Abstract

The Mexico City Metropolitan Area has been suffering severely from transportation externalities such as accidents, air pollution, and traffic congestion. This study examines pricing instruments to reduce these externalities using an analytical and numerical model. The study shows that the optimal levels of a gasoline tax and a congestion toll on automobiles could generate social benefits, measured in terms of welfare gain, of US$132 and US$109 per capita, respectively, through the reduction of externalities. The largest component of the welfare gains comes from reduced congestion, followed by local air pollution reduction. The optimal toll and tax would, however, double the cost of driving and could be politically sensitive. Still, more than half of those welfare gains could be obtained through a more modest tax or toll, equivalent to $1 per gallon of gasoline. The welfare gains from reforming the pricing of public transportation are small relative to those from reforming the taxation of automobiles. Although the choice among travel modes depends on specific circumstances, in the absence of road travel pricing that accounts for externalities, there will be potential for higher investment in roads relative to mass transit. Given the rapidly increasing demand for transportation infrastructure in Mexico City, careful efforts should be made to include the full social costs of travel in evaluating alternative infrastructure investments. Document type: Book

Abstract

The paper presents a method for optimizing the financing option for transport infrastructure project. The execution time for large project is substantial and the social costs generated during the construction phase are insufficient included in the assessment models. These are the main reasons for starting the research to extend the project evaluation methods with procedures that consider also social costs during the implementation of the project, besides the social costs after work completion. The proposed method aims to enhance the solution given by the current applied methods for investment assessment. Starting from the results of the present procedures of transport investment assessment, two approaches are presented. The first one assumes that the work starts at the reference year and different construction schemes can be applied. The optimal time of project implementation is determined considering the social costs during construction and after project implementation. In the second approach, the purpose is to determine the moments of the starting and the completion of the works for minimum of the losses caused by the social costs before and during the project implementation. The paper emphasizes that social cost during transport infrastructure work must be considered in investment timing. In this regard, supplementary procedures can be added to the current method used for ranking of the transport infrastructure investments. For an investment measure identified as opportune, the proposed method aim to minimize the total social cost. Document type: Article