Sunday, January 1, 2012

The value of time and external benefits in bicycle appraisal
Abstract: We estimate the value of time savings, different cycling environments and additional benefits in cost-benefit analysis of cycling investments. Cyclists’ value of travel time savings turns out to be high, considerably higher than the value of time savings on alternative modes. Cyclists also value other improvements highly, such as separated bicycle lanes. As to additional benefits of cycling improvements in the form of health and reduced car traffic, our results do not support the notion that these will be a significant part in a cost-benefit analysis. Bicyclists seem to take health largely into account when making their travel choices, implying that it would be double-counting to add total health benefits to the analysis once the consumer surplus has been correctly calculated. As to reductions in car traffic, our results indicate that the cross-elasticity between car and cycle is low, and hence benefits from traffic reductions will be small. However, the valuations of improved cycling speeds and comfort are so high that it seems likely that improvements for cyclists are cost-effective compared to many other types of investments, without having to invoke second-order, indirect effects. In other words, our results suggest that bicycle should be viewed as a competitive mode of travel and not primarily as a means to achieve improved health or reduced car traffic.
The estimated values of cycling time on street are similar to the results of Wardman et al. (2007). They are also similar to the (implicit) values of time in the national transport model SAMPERS, which lie in the interval 10-20 EUR/h, depending on trip length and gender. Interestingly, the SAMPERS model indicates that the value of time is higher for women and longer trip distances, in contrast to what is found in the present study. The reason for the contrasting results is likely to be self-selection. The SAMPERS model is estimated on a sample representing the entire Swedish population, not just cyclists. This strengthens the hypothesis that the lower value of time for cyclists with long distances in our sample (comprising only cyclists) is due to self-selection.

Cycling on a separated bicycle path instead of on a street with mixed traffic is valued to 5.4 EUR/h (according to Model 2, evaluated at average sample income and baseline travel time below 40 minutes). Investment costs for bicycle paths vary widely, but a typical value could be 0.6 MEUR per km (City of Stockholm, 2002), (Hopkinson & Wardman, 1996). With typical assumptions, this implies that bicycle paths are socially profitable already at yearly average cycling volumes of a little less than 300 cyclists per day, which in urban contexts is very low. Major bicycle paths can easily have 3,000 cyclists per day, which would give an incredible benefit/cost ratio of around 13. Note, however, that this is excluding the opportunity cost value of land, which in urban contexts can be a considerable cost.
The value of cycling time is considerably higher than the value of time on the alternative mode: street cycling time savings are valued almost twice as high as time savings on the alternative mode. A similar result was obtained by Wardman et al., where cycling time was valued about three times as much as time savings on the alternative mode. This is in line with the expectation that the direct utility of cycling is lower than for alternative modes.... The value of time on the alternative mode, averaged over travelers with long and short baseline cycling times, is similar to the value obtained in the Swedish Value of Time study (Börjesson & Eliasson, 2011), which is 6.8 EUR/h (for work trips with rail transit, which is the most relevant comparison for the present sample; bus values are lower and car values are higher). That the value of time on the alternative mode is similar to the average value of time for actual public transport users is interesting and non-trivial: it indicates that the difference in value of time between bicyclists and travelers with other modes is mainly due to differences in direct utility, and that the self-selection effect due to differences in resource value of time is comparatively small.
Cycling has significant health effects, e.g. in the form of reduced risk for cardiovascular diseases, especially for groups with low or moderate levels of other exercise. If improvements of cycling possibilities increase the number of cyclists, beneficial health effects will most likely be achieved. Whether these health effects should be added to the CBA, however, depends on the extent that they are already factored in when people make their decision concerning how much to cycle. If, hypothetically, travelers do consider the health effects they will get from cycling and make an accurate judgment of them, then the health benefits will turn up as part of the consumer surplus – both as increased demand for cycling and as a lower value of cycling time – compared to a situation where travelers do not consider health effects. Adding health benefits to a CBA if cyclists already factor in the health effects they are getting will hence be double-counting. To what extent additional health benefits should be included in bicycle CBAs depends on four things: the extent to which cyclists get health benefits out of their cycling; the extent to which bicycle improvements increase cycling; substitution between cycling and other forms of exercise; and the extent to which cyclists take health effects into account when making their travel decisions....

