Marginal costs of road noise: Estimation, differentiation and policy implications

Abstract

This study estimates differentiated marginal costs of road noise and then discusses the pricing of these external costs. The estimates are based on the impact pathway approach, in which traffic noise exposure implies impacts on individuals, which in turn are related to the monetary valuation of these impacts. The marginal costs include both direct noise disturbances and impact functions of negative health outcomes due to noise exposure. The empirical results indicate that the marginal costs of road noise are highly dependent on the number of exposed individuals and the vehicle type. The overall conclusion is that differentiation of marginal costs is essential, as noise exposure varies strongly with population density, and different vehicle types contribute very differently to noise emissions. In addition, marginal costs differ substantially depending on time of day. The key policy implication is that marginal costs provide a basis for efficient external cost pricing of road traffic. We outline a pricing scheme, i.e., a differentiated kilometre tax system for road use, which would constitute a basis for efficiently pricing external costs. This system's attractiveness may increase in a future of non-fossil-fuel cars when tax revenues from petrol and diesel have decreased greatly.