Does passenger transport modes internalize the external cost they produce? The case study of the Madrid-Seville corridor

Abstract

The objective of this paper is to evaluate how much interurban passenger transport modes internalize the external costs they produce in order to calculate the efficient charge that the users would have to pay. This analysis is relevant since it affects the competitiveness of the different transport modes in the corridor. For this research the case study of the Madrid– Seville corridor in Spain has been chosen since several transport modes compete in this origin-destination pair. The research carries out a balance between the marginal external costs per user produced by each transportation mode and the charges that the users currently pay. The gap between the social marginal cost and the fare paid by the users will give us the extra–charge per passenger that each transportation mode would have to pay to internalize the external cost they produce. We found that that, unlike what many people think, the rail mode does not internalize all the external cost it produces whereas the road modes do it. This happens because even though the road modes pollute more, they also pay much more due to large discriminatory fuel taxes.