above those found in the literature, since we consider the distortion cause by a wide range of subsidies.

PDF & Download

Authors

Bruno Hoornaert (A), Alex Van Steenbergen (A)

A : Author, C : Contributor

Publication type

Working Papers

The Working Paper presents a study or analysis conducted by the Federal Planning Bureau on its own initiative.

This report seeks to quantify the cost to the Belgian economy of major inefficiencies in transport taxation using the FPB’s PLANET model. Following an important strand in the applied international literature, we calculate the welfare gains from an optimal tax system, in which traffic taxes are perfectly aligned to the marginal external cost of transport (congestion costs and environmental costs).

To this end, we first provide a full overview of the current array of external costs and traffic taxation. We show that external costs differ greatly across a limited number of geographical zones, road types and time periods. For example, an additional driver during rush hour in the Brussels Capital Region would add almost a full euro of time cost to his fellow travelers per kilometer driven. Current taxes on cars and road freight lack any substantial differentiation however, while public transport, certain forms of commuting and company cars are heavily subsidized.

Clearly policy is not aligned to reality given by great concentration of traffic during certain times of the day, on certain spaces. It follows also that (some) drivers, where and when traffic is not very dense, pay too much in taxes compared to the costs they cause to society, at least when considering congestion and the environment.

A policy that would fully align taxation to external costs, would yield society at least 2.3 billion euro in net welfare gains, of which 1.3 billion euro in time gains to remaining traffic. The total welfare gain is superior to that found in the literature, since we also take into account the economic distortions associated with all kinds of subsidies. Such an ideal policy change would yield 8.7 billion euros in additional revenue, mostly through decreased subsidies.

We stress that any congestion costs reported in this study should be considered as a lower bound. Since the model only measures time lost in traffic, we do not model the additional costs due to the need to alter plans, re-arrange appointments etc. (so-called schedule delay costs). Nor are any gains form higher productivity due to better spatial allocation of resources included.