A well-functioning transport system is crucial for societies. It allows people to reach activity locations such as work places, schools, health services, other people and recreational facilities. In many countries people spend 10-15 percent of their income on transport (Schäfer et al., 2009), and ministries of transport generally have a substantial share in the overall budget for governmental expenditures. A large part of the budget is spent on infrastructure construction and maintenance, roads, railroads, harbours and airports being dominant categories of infrastructure. An extreme example: in 2009 in China the share of transport investments in GDP was 5.64% (Yu, 2016). But public policies not only relate to infrastructure, but also include pricing (levies on vehicles and fuels, subsidies on public transport, …), regulations (such as standards for vehicles and fuels), and other policies. Limiting myself to environmental and safety effects of the transport system, it is important to realize that all these effects are realized via changes in five determinants: • Transport volume; • Modal split; • Technologies used (vehicles, fuels, …); • The efficiency of using vehicles; • Driving behaviour. This ITF-OECD round table is on regulations. From that perspective it is therefore important to realize that regulations are an important category of policy instruments, but definitely not the only category. A second message from table 1 is that regulations can be used to influence volumes, modal split, technologies, and driving behaviour, and therefore potentially can have many impacts. Economists often have a preference for pricing measures, because of efficiency reasons, as often expressed in the saying ‘you can’t beet the price mechanism’. Indeed, in many cases pricing works best, at least from an economic efficiency perspective, road pricing to reduce congestion being an often discussed and studied example (Verhoef et al., 2008). But pricing also has limitations, and in some cases regulations are an easier way to make policy. It would be really complicated to set price tags on emissions of pollutants or noise, because the effects depend on many factors. Take noise as an example: the noise ‘costs’ of driving by a certain road vehicle over a road depend its speed (which has an impact on noise production), the number of vehicles driving on the same road (in a non-linear way), the number of dwellings near the road and the distance between the dwellings and the road, and the characteristics of the area between the road and the dwellings), and time of day. It would become very complicated to set dynamic prices for the noise related costs, and people very likely will not understand the price levels. Regulations for maximum noise production provide an easier and probably more acceptable alternative. Which policies do policy makers and decision makers choose? Policy decisions are based on many inputs such as political preferences and interests of the decision maker, opinions of important actor groups, and insights into the pros and cons of the options under debate. I limit myself to the latter category: ex ante evaluations. An important question from this perspective is: How to ex ante evaluate the effects of candidate policy options? In many countries proposals for new infrastructure are ex ante evaluated by a Societal Cost Benefit Analysis (SCBA, often abbreviated as CBA) ( Hayashi and Morisugi, 2000; Bristow and Nellthorp, 2000; Grant-Muller et al., 2001). A CBA is an overview of the pros and cons of policy options. These pros and cons are expressed in monetary terms, and then integrated into indicators. The most important indicators are benefits minus costs, benefit-cost ratio and return on investment (see, for example, Van Wee and Rietveld, 2013a). The pros and cons of SCBA in general or specifically for transport infrastructure options are frequently discussed in academic literature. But the academic debate on the pros and cons of CBA for regulations is much less mature. This paper therefore aims to reduce this gap in knowledge by providing such a discussion on the pros and cons of regulations. The discussion is limited to regulations for standards for road vehicles aiming to improve the environmental and safety performance of these vehicles. And the focus is on costs, although a brief discussion on benefits is added as well. The perspective of the paper is one of policy relevance and policy relevant research, not so much a theoretical academic one. The methodology is one of learning by doing: In several roles I have been involved in estimating costs and benefits of candidate policy options (regulations based or not), either in a more policy oriented or an academic discourse. Is a high level CBA the only input a policy maker needs if s/he is interested in an ex ante assessment of candidate policy options? The answer is: no, at least not in all cases. In the policy analysis community it is common sense to assume that a ‘sound’ policies meet three criteria: • effectiveness; • efficiency; • fairness/equity. See for example Young and Tilley (2006). It is important to realize that a CBA primarily evaluates the efficiency of projects, often in terms of benefits minus costs, or the benefit-cost ratio. And implicitly or explicitly it also evaluates the effectiveness. If, for example, an infrastructure project aims to reduce travel times, the CBA also makes clear if the project is effective, i.e. if it really reduces travel times. But a policy does not only need to be effective and efficient, but also fair, and in some cases fairness is a very important criterion. Section 6 discusses this topic in more detail. And what a policy maker needs, is often even more than insights into effectiveness, efficiency and fairness. In an earlier paper (Van Wee, 2009) I argue that these three criteria are important, but not sufficient. What also matters are three more criteria: • ease of implementation • flexibility • long term robustness The ease of implementation can, amongst others, depend on legal and institutional barriers, and social resistance and public support. Flexibility relates to ‘to the ease to adapt the policy, because of the easy or difficulty to foresee changes’ (Van Wee 2009: 12). Long-term robustness relates ‘to the question of whether a policy is ‘no regret’ under uncertain long term developments that could have a major impact on society’ (Van Wee 2009: 12). The message of this discussion on criteria relevant for policy makers is that the selection of policy instruments depends on many criteria, and not all criteria are well addressed in a CBA. Although I think a CBA is often a very useful tool to ex ante evaluate candidate policy options, it therefore does not mean the outcome of the CBA is sufficient for real world policy decisions. The remaining part of this paper should be seen in the perspective of the broader set of criteria for policy decisions, even though the primary focus is on CBA and next costs and benefits. The remaining part of this paper is organized as follows. The next section introduces regulations for safety and the environment. After that I discuss the relationships between regulations and direct and indirect costs, and between regulations and benefits. Thereafter I elaborate on the implications of the previous two sections. Next, because a CBA evaluates welfare effects, but ignores equity issues, I discusses the importance of ethical issues for regulations. The paper finishes with some concluding remarks. (Author/publisher)
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