External Costs of Truck and Rail Freight Transportation

Abstract

Comparatively low-cost freight transportation has been an important element in the growth of the U.S. economy. Goods can be transported between most points in the country quite cheaply and efficiently. To varying degrees, however, the freight transportation services we consume generate costs that are borne by others. Such costs are commonly referred to as external costs. From a societal perspective, it is desirable for all transportation services to pay their full social (private and external) costs. If the full social cost were reflected in the prices shippers pay, transportation users could choose the amount of each form of service to consume on the basis of the true cost of this service to society. By “internalizing” external costs, policy makers would effectively create a market through which transportation users could weigh the benefits of consuming a particular transportation service against the true costs. The purpose of this monograph is to estimate these true costs for freight truck and rail. We estimate four general types of external costs for a ton-mile of freight shipped by truck or rail: accidents (fatalities, injuries, and property damage); emissions (air pollution and greenhouse gases); noise; and unrecovered costs associated with the provision, operation, and maintenance of public facilities (primarily roads and bridges). Because the preponderance of freight transportation occurs between cities, we focus on intercity freight flows and ignore the movement of goods within urban areas. Consequently congestion, a primarily urban phenomenon, is not addressed. An intercity focus also simplifies the estimation of air pollution costs. Whereas pollution levels in rural areas are fairly consistent, an additional unit of pollution can bring about costs that vary greatly among metropolitan areas based on existing air quality. Our analysis thereby serves as a benchmark against which more specific external cost estimates can be compared. The research reported in this monograph was carried out at the University of Iowa Public Policy Center. Funding was provided by the U.S. Department of Transportation, University Transportation Centers Program, with supplemental funding contributed by the Iowa Department of Transportation.

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