Normal, Generated, and Diverted Traffic

The first step in assessing demand is to estimate baseline traffic flows, or Q1, in figure 10.1. The baseline data provides the basis for analyzing the without the project scenario. The second step is to project future demand with the project, Q2, and without the project. The analyst must project the likely evolution of traffic flows in the absence of the project to estimate the likely incremental benefits. Thus, if without the project the costs of traveling from point A to point B would increase at 7 percent per year and with the project they would increase at 5 percent per year, the incremental benefits of the project would be the 2 percent per year difference in the growth of transport costs.

         

The literature on transport projects usually distinguishes three types of demand. Normal traffic, sometimes called baseload traffic, refers to the traffic that would have normally occurred even in the absence of the project. Generated traffic refers to new traffic resulting from lower transport costs. Diverted traffic refers to traffic drawn away from existing facilities, such as trucks that divert traffic from railroads, or similar modes of transport, as when a new road takes traffic away from existing roads.

         

The simplest method to estimate demand stemming from normal traffic is to extrapolate from past trends and assume that growth will remain constant in either absolute or relative terms. However, a better way relates traffic growth to gross domestic product growth, population growth, fuel prices, or other relevant variables, because the demand for transport typically grows with population, income, and the passage of time. Forecasting demand on the basis of expected GDP growth, population growth, changes in fuel prices, and the like requires projections of the explanatory variables.

         

Demand-based projections also require income and price elasticities. As far as possible, country-specific elasticities should be used, but in the absence of country-specific data, default values may be substituted. For freight transport the income elasticity is typically around or a little below unity, while for passenger movement it typically remains slightly above unity. Base traffic levels projected in the without the project scenario should reflect this kind of expected secular growth. Because all projections are subject to large margins of errors, we recommend risk analysis. Demand stemming from generated traffic is usually a response to lower costs. A journey may become more attractive because a new road saves travel time or travel costs. A road may induce development of a certain geographical area or make it more attractive as a destination, thus generating traffic. The best way to project generated traffic is to use demand functions that estimate the response of traffic flows to changes in transport costs.

Demand stemming from generated traffic is usually a response to lower costs. A journey may become more attractive because a new road saves travel time or travel costs. A road may induce development of a certain geographical area or make it more attractive as a destination, thus generating traffic. The best way to project generated traffic is to use demand functions that estimate the response of traffic flows to changes in transport costs.

         

The third type of demand comes from the diversion from existing services. As in other types of projects, the net incremental benefits to society, not just to the project, also interest us. In the transport sector, a new project will often divert demand from existing facilities. For example, a new port may divert traffic from existing ports, or a road may divert cargo from the railroads. when demand is diverted from existing facilities to new projects, analysts should be careful not to double count the benefits. In the case of transport, the demand from diverted traffic is demand that has been diverted from existing facilities. While it does not a net increase in total demand, if it relieves congestion along alternative routes, we attach benefits to it, as discussed later. The benefits from diverted traffic are given by the net savings in transport costs resulting from the new facility.