The Contribution of Suppressed and Induced Traffic in Highway Appraisal, Part 2: Policy Tests

Abstract

In conjunction with the equilibrium model and reference states developed in paper 1 we examine, over the period 2000 – 20, the effect of new roads and highway capacity changes, applied with and without road pricing, on vehicle emissions and economic (user) benefits. In particular, we quantify the elasticity effects on these outputs. By unifying the treatment of emission and economic benefits, we have confirmed that those conclusions of the 1994 report of the Standing Advisory Committee on Trunk Road Assessment relating to the effect of generated traffic on user benefits may be extended to the case of emissions. Specifically, we have shown both theoretically and numerically that, in congested conditions, elasticity effects may significantly undermine the emission benefits from new and expanded roads. With regard to both components of benefit we have drawn particular attention to the contribution of the off-peak period. For demand elasticities as low as −0.25 we also show that, compared with their evaluation under free use, the emission benefits derived from a road scheme may be significantly reduced, and user benefits moderately reduced, under a regime of congestion pricing. We finally address Foster's contention that the inclusion of induced traffic in road investment appraisal may improve the case for building and improving roads to a higher capacity. We discuss the theoretical conditions under which this may occur but suggest that these are unlikely to hold in practice.