First, we can note that cycling is an important exercise form for cyclists. For most respondents, cycling is their primary form of exercise: more than 60% of cyclists exercise less than 2 hours per week apart from cycling. Moreover, our data support the expectation that better cycling possibilities increase cycling.
Cyclists are not (only) die-hard cyclists that choose the bicycle no matter what; the relative differences in travel costs and times between bicycle and alternative modes affect their choice. As noted above, the relatively moderate changes of travel times and costs in the choice experiment made 83% of cyclists choose the alternative mode at least once. One can reasonably assume that this argument works both ways, such that better cycling possibilities will entice some travelers to switch from other modes, and hence potentially lead to health benefits.

However, additional health benefits from increased cycling may to some extent be reduced by the fact that cycling is a substitute for other forms of exercise. Moreover, cyclists exercising more than four hours a week in addition to cycling get considerably less additional health effects out of their cycling. We can estimate the magnitude of these effects by noting that around 60% of the cyclists state that they would exercise more if they cycled less, or that they already exercise considerably in other forms (more than 4 hours a week). Older cyclists are overrepresented in this group, and since they are the ones who get the most health benefits out of cycling, the total potential health benefit is reduced by up to 60%, depending on the rate of substitution between cycling and other forms of exercise.

The most difficult question is to what extent health benefits are internalized, i.e. to what extent travelers take health benefits from cycling correctly into account when making their travel choices. To shed some light on this, we can note that 52% of the cyclists state that exercise is the most important reason to choose bicycle. The share increases to 61% for older cyclists (over 50 years of age). Clearly, a majority of cyclists take health benefits into account, although they may over- or underestimate these health benefits. Obviously, other cyclists may also consider health effects when choosing mode, even if exercise was not their most important reason. If there is a difference between the two groups regarding the extent to which they consider health effects, this should show up in the estimations as a lower value of bicycle time for the group that quote exercise as the most important reason to cycle. But as mentioned above, this is not the case: the values of bicycle time of the groups are not significantly different. Hence, there is no evidence that the group stating other reasons than exercise as the primary reason for cycling disregards the health effects.
At least in public debate, bicycle improvements are often motivated by the need to reduce car traffic. There seem to be great expectations that improving cycling possibilities will entice car drivers to change to bicycle, thereby reducing congestion, emissions, noise etc. Reductions of external costs from car travel should be added to bicycle CBA. On the other hand, a significant share of such external costs is internalized through e.g. fuel taxes, and it is only the external part (i.e. the “non-internalized” share) that should be added to the CBA . Outside congested urban areas, external costs of private car traffic such as noise, emissions, accidents and road maintenance are almost entirely internalized through fuel taxes in Sweden (SIKA, 2006). Hence, the potential social benefits of reducing car traffic by cycle improvements are smaller than sometimes expected.

Also the cross-elasticity between car and bicycle determines the external benefits of cycle improvements. From our material, this cannot be estimated directly, but it is obvious that it cannot be large from one observation: the share of bicyclists quoting car as their second-best travel alternative is a mere 13%. This is consistent with several other studies that have shown that the cross-elasticity between public transit and bicycle is considerably higher than that between car and bicycle.

In summary, we conclude that bicycle improvements will most likely generate very limited social benefits from reduced car traffic. First, even if all “new” cyclists come from existing trips and merely switch mode, we should expect that only 10-15% f them change from car. Second, only the non-internalized part of external costs from traffic should be included in a CBA, and except for congestion, the internalization rate is high.

These conclusions apply to our specific context, of course. First, Stockholm has good supply of public transit and a high transit share, especially in the central parts, and this increases the share of people having transit as their second-best mode. Second, the rate of internalization of external effects from car traffic varies widely between countries.
by Maria Börjesson 1 and Jonas Eliasson both of KTH, Royal Institute of Technology; CTS - Centre for Transport Studies Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm
Working Paper Number 2011:22; Created December 13, 2011; 20 pages

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