Improving Assessment of Transport Policies by Dynamic Cost-Benefit Analysis

In the history of cost-benefit analysis (CBA), macroeconomic and micro-economic foundations have been developed. The latter has dominated in transport CBA during the last decades. The most widely used CBA approach can be characterized as comparative static and based on separate partial modeling. However, when it comes to significant indirect effects in the economic, social, and environmental systems connected with the transport system, alternative approaches to the microeconomic approach become inevitable. A system dynamics platform was developed that allows for a dynamic CBA integrating the most important indirect effect of transport policies. The approach was tested with large infrastructure programs and transport policy packages. Results of the dynamic approach reveal that the choice of the most favorable policy can change over time and depend on the time horizon defined for the analysis. In particular the dynamic approach allows for a clear allocation of costs and benefits to periods of time, which might be valuable information for policy acceptance and implementation. This research is integrated within a stream of European Commission projects on integrated and dynamic assessment, starting with the Assessment of Transport Strategies project (ASTRA) and extended by the projects Transport Infrastructure and Policy: A Macroeconomic Analysis for the European Union (TIPMAC) and Integrated Appraisal of Spatial Economic and Network Effects of Transport Investments and Policies (IASON). IASON focuses on analysis of indirect, second-round, or induced benefits and costs that occur through feedback effects between the transport sector and other economic sectors.